Current Market Insights
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Understanding the property market can be a challenging thing, with highs and lows, twists and turns. The media and agents tend to spread the news they want you to hear, with the advice they want you to follow.
Current Market Insights is an unbiased look into what is happening, what tips you can use to buy, sell, or rent, and that you wont find anywhere else.
Current Market Insights
Episode 100: Buy First or Sell First? Avoiding Costly Traps
Hosts Ciaran O'Brien and Peter O'Malley unpack why buying before selling snares one in ten property owners — and how to avoid panic discounts, bridging finance blowouts, and stressful settlement timelines. With real examples and proven strategies, they show how to trade uncertainty for control when making your next move.
We also discuss:
- Why appraisals often overpromise and mislead sellers
- How seasonal stock surges shift buyer power and market dynamics
- The dangers of vendor overconfidence and “social proof” pricing traps
- Hidden title, access, and compliance issues that derail sales
- Buying under pressure versus selling under pressure — and which is riskier
- Using long settlements to create time and certainty
- Aligning settlement dates to reduce financial and emotional stress
- The true cost and complexity of bridging finance
- Rent-backs and other set plays that give sellers flexibility
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
Hello everyone, welcome to another edition of Current Market Insights. I'm your host, Kieran O'Brien, and with me is Mr. Peter O'Malley. Peter, hello. Good afternoon, Kieran. Good afternoon, Peter. I uh want to spend today's topic on uh something a little bit interesting and exciting, Peter, which uh you were talking to me earlier about real estate's greatest trap, and I couldn't figure out what it was, and we thought, what a great thing to talk about. So uh if you can enlighten me and our listeners, Mr. O'Malley, what is real estate's greatest trap?
SPEAKER_02:It's a common one that a lot of people run the gauntlet and get away with it, Kieran. So people don't see it as real estate's greatest trap. But it captures about one in ten people who do this, and those that it captures, it can be quite devastating, and that's buying before selling. I mean, 10%'s pretty high. Oh, it is, absolutely it is. That's why I call it real estate's greatest trap, because every, you know, the nine people that buy before um they've sold and then sell successfully and it all comes together, don't understand what all the fuss is about. But for those one in ten where it goes wrong to some degree, um, some of them it goes horribly wrong and it's devastating.
SPEAKER_01:And I'm sure, you know, our listeners and myself included, I I think I even said to you once a couple of years ago, I had a friend who made this mistake, you know, bought a property thinking that theirs would sell quite easily, things go south, ended up on finance and a whole range of things. So for people like my friend or anyone listening who has been caught in this trap as the unfortunate 10%, how do buyers and sellers, you of whichever part of the cycle they're in, how do they go about navigating that kind of transaction, that swap, uh, so that they can avoid being in the 10%?
SPEAKER_02:Uh look, let's talk about why it goes wrong first of all. I think that's really important so that you know people who are considering doing this may see themselves in there. And some of the reasons that buying before selling goes wrong is that most people will get market appraisals on their existing property before they purchase a new one. Yep. And at that stage, the agent's goal is to be the listing agent. It's not to get the price accurate. And one way, as we all know, to be the listing agent is to be optimistic on price. Yep. So as a vendor, you're susceptible at that point to an overquote. Um, then the the adjunct of that, and the agent during the campaign, if the price is softer than what they've quoted, will always default to this point. There are at times genuine shifts in the market. And obviously, we're recording this during spring when a lot of stock comes to market. So you may have got a market appraisal from a real estate agent in July, August, where it looks like properties were turning over in a quicker time frame, and the agent might have been confident about a price point at in July, August on your property. That doesn't necessarily hold in August when the selling competition for the same sort of properties quadrupled. Yeah. And uh, if we just take one suburb, for example, at the moment, Balmain, um, houses on market um in in Balmain in July and early August were sort of around 12, 15 houses. Yeah. We're we're running at 30 plus houses at the moment. So stock inventory has expanded very quickly, um, as it always does during spring, and that's given buyers a lot of choice. Um, so there are market shifts. Um, the other thing is the agents can be accurate in their price guide when they meet the prospective vendor. But the vendor's had 10 years of living in the home, knows its true benefits and features, and the vendor has an excess overconfidence in what their home will sell for because every friend and family member who's visited the home has complimented it on what a terrific home it is. Yeah, that does not necessarily translate into a price that one wants, um, but it can in the short term breed overconfidence in the vendor. And then you can stumble on unforeseen issues that you didn't see coming that suddenly drag it out on you, whether it be um, you know, you don't have an occupation certificate or there's an encroachment on uh your property that needs to be resolved, or uh last year, for example, someone was selling their property and they didn't realize that their land ran over two lots. And when they purchased it 50, 60 years ago, this was a lady in her um late 80s. Yep. When she purchased the home 50, 60 years ago, the conveyancer at the time never registered the second lot.
