Too low? ‘Insulting offers’ getting zero traction in current market

Buyers who have pre-approvals ready and raring to go are missing out on snapping up properties by making “ridiculous” offers, mortgage brokers say.

Time and time again mortgage brokers are seeing these bargain-hunting buyers miss out on homes they want because they think they can get them for absolute steals.

Loan Market Tauranga mortgage adviser Dave Williams said one of the reasons bank pre-approvals don't always result in settlements is because of the gap between what purchasers are willing to pay and what sellers are willing to accept.

“I think purchasers now are the ones being a little bit unrealistic to be honest because vendors seem to be willing to come down, but purchasers don’t really seem to be willing to go up,” he said.

“A cheeky offer is one thing, but an unrealistic insulting offer is another and it actually devalues the option of putting a cheeky offer in.”

Williams said a cheeky offer needs to be realistic and based on information such as current online estimates and recent sales.

“There’s enough information to put in a fair offer. If you are going in too low and it’s just completely unrealistic – remembering, of course, that the vendors are also looking at these figures and are like, ‘just a minute that’s what the house down the road sold for and it is kind of comparable and it was only three weeks ago so it’s not unreasonable for me to want that figure’.”

EasyStreet mortgage broker Gareth Veale agrees some buyers – especially first-home buyers – are expecting too much of a bargain.

Veale, who is based in Christchurch, had one client put in an extremely low offer only to miss out when the house sold for significantly more than what they wanted to pay.

EasyStreet mortgage broker Gareth Veale says buyers need to be realistic about the market they are in. Photo / Supplied

“I’ve seen clients in the first-home situation in Christchurch who are just putting ridiculous offers on properties thinking the market has shifted so much, but the properties are going for a $100,000 more than what they have offered.”

People are also being quite picky about what they want, he said.

Harcourts Papakura salesperson Alex Dunn has seen buyers offer almost $200,000 less than what the property actually sells for.

The first offer on a Takanini house he was marketing was just under $500,000, but the property ended up selling in the high-$600,000s.

Often the really low offers are made when the property has been on the market for a little bit longer, he said.

“Buyers try and be advantageous. I guess the mindset they are coming from is they are hearing through different channels in the media that it’s a buyers' market so they take that quite literally and think they might be the only buyer in the market so they just give whatever offer they come up with and whether the vendor comes back or not they are not really too phased.”

Other buyers tend to have a strategy where they make offers about $100,000 less than the capital valuation, he said.

But his advice to buyers is to take the time to understand the market and look at comparable or recent sales before making an offer.

“I know there’s a lot of fear with buyers around not over-paying and that probably feeds into throwing these lower offers in because they probably think ‘if I put in a low enough offer, I’m not going to over-pay and if I get a deal at the same time’.”

A two-bedroom brick and tile home at 2/58 East Street, in Papakura, Auckland, has been priced to sell, according to the listing agent. Photo / Supplied

Another two-bedroom brick and tile home at 2/27 Duke Street, in Papakura, Auckland, has a $695,000 price tag. Photo / Supplied

Dunn is selling a two-bedroom, one-bathroom home at 2/58 East Street that is being marketed as “priced to sell” and another at 2/27 Duke Street with an asking price of $695,000 which he is selling on behalf of investors who are cashing up. Both are in good areas and would suit first-home buyers, he said.

The vendor’s motivation for selling also plays a part in whether they are ready to meet the market and whether they just want to sell or actually need to.

And these low-blow offers are happening around the country.

EVES Waikato general manager Sean Foster said in a changing market where the media is representing a downward spiral in property prices and activity, opportunists start showing up.

“Do we see the opportunists in Hamilton where they feel they are going to get an absolute bargain? Yes, they are out there.”

However, Foster said while they have to present all offers to their vendors, the ones that are, say, more than $250,000 under the asking price just don’t go anywhere.

“They just get zero traction from our end.”

Foster said vendors are more realistic than this time last year and most are ready to meet the market.

“Right now, I know that our vendors that we are working with understand and, look there are always exceptions, I guess with our team we are now having properties placed on the market that meet current market conditions more than anything.”