Almost all of us have been impacted financially by the COVID-19 pandemic. Personally, I’ve been impacted on a number of fronts – but perhaps the hardest one has been my property sale.
This home is listed for sale for $875,000.
Today, my real estate agent reluctantly forwarded an offer:
“As the market is clearly on the way down, we would like to make an offer $675k for this property subject to building inspect. Finance 14 days. $10k deposit cash.”
I’ve been a property journalist for almost 15 years, so I’m not surprised by this low-ball tactic. But I am disappointed that there are bottom feeders in the market already, seeking to profit off of our collective pain and misery.
It’s obvious that this buyer has taken the scattergun approach: he’s messaging dozens, perhaps hundreds of property sellers and making skeezy low-ball offers of 25% or more below asking price.
The thing is, the buyer clearly hasn’t done his research. We’re not quite at “pandemic pricing” yet…
1. “The market is clearly on the way down”
Is it? We’re at the very beginning of this pandemic, and the only thing that is clear right now is that everyone has left the market – buyers and sellers alike. Demand has fallen, but so has supply. Where buyers are forced to sell, they may be inclined to accept a low-ball offer. But overall, the fundamentals for Australian property are solid. As property analyst John Lindeman confirms, “leading indicators suggest that property prices will continue to rise in our major capital cities despite the pandemic, and that they could rise strongly once the coronavirus has become old news.”
2. This crisis is health-based
This is a health crisis driving an economic crisis, rather than a financial crisis of its own accord. Once the earth gets back on its axis and confidence returns around employment and income (however long that takes), property markets will stabilise. And once pent-up demand for property is unleashed, we are likely to see values surge. “The 3-years subsequent to both Australia’s last recession and the GFC produced strong increases in median house prices in 8 out of 8 capital cities and most regional locations,” says Simon Pressley, head of property market research and Managing Director at Propertyology.
3. Finance in 14 days?
Anyone who can get finance approved, processed and settled in 14 days right now must be a magician. I interviewed a senior bank executive last week who confessed that his bank, one of the Big 4, had received more enquiries in one week than they usually receive in 12 months! Offering swift finance terms in your offer is a strategy people use to make their offer more enticing, but it’s not realistic right now.
What to do with a low-ball offer?
Fortunately, we’re not in a position where we’re desperate to sell, so we brushed him off.
But what if your situation is dire? There are other sellers in the market who are desperate, stressed out, anxious, not sleeping. They need to entertain any potential indication of interest. It’s these sellers I worry about, as they may engage with bottom-feeding buyers as if they’re offering any sort of solution – when really they’re just trying to profit off someone else’s dire financial situation.
So what can you do from here?
First, try to adopt the mindset that it’s just business. Nothing personal. It definitely feels personal, I know! We had poured blood, sweat and tears into our home, not to mention the funds flowing out, as we spent two months letting endless contractors through our home at 7 in the morning for renovations and repairs. A low-ball offer feels like a slap in the face.
But this is a time when facts and figures are your ally. Your situation may feel desperate, but there are plenty of things you can do before resorting to Plan S: selling your house for a massive loss. Think clearly about your options:
- Can you rent out your home for the next 6-12 months and move in with relatives?
- What if you rent it out, and then rent somewhere cheaper yourself?
- Can you rent out one bedroom to get some cashflow coming in?
- If you’re committed to two properties, can you list one for rent for the next 6-12 months?
- If you’re committed to several properties and the financial obligation seems overwhelming, can you restructure your finances? This may unlock some equity/value in your property.
- Can you refinance to an interest-only loan?
- Or, can you refinance to a loan with a lower interest rate?
- Can you apply for a mortgage repayment for six months?
Bottom line: there are a number of avenues you can explore, before you go down the path of entertaining low-ball offers on your property. If you’re overwhelmed, stressed out and not sure what step to take next, reach out to an experienced mortage broker or property advisor to get guidance on the best way to move forward.