SPEAKER_01:Right.
SPEAKER_02:And that held the settlement up by nine months as we were chasing through Lance title and having to do possessory title, and the neighbor put an opportunistic claim in, which was pretty rude. Um, was unsuccessful, but but pretty rude to even put a claim in. Yeah. And um clearly the uh the person that sold her the land had long passed, so um his descendants, we had to find his descendants and sign Stat Dex. Stream example, I know, but um we had another sale. It happens, we had another sale more recently where um uh the owner thought the uh the land next to him was a right-of-way in his favor and told all the agents that when he interviewed them for the job. Yeah, and then when the contract came from, was came through to us because we won the listing. It's like, where's the uh where's the documentation uh for the right-of-ways? Like, I know the neighbors have always said I can use it. It's like that's not a right-of-way. That's that's that's that's a gentleman's agreement. That's a gentleman's agreement until it's not. Yeah. Um, so unforeseen things can come up. I'm not saying I've captured all of the unforeseen issues in that explanation there, but it just gives you an idea that uh you can get blindsided.
SPEAKER_01:Well, I mean, anecdotally, and uh, you know, a good topic to talk about. I quite literally had a conversation maybe two hours ago uh with someone talking about a very similar scenario, you know, selling the family home. We're given confidence, the agent bought the listing for for lack of a better description in some ways. Um, came time for the campaign, the interest wasn't there, the price was knocked down, you know, the chipping away, the conditioning that we've talked about. Uh, and then in that period, they've gone on, looked at other properties elsewhere, got their confidence and hopes up about what they could afford based on the estimate, you know, all that that old classic tale. Uh, and I think probably the only thing, thankfully, in their favour is they hadn't, they didn't purchase the new one, anticipating the one to go, you know, they're selling it the way it would, and and they got caught out. And luckily they didn't buy the other one and and they were able to avoid a disaster. But it it can easily happen. Uh, had they been a little bit more ambitious or or uh eager to move on, they could have found themselves in a very nasty trap.
SPEAKER_02:No, indeed. So we uh often caution people that they'll be better buyers in the marketplace, they'll be more decisive if they secure a sale price first, knowing exactly how much they've got secured as far as a sale and run through the process and know that none of those unforeseen circumstances or overquotes or overconfidence, uh they're all they're all out of play. Yeah. Once you've got a secure contract on the property, there's no doubt.
SPEAKER_01:It's it it strikes me as such a uh like an alien concept to go out and purchase something on the idea of an outcome. I like this is going to be such a bizarre example, but I think of you know Chevy Chase, the old national lampoon movies where he uh he's hanging out for his bonus check to build the pool, right? It's like the the core of the movie. And I remember watching that as a kid thinking, what a funny, you know, what a funny thing to happen. And then as an adult thinking, who the hell like buys a pool before they get their check? Like, and that's kind of what this is, you know, you you're working on the idea that everything will, the dominoes will fall the way you want them to, and you can go out and make this, you know, decisive choices based on that. But I think that's got to be, I mean, that's risky as an element anyway.
SPEAKER_02:So how how people may be able to see themselves and catch themselves in this situation is that it's almost a cliche that we hear from people that are buy sells is look, um, we're gonna we're gonna buy first. We know we'll have no problem selling ours, yeah. Um, but what we want is unique or it's rarely offered. So uh we'd prefer to buy, knowing that we can sell ours easily. And it's like, okay, and who said you can sell it easily? Yeah.
SPEAKER_01:Well, they I would assume in many of those cases they bought it quickly because they loved it. Therefore, the inverse is true when they go to sell, right? That they just, well, someone else will snap it up in five days.
SPEAKER_02:Yeah, and well meaning, friends and advisors, your house is lovely, it'll go quicker, it'll go for more, it'll go, it's better than the one down the road. But at the end of the day, until a buyer turns up pen in hand, ready to sign a contract, uh, you know, with a with a you know, five or ten percent deposit, um, it's all whistling in the wind.
