The 'One and Done' - Here to stay or just a result of the rapid rate increases?
Is the 'One and Done' here to stay or is it only a short term reaction to the successive RBA interest rate increases?
Firstly, what is the 'One and Done'? Also known as the 'First and Final Offer'. This is when a property buyer is keen to purchase a property and has prepared themselves to make just the one written, best and final offer to purchase a property. If they get it for that price then happy days, and if they don't well that is okay as well.
The first and final offer is a method of negotiating as old as time and can be a tactic utilised by experienced property purchasers as well as less experienced buyers. The key reasons for the implementation of this method of negotiating varies, and includes:
- Fear - Fear of the negative movements in the market, of rising bank interest rates, or of simply paying too much!
- Budget limitations - Being limited by the bank, placing a self-limited budget, or a lack of understanding of what their true buying budget is.
- Experience - In a volatile economy experienced property purchasers, such as professional investors, implement such offers to see if a seller is very motivated and serious about moving on from the property.
- Inexperience - New property buyers who are nervous and may be relying on the expertise of friends, family, colleagues or even service providers such as their mortgage broker can dip their toe in the water by using this method of negotiating. The buyer and their trusted adviser may not understand the property well enough nor the market or the buyer's personal financial position. They may not also understand the power of fair and reasonable negotiation and the need to concede to score a decent deal.
In today's Perth property market as an active selling agent I am not personally witnessing many bargain buys, being the case where the buyer absolutely wins and the seller is absolutely robbed. What I am seeing are fair deals being agreed to, where the buyer is securing a quality property for a good buy price and the seller is achieving a result that is making them happy enough to sell (albeit mildly happy on some occasions).
But is this method of negotiating a good idea and why has it come back in to the current Perth property market? As an experienced Perth property selling agent I am seeing more and more of this in 2022. With the Perth market showing its first monthly price fall in more than two years (Source: CoreLogic via The West Australian, Friday September 9, 2022), and our WA household mortgage serviceability being one of the best in the nation across all states and territories the 'one and done' is not likely to be as effective as it may be in other Australian states such as our east coast counter-parts. In the east coast many markets are experiencing more drastic changes in their property price growth than our similar Western Australian markets. With continuing uncertainty about whether housing and apartment prices in Western Australia will soften, grow or remain steady, my thoughts are that the 'one and done' will continue to pop its head up as we sell more and more Perth property in 2022.
The answer to whether it is a good negotiation tactic or not is in the eye of the beholder. If the property buyer is truly happy to pass on the property if their first and final offer is not accepted, then it certainly is the right method to follow for that buyer. But if the buyer has a larger budget, completed their due diligence and loves the property enough to want to negotiate further to secure the property that they really want, then perhaps the best thing when negotiating is to be firm but fair. Most of the time when buying a property the buyer will pay that little bit more for the quality property that they want, which for a long term property acquisition is perfectly fine, and this is the key! Property purchasing should be for a long term acquisition and hold.
If you are a seller in 2022 and considering whether a buyer's offer is one to consider, to counter-offer or to flat out reject, my suggestion is to carefully review the market information provided by your real estate agent at the time of presenting the offer, consider the conditions included in the offer and most of all to trust in the professional suggestions that your agent provides. As your agent we have a duty to work in your best interest and to provide timely and accurate information, which is the key to making the correct decision in a changing and uncertain market. Achieving the best sales result for you is our job and sometimes to do this we need to educate as well as negotiate.
Hopefully the offer you receive for your property is a great one and that the buyer's 'one and done' is well above your expectation. This is the dream of course! If only real estate could be so easy.
Brendon Habak - Selling Principal