Buying Through the Christmas Cheer

2008 Update

By Justin Eslick

This article first appeared in December 2007, but because Christmas comes around once a year it has become relevant once again. The article has been updated for current market conditions, but nothing much has changed... there are still pitfalls and opportunities to be found during the Christmas period!

Christmas is a time of many indulgences, from excesses in food and drink, to large gatherings of friends and families, to time in the sun and sunburn. It is easy to see why some people may not be thinking clearly when it comes to property at this time of the year and why many people find it easy to put it on the back-burner.  But this shouldn’t be the case as this time of the year should spell OPPORTUNITY for investors. Providing they think it through. Let’s explore.

The Pitfalls

No doubt the major hurdle is the timing and everything that this brings. Have you ever tried to get anything renovated or repaired the day before Christmas? How about a building inspector before the New Year? It is never easy. Not to mention all the soldiers that make up your army that close their doors at this time of year – accountants, solicitors, financiers, inspectors, real estate agents, property managers, handymen, town planners, etc. etc.
The list goes on...

None the less this should not be an excuse for avoiding the purchase of property.  You just need to take these things into account and be up to speed on who is available and who isn’t.

One thing to note is that a lot of builders, tradespeople, handymen and professional consultants are not busy like that have been in the last few years. Things have slowed down for them so you may find them more willing to work during the Christmas period. It is a strange phenomenon that when they are at their busiest, they are never available over Christmas – for some of them up to 5 weeks!

The easiest approach is to make the agent aware that there are likely time delays. They are more willing to accept longer conditions as a result. Don’t forget also that they themselves might be planning on a little bit of Christmas time-off and may even appreciate the delays. Real estate agents take very few holidays, so when they do go away it can be very difficult to reach them!

Further supporting the potential for lengthier conditions is the fact that there are generally less people looking to buy at this time - regardless of the state of the market, but especially when things are quiet. There are some people out there who will be watching every dollar that goes into the Christmas stocking and the last thing on their mind is spending a few hundred thousand on a property.  This enables greater freedom for negotiation and who knows, as a result you may pick up a bargain!

The question must be asked also, "What if they won't accept lengthier conditions?"  You have three options.

1. Have everything in place so that the timing is not going to be an issue (can be very hard!). The main one is finance – try getting finance out of a lender on New Years day!
2. Minimise the appearance of these delays. The term ‘business days’ in contracts is well known, but it takes on a whole new meaning during the Christmas/New Year period. For example, the term ’14 business days’ on a contract signed on the Friday before Christmas in 2008 actually equates to a total of 25 days!
3. Walk away.

As mentioned there are less people looking at this time of the year and in the current market, so the chances of the agent coming back to you are greater than usual.

The Opportunities.

You will have already picked up on a couple of the positives of buying just prior to Christmas. The first obvious one is less people looking equals less competition, which means greater flexibility in negotiating conditions, a more likely scenario of buying at a bargain price and a better chance at securing deals. The other obvious positive is in the potential to increase timeframes.

Another great outcome of buying at this time of year is that settlement will often be in January or early February – peak rental time! This works in reverse too – the properties you are buying you are buying at a better price because often they are vacant and will likely remain vacant for a number of weeks because no one likes to move just before Christmas.

To fully appreciate some of the potential this time of year can bring, you need to understand the selling and marketing process for a property.

Traditionally and in a normal market a property is listed with a four week advertising campaign and a 60 day exclusive agency. Naturally as a result there are less properties listed from around the end of November and start of December, which makes you wonder why someone would list after this period in time. In most cases it is because people either don’t have a choice (one of the dreaded ‘D’s’ – desperate) or they don’t quite realise the ramifications. It is not a good time to be a ‘D’ either. What if you list two weeks before Christmas and there is very little interest in the first of those weeks? All of a sudden you are looking down the barrel of another two to three weeks of inactivity. That hurts.

Get into the mind of the agent also. They have 60 days of exclusivity, after that there is no certainty. But they can very easily lose 1-3 weeks of that due to Christmas and the New Year. This prospect, plus the attraction of selling ‘one last property’ before Christmas can really get them working in the buyer’s favour, especially of their sales quota is down. Most agents will realise that they have limited prospect of selling many properties just prior to and over Christmas and those working wholly and solely on commission basis will be keen to get a deal over the line.

One last tip for those looking at traveling over the break. Do not buy any property while on holidays in a market you do not know! There are so many stories out there of people who return from holidays, having placed under contract a beach shack or holiday apartment. In most cases, they are in locations where they do not know the market intimately. Generally it is the euphoria that being on holidays creates that makes any holiday purchase look good! Especially now, where there is so much talk of bad economic times, a good holiday can really lift you into the clouds. For those of you who can't help yourselves, by all means look, but make sure you come home, do your research and investigate the market before buying that holiday home. It is amazing how different things can look once the holiday is over.

Merry Christmas and I hope that after reading this article there are a number of people who look towards Christmas with a slightly different mindset.

Justin Eslick can be contacted through Investigate Property.  For more information click here.