SPEAKER_01:Yeah. Is there before we kind of tackle or have a bit of a look at uh what people can do to avoid these, the majority of these, are there any other scenarios? And I thinking more in the settlement phase, you obviously mentioned some extreme ones with the um like the easements and the right-aways and all that kind of thing. But extreme, but not that uncommon in the inner west, though I should caution. Oh, of course. I think your your uh maybe your example was quite extreme being 60 years without titles or whatever. Um, but more so, are there scenarios where and I I'm thinking more about like failure to complete within a contract where uh you know the buyer's finance isn't approved or the seller's got some other issue. Are there scenarios that could actually you know lead to this kind of situation where you've already exchanged and you're just going through the settlement period?
SPEAKER_02:Oh, look, there's always extremities. Parties um unfortunately can die between exchange and settlement. Um, parties can go bankrupt, unfortunately. Um, parties can change their mind. I've had three or four vendors over the years say to me between exchange and settlement, I I regret selling. I don't have a problem with what you did in selling it. You did a great job, but I regret selling it. Can you ask the buyer if uh I you know we can tear the contract up?
SPEAKER_01:Yeah. But obviously the buyers are under no obligation there to back out, right?
SPEAKER_02:Oh, absolutely. Yeah, so um look, they're they're all all those sorts of examples between exchange unconditional exchange and settlement uh are so rare that they're probably not worth pulling apart because they're such always unique and highly rare circumstances that they never really play out. Once you get to an unconditional contract, you're pretty good. So I don't want to frighten the daylights out of people to you know stop them from acting and doing. Um all we're saying here today is that um buying unconditionally before you've sold your existing property carries an element of risk, and for some people the risk is zero, basically nine out of ten, pull it off without incident. But those one out of ten where it goes wrong, it goes wrong to varying degrees, and some of them it goes horribly wrong on them.
SPEAKER_01:Okay, so what then can people do, or what are the best tips that you can give for people to uh as much as they can, other than just simply saying, well, don't buy until you sell, uh, which is like you know, you can't have the problem if it doesn't exist in the first, you know, in the first place. But are there any kind of proactive steps that people can take or any things that um you know they might be able to consider that can help alleviate the risk?
SPEAKER_02:Yeah, look, I think um if you sell first with a long settlement, um it gives you time to make a property purchase. Yep. So I always say in my client meetings that you're either going to sell under pressure or buy under pressure. And you'd rather be buying under pressure in my view than selling under pressure. Yeah. Because if you're buying under pressure, meaning you've sold yours and you need somewhere to buy, if you don't find the right home, which you probably will, but if you don't find the right home, you can just rent until you do. Yeah. That's your worst case scenario. Where if you're selling under pressure, you've got to complete on the contract. And um if you can't sell yours um for the price you want, but you've got a time frame in which you need to sell, you've only got one option. Yeah, and that's drop the price until someone bites. Yeah, and that that that that can be financially devastating for a lot of people because they hadn't budgeted budgeted for such a scenario. And some agents will highlight this risk of people who are buying first, and some won't. Um, excuse me, but it's a risk that's always there, whether uh whether the consumer is conscious of it if not or not. So um uh if you do choose to uh transact um together, um I think you should get a delayed settlement on the on the sale, as we discussed, and aim to settle with the purchase on the same day.
SPEAKER_01:Okay. I mean, good good advice. That is kind of like the the gold standard, right? Of of the way to approach this. Um just I guess adding a another thing into the mix there. The person you you say one option for the sellers who are under pressure is to cut the price and just get a sale through. One potential alternative is something like bridging finance. If they you know need to meet the loan obligations in time or whatever it might be, just very, very briefly for our listeners who may never have engaged with uh bridging finance, one of the things that I know about it, like it's notoriously uh kind of expensive to maintain. What is it kind of I I guess what does it look like to use bridging finance and and what kind of impact does that have on people that you know that have been caught in that situation?
SPEAKER_02:Well, look, you're carrying you're carrying a second full mortgage at a at a higher interest rate, yeah, at a penalty rate, essentially.
SPEAKER_01:Yeah.
