Ep 66. How we beat the competition
Ever wondered what really goes into winning a property when the competition is fierce… and you’re not the highest bidder?
In this episode, Michelle takes you behind the scenes of a recent first home buyer purchase, revealing the exact strategies, conversation and decisions that secured the deal before auction AND under budget, on favourable terms.
From interpreting misleading price guides to negotiating like a pro, this case study is packed with insights that most buyers never hear about, unless they’re working with an experienced Buyers Agent.
Here’s what you’ll learn from today’s episode:
How to use market knowledge and timing to outmaneuver other buyers
Why relationships with agents matter
What questions you should be asking the agent, and why
How favourable settlement terms beat a higher offer
What to expect from a strategic Buyers Agent, and how it can save you stress, time and money
Speakers in today’s episode:
Michelle May - Michelle May Buyers Agents
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Please note that any views or opinions presented in this podcast are solely those of the speakers, and do not necessarily represent those of any business. These views and opinions are general in nature, and do not take account of your personal objectives, financial situation and needs. Please consider whether it applies in your circumstances and seek professional advice wherever appropriate.
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Hi, and welcome to another episode of the Buy Your Side podcast, the property podcast that will help you make smarter property buying decisions. My name is Michelle May and I am the principal of Michelle May Buyers Agents here in Sydney.
So, my aim of this podcast is always to make you smarter and to give you the tools to purchase better, quicker, with less stress and make smarter decisions all up. So I thought this episode, I would actually try and go through a recent purchase that I made on behalf of clients to sort of take you through this real life scenario as opposed to just talking about the theory of purchasing if you like.
I call this the anatomy of a purchase. So let's start at the beginning. I had a client, a first home buyer, who had been looking for quite a while by themselves until they came to my team and I to purchase a property.
So we saw a property that was about to come online. And I think when you see something online, and when you start your property journey, timing is of the essence. So when you think a property might be of interest, you want to have as many options as you can to devise a strategy. So even if a property is tagged to go to auction, it may not necessarily end up there.
So the earlier in the campaign you go and see the property, the more options you have really to devise a strategy moving forward. So we made sure that we got through at the first open. We weren't able to get through before the first open. And sometimes that is definitely something of a possibility. So make sure that once you get notified of a property, and it even is scheduled to say, look, the first open is Saturday, always contact the agent and ask them, look, is there any chance I could come through on a Wednesday because I can't make the Saturday or the Friday or whatever.
Any extra time you get to decide whether this property is for you will be to your advantage. So in this case, we went through on the Saturday, had a really good look and decided that this was gonna be the one for us.
So because obviously my client was working with us, we started our due diligence and we have access to things like RP Data CoreLogic, Price Finder, to look at comparable sales, median price changes, But we also look at zoning, redevelopment, DA checks, and a lot of that you can find for free. So if you don't have access to RP data and Price Finder you can actually ask the agent, look, I know your guide is this, but what are your recent comparable sales? So to form a picture around, okay, so what are actual values? What are the houses or apartments in this area actually going for?
Because as we all know, price guides can be vastly misleading. so that you'll get a picture of okay, I think this property is probably going to be selling around this price bracket. And that's where it's very important to separate your wishful thinking because you're getting lured in by that price guide versus, okay, these are what the property is actually selling for around the area.
So, the house had a guide, I think, of $1.7m or $1.8m. But I knew that only one street over, a very recent sale, literally like two weeks before, had sold for $2.040m. And in my opinion, the property that was in front of us was actually superior to it, so by all accounts, it should sell for over $2m and over $2.040m. I sort of tested that with the agent, but I'll get back to that conversation because it's really important to have lots of conversations, not just one conversation with the agent, just to determine where the sale is going.
So whilst we were working on our due diligence, so the pricing, median price changes sales in the area what it last sold for development application zoning like I said before, flooding, heritage what are the inclusions on the contract, was the development that they did, was it approved with council all that kind of stuff. What are the neighbours up to, so to give our clients a complete picture we also decided that we wanted to get a building and pest. Now, one of the things I always say is that you should never rely on the building and pest that the vendor or agent provides.
In my experience, over many years of reading those free or subsidized reports, they tend to pick the same guys, because they tend to be guys, and those reports are typically copy-paste and they never really flag the big things. And there's a reason why these guys get the work that they do. It's a little bit like the private certification of buildings. You don't bite the hand that feeds you. So therefore we always get our own building and pest inspection done.
