Finally get off the rollercoaster of offering #allthethings by uncovering your true potential
Expert buyer’s advocate, founder of Amy Lunardi Property and the host of The First Home Guidebook - an educational podcast & online course
that empowers first-home buyers with all the necessary tools and knowledge needed to buy their first home.
When it comes to real estate the funny thing is everyone has an opinion, but not everyone should be giving advice!
In today’s post, I’m talking all things BAD REAL ESTATE advice – how to identify it, where it can come from and how to avoid it!
The kicker is it can come from anywhere – a stranger on the internet, someone you know, or even *gasp* someone you’re paying professionally.
Let’s quantify first, what actually makes advice bad. It could be misleading, generalised to the point of irrelevancy, or dished out by someone who doesn’t have the experience or qualifications to do so.
The fallout from following bad real estate advice can be costly in both an emotional and financial sense. The complexity lies in the challenge of knowing who to listen to and who to trust, especially when advice is coming from people in positions of authority like professionals or your parents who only have your best interests at heart.
Here are 5 real-world examples of bad advice I’ve come across in my 10+ years of working in the industry:
I once heard a building inspector advise a potential buyer “You wouldn’t want to pay over $900k for this property”. Not only was property appraisal not his job but he was stepping out of his lane and area of expertise to fork out some advice he wasn’t qualified to give, which subsequently put a lot of doubt into the buyer’s mind who was preparing to pay quite a bit more than that.
All comparable sales suggested the property was worth more than $900,000, and ultimately the property sold for $1.1million so not only was the building inspector way off, but he created doubt with an off-hand comment that probably had good intentions.
Another example I’ve come across of a professional stepping outside of their scope and creating more harm than good is when a mortgage broker supplied his client with tips on how to negotiate for a property. A mortgage broker’s job is to help their client get pre-approval for their loan, and in this particular case, the advice was not right and his client missed out on that property.
Bad advice from real estate agents is definitely one to watch out for, although you’d be forgiven for assuming they knew what they were talking about when it came to property.
Always do your due diligence and consult the professionals in the associated field if you hear advice like “You can renovate this property by extending it” or “You could put an en suite on the side or knock those walls out”.
Remember their job is to sell you that property – they are not a builder, and they may not know all of the planning regulations and overlays.
Whilst they may genuinely be trying to help and not all advice may be malicious or with a hidden agenda, it is ultimately your responsibility to assess advice further than face value and think critically about whether the person giving the advice is qualified to do so.
The scary part? Sometimes bad advice can come from professionals who are within their field of expertise! I was having a discussion with someone who worked at a bank about one of our mutual clients and talking about bidding at auction, and they said to me to “make sure that offer is subject to finance if you are bidding at auction”.
I was pretty shocked because as someone who works at a bank, they should know that this is absolutely incorrect information – you can’t bid at auction subject to finance. So even though they were in a position where they should have known that, it’s a perfect example of why you as a buyer, need to do your own research and self-educate as much as possible to ensure you’re getting the right advice.
So if something doesn’t sound quite right or you’re getting conflicting advice, don’t just take it as gospel, even if it’s from a professional!
You can see the logic behind this outdated piece of advice – by waiting until the last moment to bid, the other buyer feels like they’ve almost got that property and then you swoop in and surprise them at the last minute to demoralise them and perhaps you can shake them off.
Why is this bad advice? Sure, it could work in some situations however overall it’s quite a risky strategy during what is already a heightened, emotional and potentially stressful situation. If you wait until the very last moment to bid and happen to miss the window before the hammer falls, you’re too late. Every auctioneer does this differently – some do it quite quickly, others drag it out, but I’ve seen several instances where a bidder has lost out because they miss-timed their bid and were too late to jump in.
In my opinion, this can add unnecessary stress (which can also cloud your judgement) in a situation that is already stressful so why do it to yourself?
This one is thrown around all the time, and I attribute it to not wanting to seem too keen so you can negotiate later on. Or devising a strategy where you let the agent know all of the things that you don’t like about the property so they don’t think you’re too desperate.
