Markets are all about supply and demand, and a property's value is a fixed figure reflecting a balance of both. Right? Well, mostly yes, but there are ways to push your advantage so that you end up paying less than you may have expected and land a great buy that will fill out your portfolio plus provide plenty of opportunities for dinner party gloating at your next social engagement. The key is to get smart, get ready and back your judgment.
We've found a few ways to help you look back on your next purchase with smug self-satisfaction.
1. Look for an eager vendor
A vendor under distress is the most obvious component of a cheap purchase. There is no moral high ground here - often it's a case that the seller needs a quick disposal and is willing to cut back on the price in order to move the bricks and mortar on.
While it isn't pleasant to see another party in a sticky situation, you may be doing them a favour by relieving them of the property and, in most circumstances, it's a business transaction where if you don't someone else will.
Ben Anderssen is the director of Brisbane-based buyer's agency Property Chase and is on constant lookout for property bargains for
his clients. He often finds his best source of information to be the seller's own representative.
"If you quiz the agent you'll get to the point where they'll start telling you perhaps a bit extra... And you can't forget that agents, despite everything else, are there to do a deal. You'll be able to tell pretty quickly whether or not they're in a hurry to sell," says Anderssen.
Some eager vendor situations:
The vendor has bought elsewhere
Gun-shy buyers will contract on one home before selling their current abode and will include a 'subject to sale' clause in the dealings. As settlement draws near, they become eager to dispose of their old property and now is the time for you to leap. Drive hard on the bargain - particularly when you're armed with a cash contract free of conditions.
"I spoke to an agent the other day and he said: 'It's a young couple that owns this property and they've bought another house and have bridging finance.' And I just thought: 'Oh, my god, this is perfect,'" recalls Anderssen.
No one enjoys seeing these situations come to a head, but the end of a relationship is often punctuated by cutting ties and the settling of assets. Even where the separation is amicable, there is often an eagerness to move on and this means disposing of assets at a quick sale price. The effect can be amplified in acrimonious endings where both parties are eager to sever ties as quickly as possible.
Costs of living pressures, interest rate rises, spiralling petrol prices - these are all catch phrases that have put further stress on those trying to service a mortgage and keep their head above water. Unfortunately, an overextended buyer may receive an unwanted knock on the door from the financier looking to recoup their loan.
Watching for a 'Mortgagee in Possession' sale is one strategy, and another is to seek out an owner trying to consolidate their assets and settle their loan.
In the situation where property is willed to the next of kin, there may be many recipients to consider. While this is sometimes a sticking point, it's common for family members to agree that a quick disposal of the property will help put the estate to rest.
Another consideration when multiple beneficiaries are involved is that the value of their share becomes diluted, so any reduction in the offer can appear minor. For example, a $500,000 home divided between four siblings will reap $125,000 per share. If a cash unconditional offer of $460,000 is forwarded, a $40,000 saving to the buyer means each sibling now gets $115,000 - not too dramatic a fall in the scheme of negotiations.
2. Get smart
Forearmed is forewarned. When a bargain arrives, the first buyer to spot it will be the victor, so if you don't recognise the opportunity when it arrives, someone else will run off with it.
My first purchase occurred in inner Brisbane in 2003. After months of researching the market, I was sure a dated two-bedroom unit with lock-up car accommodation could be located for under $180,000. Despite the agent's reservations about such an animal existing, I received a phone call from one local realtor informing me that something had come onto the market "just yesterday".
He first called the out-of-town lady at the top of his possible purchaser list who was keen to find a Brisbane base for her student daughter, but she had baulked at the $145,000 asking price.
Within three hours we'd arranged to meet at the unit and, armed with an intimate knowledge of the market, I suggested he bring around a standard contract of sale at the asking figure. The contract was signed on the kitchen bench within the first half hour of the inspection.
The body corporate manager told me later that the Gladstone-based couple who sold it was delighted to get $145,000 for it. My response was: "That's great because I was delighted to pay $145,000 for it." After $30,000 worth of renovations, the unit was worth approximately $210,000 and now five years later is around the $340,000 mark.
Know your market. Set your criteria on what you want and get informed. If you know that your next investment is to be a four-bedroom, two-bathroom, double-garage renter in outer Melbourne, get real about what they sell and rent for. Dig, dig, dig so you become the local expert.
When the right property comes along, you might be surprised to find that both the vendor and your competing buyers have scant idea as to what a great deal a property offers.
3. Be prepared
By taking care of a few of the basics, you can remove uncertainties and move quickly.
Arrange your finance before you start hunting your prey. Know how much you can afford to borrow and get it organised. Now is the time to shop around for finance, not when your unconditional day of reckoning is imminent.
Also, go through the exercise to work out what sort of rental you need to achieve on your property to help service the loan.
This is an important step that can stop a prospective buyer in their tracks if they haven't taken the time to consider the return on the investment.
Form a relationship with professionals whose help you'll need when snapping up a deal.
Most valuers will be happy to discuss their general expertise and what they look for in a property, and can stand at the ready to provide their services quick-smart when they know you're likely to call.
Similarly, have the phone number of your trusted pest and building inspector handy so they can provide a ready-to-go service when you come up with a possible winner.
By making their acquaintance early, you can get some pre-purchase heads-up on possible pitfalls that might surround your sale of the century.
