Last Updated: 1st September, 2021

As soon as you hear “market downturn”, it is very easy to get swept up in the madness that comes with deciding whether to buy now or wait.

Experienced investors know that real estate is a long-term game and profiting in a falling market means staying true to a handful of fundamentals during the house-hunt.

Do your homework on location

Before you even step foot in an open house, learn to identify the opportunities in choosing the right location.

Capital cities, particularly the big three on the east coast (Sydney, Melbourne and Brisbane), are the first to feel the pain of a falling market.

That’s because they are usually the cause of inflated prices and speculative investing.

However, if you ever consider purchasing property outside of your postcode or even interstate, you might be in for a pleasant surprise.

This is particularly true for property investors pursuing a house flipping strategy with the aim to turn a quick capital gain.

Look to regionally areas and submarkets

In a falling market, opportunities can appear in many surprising locations. There can even be significant property price differences from street to street.

Regional areas, in particular, can be heavily-influenced by:

  • Affordability in major cities driving interest to the city outskirts.
  • Infrastructure developments.
  • Employment opportunities.
  • Population growth.
  • Tourism.

Understand the seller’s intentions

Buying below market value is possible, even in a seller’s market, if you understand the mindset of the vendor (property seller).

Typically, this has to do with how long the property has been on the market and whether the asking price is reasonable.

The first step is to do your due diligence on the property and the local market by following the 4-step guide on how to value a property.

Secondly, beware of properties that have been on the market for just 1-2 weeks.

The vendor may be holding out for a higher offer so now might not be the right time to come in with a lowball figure.

If the property has been advertised for six months or more, the vendor either has a sentimental attachment to the property, or they have put considerable time and money into renovations and repairs.

Either way, they’re unlikely to budge on price!

Golden tip: consider making a low offer on a property that has been on the market for six weeks or more.

Most vendors at this point recognise that the initial interest in the property has passed, so they’re willing to consider lower offers.

If you’re not entirely comfortable in purchasing at the vendor’s asking price, have a chat with the real estate agent after the open house.

Ask them if they have any properties where the vendor wants to sell quickly.

Ultimately, the vendor wants to make a sale, so, if they can get it with another client, the agent will help you out.

Auctions will always be madness

Auctions are the one place where emotions run high so the key is not to get caught up in the show!

Set a budget and remember that it is ok to walk away.

Make offers on multiple properties

Remember lesson 2? Do that another 5, 10 or 20 more times!

Moving fast and making lower offers on multiple properties is what professional properties do to snap up a bargain.

If one property falls through or the vendor is asking too much, learn to move on quickly in the knowledge that many other local suburbs are experiencing a slowdown.

Keep this up, even when you start negotiations with a vendor.

Real estate agents will often pressure you into signing the Contract of Sale but, in a cold market, you have the power to turn the tables.

Tell them that you have made offers on other properties and, unless the vendor is willing to drop their asking price, you can threaten to move on.

Always get pre-approval first

We can’t tell you the countless times that we have received a call from a client at the eleventh hour needing a home loan approval after paying their deposit.

In many cases, they were previously declined by a lender, unaware that they would encounter any problems getting approved.

There are actually many reasons that you can be knocked back for a mortgage including:

  • Your deposit is too small, or you don’t have genuine savings.
  • You have a black mark on your credit file that you didn’t know was there.
  • Your property is unacceptable to the bank.
  • You have an unusual employment situation.
  • Many other reasons.

The best approach is to get home loan pre-approval before you start making offers on properties.

The next step is to ensure that the sales contract has a cooling off period and a finance clause.

You can then go into negotiations with confidence in your borrowing power, the knowledge that you have three months before your pre-approval expires, and that you have protection in case things turn pear-shaped at settlement.

Avoid costly selling mistakes

These common mistakes can cost you thousands of dollars, not to mention delays in successfully selling a property.

The following examples contribute to what is known as “opportunity cost”:

  • Choosing an inexperienced real estate agent.
  • Agreeing to pay your agent more than what you should
  • Your property is unacceptable to the bank.
  • You have an unusual employment situation.
  • Many other reasons.

Be prepared to move quickly

It’s not about timing the market: it’s about time in the market.

This sentiment still holds true even when real estate prices are in a downturn.

Great investment opportunities won’t stay on the market for long so get started on your home buying journey today by speaking with one of our experienced mortgage brokers.

We can assess your eligibility for a home loan.

All you have to do is call 1300 889 743 or fill in our online enquiry form today.