And let me tell you, Daniel Leahy, who has been on the podcast before, he is a local building and pest inspector in the Inner West of Sydney. He has saved our bacon many times. He is able to put context around the issues of the building, looking at the age of the building and modern standards and requirements. But if things are really complicated and almost impossible to rectify, we will know about it.
And he always goes that extra mile. Will fly a drone to see what's happening on the roof, etc. So we made sure that first Saturday, we went through the property and we made sure that we had the building and pest done in that first part of the next week. Then we had the contract reviewed and we also work with conveyances and lawyers who are commercially savvy. They are able to work in the best interest of our clients to sort of equalise those terms and conditions in the contract without actually making things too difficult to the point where the vendor solicitors are going to just say no to everything. So that was underway as well.
Now, if you are working with conveyancer and solicitor, they need to be communicative and they need to certainly be aware that they're working for you and not the other way around.
I have come across many solicitors, or lawyers who were recommended through friends, family, hairdressers to clients and said they've done great work for us and then found that actually they weren't great at all. They only worked 9am-5pm. They didn't copy me into communication. That could have led to time delays in any potential offers. They were being unreasonably harsh in what they were demanding and weren't working in the best interest of their client at all. They just wanted to be, for want of a better word, dick swinging their power around. I apologise for swearing, but that's literally what it was.
So it's really important to understand that who you're working with needs to be on your team and not the wrong team. You're paying them after all. So whilst that was all underway, that then gave me the option to put my client in the driver's seat and really assess what was going on with this sale.
Now, for one thing, I had worked with this sales agent before and I had bought prior to auction from them. So I knew that if the situation was right, they would be open to offers prior. And so it was then a case of assessing, were they open to doing that again? And what was the vendor's situation and would they be open to an offer prior? And then, who are the other buyers in the equation? So you've got to look at all these different facets before you can decide to make an offer or potentially that can really work against you.
So, assess that the agent was like, yeah, if the money's right, let's do a deal. What was the vendor's position? Well, they were looking to purchase and they had their eye on something. So potentially, if we came with the right offer, that would allow them to then make an offer elsewhere and buy in the same market as they were selling, which is to their advantage because prices are going up. They don't want to sell and then it takes three to six months even a year for them to purchase because that means effectively their money has become worth less.
So we knew that the vendors potentially would be open to an offer as well, but then it was a case of finding out where does the agent find value, where does the vendor find value and where do the other buyers find value and does that still match our budget as well?
We knew what the property was worth based on the comparable sales, but obviously we weren't gonna show our hand. I wasn't gonna say to the agent and put words in his mouth and say, look, what do you want me to pay? I was saying, hey, where do you see value for your clients? What does the vendor want to do? Where do they see value? i.e. How much money do they want for this house? And the one thing that the agent said was, well, it has to have a 2 in front of it. So there you go. Price guide completely out of the window. It had nothing to do with a 2.
The 2 had to do with the comparable sales in the area. So buyers who were savvy would know that to be the case. And there would be a whole bunch of buyers that had gone through the property thinking they were in with a chance, but were never going to make it in that 10% range, or looking at the guide, they would have been out of pocket.
So, I was comfortable with that. I said, okay, well, I'll need to talk to my client about this. Let's see what they say, and why do you say it has to have a 2 in front of it? And then he mentioned the sale over the back lane, which was fair. I then asked him lots of questions about the other buyers. Who are they? Are they local? Have they sold? Have they got a buyer's agent? How long have they been looking?
What else did they put an offer in on? Because he had all that information. Sales agents have a ton of information about other buyers. So I may as well ask them for that information, right? Because that then makes me build a much better picture of who I'm competing against.
So one of the buyers were... over it, as he said. They've been looking for ages, they keep missing out, and they're going to throw everything at it. So that was a dangerous situation to be in, because that happens a lot, that after people have been missing out on properties that they potentially didn't go all out for, then once they find something, they're just like, yeah, just, I want it done. So they overspend on something that they probably wouldn't have done three or six months ago.