SPEAKER_02:Yeah. And um you can say, well, I'm not gonna drop the price, I'm gonna wear the bridging finance till I sell. But the reason your property's not selling is probably because it's pitched too high for the current market. Yeah, and unless the market's actively rising, you're gonna have to drop your price at some stage to meet the market anyway. So if you pay for a lot of bridging finance and then go, that didn't work, so let's go to plan B and adjust the price to meet the market, you've kind of paid double. You're just burning money. You're burning money because you got the way you've got to look at it. I always try to structure a deal where bridging finance is not a part of the deal because that's just a bank instrument where the the only winner out of that is the bank. Yeah. I always say to the vendor, why don't you give the buyer a longer settlement in return for a higher price? And instead of them having to give the money to the bank in the form of bridging finance, they give it to you in the turn in the you know, in the frame of a higher price. Yeah. And that that often works, not always, but often works for people.
SPEAKER_01:So in your experience, do you find that most uh most parties to an agreement, you know, whether it be the seller or the buyer or the conveyances involved, uh are most of them able to coordinate the sale in such a way that it can all be wrapped up in a single day? I know like doing some trust stuff for you over the years, I've dealt with a couple where it's all, you know, it's been a bit of coordination to get things through. But how, you know, in your experience, how willing are parties to actually negotiate around and make it happen?
SPEAKER_02:Look, try trying to buy and sell on the same day is sort of, you know, just asking too much. Some people, just through events, pull that off.
SPEAKER_01:Yep.
SPEAKER_02:Let me tell you, for the people that are buying and selling, that's about 1%. One in a hundred buy and sell on the very same day. And settle it all on the same day. Well, what you should what you should be looking to do is don't worry about um what the exchange date is, because that doesn't matter. Yeah.
SPEAKER_01:What matters is the settlement date. Sorry, that's what I meant by my question. Do you find that most parties are willing to kind of coordinate and compromise to get the settlement dates to line up? Yeah. Okay. Yeah.
SPEAKER_02:Not always. Sometimes there's a little bit of bridging finance, but let me say this, Kieran. Paying three weeks bridging finance just to build a bridge between the early settlement on one and the closure of the other, um, but knowing that you have both transactions contractually secured is a whole lot easier than settling on a second property without having sold your first and not knowing when you're going to sell your existing home for and for how much, because the market response is not as anticipated.
SPEAKER_01:Yeah. Oh, well, that's it. And I think most people are willing to pay a little bit in interest in finance if if there is a like a finite end date, right? It's it's okay to know that there's only three or four weeks worth of rent until we can do what we need to do or finance or whatever.
SPEAKER_02:It's the open-ended bridging finance that is is frightening. Yeah. Because it's like we don't know who our buyer is, we don't know how much they're offering, we don't know what their settlement terms are.
SPEAKER_01:Yep.
SPEAKER_02:And we don't know when they're coming along.
SPEAKER_01:Well, one final point then before we wrap up, Peter, I over the the years that I've known you, there's been a few occasions where we've had uh sellers either then rent back the property they've purchased or similar to help them with what they're doing, whether it be to buy another one or to, you know, to kind of work through and find a solution. Do you have you found in your experience that that is often an another potential avenue to have that communication between buyer and seller where you know there may be some negotiation around we'll settle but we'll change the dates and you pay us a little bit of fight, you know, bridging finance to keep yourself settled while you sort the rest of it out.
SPEAKER_02:Yeah, it can go that way, absolutely.
SPEAKER_01:Yeah. Which is another alternative if things don't quite pan out.
SPEAKER_02:The longer you're in real estate sales, the more sort of obscure tricks or tactics that you or ploys or set plays that you come across, there you go, that's a good one. I'll I'll use that again in the future at some stage. So, you know, the the new guys coming into the office, they'll get caught in a situation. We'll introduce uh, you know, a set play that we use once every four or five years, they don't see it coming. How'd you think of that? It's like I didn't really think of it. Um we just we just used it five years ago and I just dusted it off. Yeah, you know, um, even um um God bless him, Phil Harris is in Harris Partners. Every so often um I'll use one of Phil Harris's set plays, and someone will go, That's really creative. Where how did you think of that? And it's like I didn't. Phil Harris told me that 25 years ago.
SPEAKER_01:Yeah, yeah. Look, uh good good topic today, Peter. I think um it's you know over the the last period we we've done a few episodes where we have talked about some of the things that people transacting in real estate may not think about. And I think it's important to continue, you know, providing a bit of education and insight as we do. And I know that uh our listers certainly value your experience. So thank you for coming in. Yeah, pleasure, Kieran. Cheers. Thank you, and thanks to everyone for listening to Current Market Insights. We look forward to speaking with you next time.
SPEAKER_00:Thanks for joining us on the current market in summits, puppet columbus. Realistically, the puppet columbus, performing realistically insummings, the woman, anyone else.