Why is this bad advice? Because you might do too good a job here and convince the agent that you’re not actually interested! The risk here is if they receive an offer or they’re selling it prior to auction they might not notify you if you’ve been outwardly negative about a property or seem genuinely disinterested.
Remember as a buyer, you also need to protect your reputation. If agents perceive you as a more difficult or fussy buyer, you risk not being prioritised or privy to alerts when a property is about to sell, and also potentially missing out on access to off market properties.
While the adage “land appreciates, dwellings depreciate” may hold some truth, it’s not a one-size-fits-all rule. Buying a property solely for its land may require compromising on location, lifestyle, or budget. This is a pretty outdated piece of advice, perhaps you’ve heard it from your parents or other baby boomers who had the luxury of being able to afford it back in the day.
However, it may not be realistic for you to buy as big of a block of land as possible, depending on your budget and where you’d like to live particularly if it means compromising location and proximity to friends and family.
Even if the block of land did grow more in value, which of course isn’t actually guaranteed, would it be worth the sacrifices that may come with it?
Everyone is going to be different. The most important thing when it comes to figuring out what kind of property you are going to buy, whether it’s an apartment or a townhouse or a house with land, is by creating a property strategy based on your own personal requirements. And ultimately, if you have a fixed budget and a property wishlist, that’s what will determine whether you can afford something with a bit of land.
It can’t be assumed that land or a house on a full block will always perform better or grow more in value than something on a smaller piece of land like a townhouse or an apartment. In some cases, a smaller property could be in a superior location which can be just as if not more important than land.
I have seen numerous situations where apartments, which are in fabulous locations and in boutique blocks with a bit of character, outperform houses on full blocks, which are way further out from the city and have no amenities or scarcity.
It’s also worth bearing in mind that there is a difference between land size and land value. For example, there might be a property on 100 square meters in a really amazing location near the city worth far more and having a lot more capital growth than a block that is 800 square meters but is located 50 kilometres out from the CBD.
So the advice that you should always buy land or the bigger the land, the better is pretty generalised and not always correct, so may not necessarily be the right option for your personal situation.
Sometimes banks and mortgage brokers will send you these reports if you’re looking to purchase a specific property and whilst their intention is positive, more often than not these reports can do more harm than good.
These reports will provide you with a little bit of information about the statistics of the local area and maybe some comparable sales, but also sometimes these reports will give you an estimated value of that property, and in most situations, that estimated value is totally wrong.
Why are they inaccurate? The reports are computer generated using an algorithm that can’t identify things like – is that property fully renovated? Is that property in the best street of that suburb or is it in the worst street?
There is also room for data errors. I’ve seen situations where a property has been input as two bedrooms when it’s actually three, or the report compares a property to another that property has already been subdivided, so the land size is totally wrong in the system.
The issue here is that even though that professional is trying to help you by giving you that information, it can influence your decision-making in many ways.
It could give you false confidence about what you should be bidding up to or submitting an offer for. Or if that estimated value is lower than what that property is really worth, you may lose the confidence to put in the right kind of offer or bid to the right kind of level at auction, and you might end up missing out on that property.
It’s best to ignore these reports if you’re presented with one as the best way to determine a property’s value and its true worth is by doing your own comparable sales and market analysis. Don’t take any shortcuts here!
Ultimately bad real estate advice can come in many forms and can come from people who you trust or who should know better – which can make it harder to spot!
As a buyer, it’s imperative you:
✔️ do your own research
✔️ crosscheck information
✔️ fact check, double check – all the checks!
✔️ acknowledge that some advice might be correct but it isn’t relevant to you so could be harmful because everyone’s situation is completely different
And finally, if something doesn’t sound quite right, well, maybe it isn’t!
Want to learn more? Check out my online course The First Home Guidebook to help you buy your first home faster – without the fuss.
If you’re looking for professional support for buying a property, check out my buyer’s advocacy services over at Amy Lunardi Property.
A must-have checklist for any aspiring property buyer - you’ll never look at a property the same way again.
© 2023 the FIRST HOME guidebook