They were ready to go, those buyers. And then there was another party who then came to the agent and said, yeah we're ready to go as well but he wasn't sure as to where they were when it came to their limit as such and how long they've been looking so a little bit less information and then there was a lots of other buyers circling i think three or four had asked for a contract etc etc. So, i then said to the agent, okay so we've had one Saturday, we've had one midweek inspection. My client came to look at it for a second time, was sure that this was the right property for them. What are you going to do? And the agent said, look, my client needs to see value from what we're doing. They want to see that second Saturday, which is very typical, actually. A lot of buyers or spenders, sorry, want to see that second Saturday just to see where the interest is really at, because the first Saturday is usually just for well, there's a lot more interest than real interest, if you like, because it'll be the neighbours and people sticky-beaking, people who don't have pre-approval, or they need to sell, all that kind of nonsense. So it's usually not until the second Saturday and the Monday following that they have a clear visibility as to who may be the actual contenders to purchase.
A lot of agents will recommend this to their vendors to say, okay, look, after that second Saturday, once I've got all the feedback, let's see who's really there. So that's what happened.
They had the second Saturday, we had our Building and Pest Inspection back. Very patiently waited. My client said, well, can't we make an offer? And I said, well, no, because they need, everybody else, and the vendor and the agent need to be ready to accept it. If you throw an offer out too early, and they're not ready, they'll reject it. A, that loses your firing power if someone else makes an offer the week after or to auction, right? But also it would mean that they would have to change the price guide alerting everyone else. So we don't want to do that. We have to sit quietly on our hands and waiting for the green light from the agent. So, the Monday rolled around after that second week, so that second Saturday, the agent contacted me and said, are you still there? Yes, we were. And he was doing the ring around and he was trying to contact everybody to see where they were with their interest.
He also asked me, he said, are you able to take it to $2.1m? And I said, I don't think so. No, no, no. That's above budget. Like, I don't think that's there. Let me talk to my clients. But, I don't think that's there.
So he was testing the waters and he also tested it with the other buyers. After the ring around, he decided that he had enough interest from buyers to potentially start the pre-auction bidding.
So I waited to see what eventuated. I didn't want to be the first person putting my offer out there, but we were ready to go. Our contract had been reviewed. We had our Building and Pest Inspection. We're comfortable around the zoning and et cetera. Now, there were two people who wanted to participate and were ready as such, but one of them wanted to get a Building and Pest Inspection and obviously there wasn't time so they contacted our Building and Pest guy to see if they could purchase the report, because the agent had told them that another buyer, us, had commissioned an independent report and they didn't want to use the building report from the vendor, which is clever.
So our building and pest person contacted me and said, are you okay, are you still in the running for this property? Because I've just had an inquiry from a potential buyer of that property and asking if they could purchase the report. And I said, no, absolutely not. You can't sell that on because we are hoping to purchase. So tip here is that if you commission an independent building and pest report, make sure that they don't on-sell it to another buyer without your knowledge. Because him saying no stopped them from making an offer. So that was our advantage here.
So our building and pest guy had to tell them no because my client was the owner of that report, right? And so he couldn't sell it without our approval. And of course we said no. That left us with one other buyer. Now, the agent had asked us in advance, and we'd spoken about this, whether a shorter settlement period would be of use to the vendor. Because I knew that my clients were renting from friends, so they had no particular period of time that they had to be out by or etc. So they could act quicker or also later, longer, longer than six weeks. And he said, well, actually, they could benefit from a four week settlement. Is your client able to do that? So If you're going to be offering a shorter settlement, always check with your broker first, or your bank, whoever you're borrowing the money from. Because most banks, most lenders do not like anything shorter than four weeks, four weeks minimum. But check that in advance, okay? And also check that with your broker or your lender that the property that you're looking to purchase is on their okay list as such, particularly with apartments, because some lenders will have restrictions around certain buildings or postcodes because they're overexposed there.
So when you're coming to the pointy end of potentially putting in an offer or going to auction, check with your broker, settlement period times, but also if the property is okay, and say to them, look, this is the property, I'm thinking of spending x amount of money on it so they can green light that. Because if something comes up with the financing that is not okay, that could be a stressful period of time for you, as you can imagine. So we checked with the broker, four weeks was fine with us. So we said, yeah, we can definitely write in four weeks as a settlement period along with our offer.