4. Raise your profile
In the real estate game, wallflowers don't get dances. Once you know what you want, what it should cost and where it's located, get out there and get known. Most agents keep tabs on buyers who are serious and ready to jump in their area. For an agent, a smart, cashed-up purchaser who can be quickly married up with their perfect property saves headaches, puts money in the bank and helps forge an important professional relationship.
Good agents keep buyers' phone numbers handy and know who to call first when the right piece of real estate comes along. Don't stop at one call - ring all the agents in your area regularly to check up on possibilities. Let them know you're out there and they'll let you know what crosses their desk. A word of advice, though: be serious. Time-wasting purchasers get short shrift from busy agents.
5. Look for the angles
Bargains aren't always obvious and you must dust off a little dirt to find the gold seam. Try thinking outside everyone else's square to see if you can make a go of a property possibility.
For example, one agent in a near-university suburb has built a formidable self-funding rental portfolio by identifying homes where additional bedrooms can be created for leasing on a per room basis to the student market.
It's also worth considering whether a property holds a value to you over and above the local market. Perhaps by purchasing your neighbour's home you may suddenly find yourself with a potential development site ripe for rezoning to units. And all for not much more than the cost of a standard residential dwelling.
Bargains may also be had by considering other angles for savings. Purchasing a home from a family member or buying the property you currently rent may circumnavigate the need for agents, thus saving on commission. In the latter case, you may also come to an arrangement where you're compensated for upgrades you've carried out on the property yourself.
6. Look for growth fundamentals
He who hesitates is lost when it comes to areas with all the elements of a future upside. Are there major industries or transport routes likely to boost a suburb's profile?
Perhaps a new bridge will drop potential tenants right at the door of a workplace, or perhaps the local university is expanding its overseas student program. If you're sure it's worth a punt and can handle the risk, try your hand and there may be a pot of gold at the end of the rainbow.
7. Buck the market trend
Noticed that things have slowed in the area?
Is everyone looking a little sheepish about property despite all the fundamentals being in place for plenty of positives? Are there fewer people at the auctions with even fewer competitive bidders?
Hello! Now is the time to put your hand in your pocket.
"There are great buys on the market now and no one is touching them. I've got all these clients at the moment who want to watch the market for six months before committing, and I say: 'You know what - everyone is holding back, and all of you are going to hit the market in six months and compete with each other!' The time to jump is when everyone else is hesitating," says Anderssen.
8. Stick with the basics
Bargains aren't bargains if things go sour easily.
Avoid main roads and adjacent rail lines. These things don't sell in a soft market.
The rule is: a window of opportunity comes around to sell a dud property about once every
seven years, so avoid them like a biblical plague.
9. Beauty is skin deep
See beyond the facade and look for good bones. Michelle turned up at an open house to find her unit of interest was inhabited by some very disgruntled tenants.
"They obviously weren't pleased that they were being kicked out and that the open house was on their Saturday morning. The stereo was turned up loud, they had collected about 50 empty toilet rolls around the pedestal and they even started shifting a filthy mattress down the hallway past prospective buyers. The place was a pig sty," she recalls.
"Plenty of people turned up their nose at the state of the property, but all I could see was the massive size of the bedrooms, plenty of light from the numerous windows and the hidden surprise of a huge downstairs storeroom," Michelle says.
Hers was the only offer of the day at $192,000. A new coat of paint, kitchen and floor coverings plus some general dressing with drapes, etc, and Michelle had turned the hovel into a cool near-city crash pad worth $250,000. Not bad in six months.
10. Work the conditions
"Quite simply, the fewer conditions you have in a contract, the more the vendor is going to favour that contract," says Anderssen.
By reducing the unknowns you can keep a step ahead of the competition. Don't put yourself at risk, but if there are instances where you can safely take out the finance clause, waive the cooling-off period or forget about building and pest inspections, then you could well find yourself a step ahead of the competition.
"The more favourable you make that contract, the less you'll have to pay if, say, you're up against somebody who wants to extend the settlement period or make it conditional upon getting something through council or whatever," adds Anderssen.
With this approach, it can pay to ask the agent what the buyer wants in the contract. If you're flexible with your requirements and cater to theirs, it might swing the deal in your favour.
11. Look for out-of-area agents
There are instances where sellers are represented by agents who don't know the area. They might be family friends or long-term business associates who the owner trusts with their valuable asset. While in most instances a professional agent will do their research, there are occasions where an overworked agent has taken on a listing beyond their specialty. Unfortunately for the seller, there's little substitute for local knowledge.
12. Long listing can equal big savings
An overconfident vendor can be their own worst enemy. In most markets, appropriately priced properties sell within reasonable timeframes. When markets are rising, sellers may confidently list their investments at a price above the local market and wait for it to catch up; but when things stagnate these properties will sit, and if the seller isn't flexible they'll burn off potential deals.
If you feel a property is overpriced, keep an eye on it. If the market isn't particularly hot and you start seeing the home appear week after week with no joy, particularly if the list price keeps reducing, try your hand. The frustrated homeowner may just feel the need to get the darned thing over and done with.
There are no guarantees in the property game, but you can help make your own luck.
The strategies above, particularly in combination, can give you the firepower needed to get a steal.
Lay the bait for a bargain, keep a keen ear to the ground and you may just throw your net over the deal of a lifetime.
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