The real estate market presents good buying opportunities for those who do their due diligence and know where to look. Here are some quick tips to help you recognise the different sellers, their motivation to sell and how to acquire these properties below market value.
Video: Financing and Buying in your Local Area
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Robert Projeski gives quick tips for why you should buy in your local area, and how you should structure your finances.
Market Value Vs Property Value
The first thing that we need to establish is that price is subjective. In reality, there is no median house price, only the price the seller believes their property is worth. Therefore to buy property at a discount, you will need to target the right seller.
There are sellers that for whatever reason, needs to sell within a certain timeframe. The first type of seller urgently need funds, perhaps due to a divorce or a family crisis. The other type of seller are the ones who haven't done their homework, and therefore may accept a bid at a lower price thinking that they're getting a bargain.
1. Distressed Sellers
Everyday, thousands of people fall on hard times or into circumstances beyond their control. They may be filing for divorce or they may experience severe health problems and are therefore required to sell their homes quickly, and at a loss. While it's never pleasant to learn of such circumstances, it happens everyday so empathy, flexiblility and good negotiation skills can often help you to secure a great property deal.
You can find distressed properties at public trustee, deceased estates and mortgagee sale websites. Start by subscribing to NMD Data - an online property listing portal that lists mortgagee foreclosure and deceased estate within Australia.
2. For Sell by Owners
Some people prefer to sell their own property and save on the commission paid to real estate agents. In NSW, real estate agents fees can range from 2 - 2.5 per cent in the city and metropolitan areas. For a typical $500,000 family home in Western Sydney, that's about $12,500 excluding any additional fees and advertising cost.
You can find properties for sell through most online portals such as Ebay, Gumtree and on ForSaleByOwner - a speciality site that allow owners to list and sell their own properties.
3. Selling Under Market Price
The only reason that most sellers sell below market price is that they don't have a recent history of what properties have sold for in their area. Usually sellers will turn to a local real estate agent for help, relying on their expertise and knowlege of the local real estate market. However, there are some agents who may unknowingly price a property way below market value. They may not be up-todate with council regulation, such as on granny flat laws or legal requirements for living space and as such may not factor them into the selling price of the property.
Do your Due Diligence
Before something becomes a bargain, you have to know what the market value is for the property vs the price the owner is selling the property for.
Don't Rely on Second Hand Information
It's a good idea, before you make a bid on a property, to visit that property several times before you put in a written offer. There are many investors that buy sight unseen and "invest by the numbers", and if the numbers work for them, they will put in an offer to buy the property. However, physically inspecting a property is always the better option than working from a theoritical, mathematical concept only.
Although the internet provides us with the luxury to do our property search from the comfort of our own home, it cannot uncover everything there is to know about a particular property. This is why, making a visit to walk through and inspect a property is so important. There is always a limit to how much informaiton you can glean from council websites and from internet searches in general.
Networking with Agents
Bargain can be found when you start to build a network with agents in the area you intend to buy. When you start to build a good relationships with real estate agents, they'll likely remember to call you later when they come accross a particular property that suits your budget and preferences. These are often new properties that have not been listed, or they are properties that need to be quickly sold off - and you're the first person to learn about it.
Use the time that you spend building relationships with agents to ask questions about the area, where the shops are located, the reputation of the street and neighbourhood. Local agents are a great source of information, and you could potentially uncover hidden gems that you would not be able to find by searching on the internet alone.
If you show interest in a particular property, the agent will likely try to get you to put in a higher offer if they sense that you're eager to buy. For this reason, always remain even tempered, and don't show your eagerness to buy. Remain tight lipped about price - at least until you've had a chance to look at the pest and building report, talked to your solicitor and your property manager. Although agents have a duty to present all offers to the seller, you can better stand your ground if you can justify why you're bidding for less than the expected selling price.