I decided to wait. Sometimes I put in the offer first, but I wasn't sure where this was gonna go. We knew that obviously the comparable sales were $2.040m. They were slightly inferior. So for the vendor to see value, we would have to be above that, even though the agent had said they would sell at $2m, but then they came back and said, well, what about $2.1m? And I said, oh no, that's crazy money. Even though I knew that actually I had priced it up to $2.1m. I texted the agent and said, hey, do you think these other guys are going to make an offer? And he said, yes, most likely. And lo and behold, within an hour they had offered $2.040m, just like the other sale in the other street. I then asked him, did he ask what their limit was and where they were? And he had tested that by asking them, hey, would you go to $2.1m? Potentially it's yours then. And he said that they didn't hesitate. Now, you can question whether that was truthful or not, but...I think that's where I guess my relationship with agents is different to unassisted buyers out there. I know this agent to be very truthful and open and communicative with me in the past, and so I didn't doubt what he was saying. Also because I knew the values around here, right? And I also knew that these guys were over it, and they were desperate to purchase just for it to be over. So thinking of all that, wasn't surprised that they said, yes, we can do $2.1m. So after deliberating and talking to my clients, and they had given me a maximum limit by the way of $2.1m which obviously the agent didn't know, I thought that it was strategically better to get to $2.1m first, because then they would have to cross their own limit, the other buyers, that is.
They would have to go over that magic $2.1m, because don't forget, a lot of buyers will have round numbers as their maximum. And that's why I usually have odd numbers. So normally my client would have done like $2.107m, example, right? So i thought if i go in at $2.1m as opposed to, they were at $2.404m, and i go in at $2.076m or something they make it to $2.1m, does that make sense? That gap is quite scary for any other buyer. But I also knew that it was gonna get there anyway, because I knew these other buyers had said yes to $2.1m in theory, even though they probably hadn't said that and not potentially thinking it was gonna go there.
But I knew it was gonna get there based on the comparable sales, because don't forget that you're not just dealing with other buyers, you're also dealing with the comparable sales, the facts that you're looking at, and what the vendor is prepared to accept. My client had a lot of faith and trust in me because that's what they're paying me for, my expertise and my strategic thinking. So I said, let's get $2.1m and offer the four week settlement.
So at this point, we hadn't offered anything yet. I'd just been talking with the agent. And so offer $2.1m. In the email, I wrote, I'm offering $2.1m, I'm offering four weeks, under the condition that it gets exchanged today. And so the agent called me and said, okay, let me see, let me do the ring around. Let me see if anybody else is still out there, just in case. And I'm gonna go back to the other buyers. Now, he's just doing his job, right? I made a joke and said, no, listen, let's do the deal now. You don't have to call anybody, like, just block them. But of course he has to see if anybody else is still out there. So he came back to me and said, listen, all the other buyers are out, but the initial people who offered, the ones who were over it, are deliberating.
So we were sitting on tenderhooks like shoot, we don't actually have any more money, this is it. And they came back after a couple of hours and their offer was that they could potentially increase their offer over $2.1m, but they needed a 12 week settlement. They needed their parents' help to increase their offer. So they didn't actually say how much the increase was. I don't know. But they were initially saying, we can increase the offer, but we need 12 weeks because our parents need to liquidate whatever. So the agent then said, look, Michelle, this is the situation. I'm going to go to the vendors and leave it up to them to decide. So there you have it.
We ended up getting the property not because we had more money but because we had more favorable terms. The agent and the vendor realised that offering a four week settlement was going to work in their favour to be able to purchase in potentially the same market as opposed to having to wait 12 weeks for that money to come in, whatever that extra little bit was going to be, because the market is moving up. So it's a huge gamble. It also meant that in that 12 weeks, they weren't able to look at anything potentially, right? So they settled for the bird in the hand, which was us, four weeks, $2.1m.
And that was the upper end of our limit, right? I usually have a price range of about a 5% variance as opposed to agents with a 10% because I want to give my clients as much surety as possible. And you know what the great thing is? We actually saw an off market inferior property literally a couple of days before we saw this one. It was an inferior location, diagonally across from a childcare center, on a busier road. That ended up selling for $2.1m. So actually, we got a good deal because we know that the location we're in is going to appreciate and value more so than the other off market that we saw. The house is fully renovated, they can just move in and get on with their lives.
So I hope that this scenario, this case study has given you some ideas on what to think about.
Timing is everything, questioning everything, asking questions is everything. Stay on good terms with the agents. I can't stress this enough. Like there's no point getting adversarial with an agent because you're not going to get anywhere with that. Agents are human beings too. So keep your relationship with the agents friendly, they want to just do their job. So, and just ask them all these questions that I've mentioned before throughout this conversation.
I hope that helps and if you have any questions for me, as always, get in touch hello@buyyourside.com.au. I'd love to hear from you. I also do the occasional TikTok, like and follow me there. Leave a review, please, so other people can find me. I would really appreciate it.
Anyway, until next time, thanks for listening.