10 tips to help you avoid overpaying for a property
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 is not 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 is a business transaction where if you don’t, someone else will.
‘Eager vendor’ situations include:
- Vendor has bought elsewhere
- Divorce Settlement
- Mortgagee sale
- Deceased Estate
Forearmed is forewarned. When a bargain arrives, the first buyer to spot it will be the victor so if you don’t recognise the gift horse when it arrives, someone else will ride off with it.
Know your market. Set your criteria about 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. 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 the property offers.
Take a leaf out of the scouting book of bargains. Get ready to break the tape and be first across the line. 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 as to what sort of rental you need to achieve on your investments to help service the loan.
Form a relationship with professionals whose help you’ll need when snatching a deal. Most valuers are happy to discuss generalities of how they view their areas of expertise and can stand at the ready to provide their services quick smart when they know you are likely to call. Similarly have the 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.
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 to their perfect property partner saves headaches, puts money in the bank and helps forge an important professional relationship. A word of advice though – be serious. Time wasting purchasers get short shift from busy agents.
Look for the angles
Bargains are not always obvious and you must dust off a little dirt to find the gold seam. Try thinking outside everyone else’s box to see if you can make a go of a property possibility. It is also worth considering whether a property holds a value to you over and above the local market. Perhaps by purchasing your neighbor’s home you may suddenly find yourself with a potential development site ripe for rezoning to units – all for not much more than the cost of a standard residential dwelling.
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 programme.
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? Now is the time to put your hand in your pocket.
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.
Work the conditions
The fewer conditions you have in a contract, the more the vendor’s going to favour that contract. 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 your self a step ahead of the competition.
With this approach it can pay to ask the agent what the buyer wants in the contract. If you are flexible with your requirements and cater to theirs, it might swing the deal in your favour.
Long listings can equal big savings
An overconfident vendor can be their own worst enemy. In most markets, appropriately priced properties sell within a reasonable time frame. When markets are rising, sellers may confidently list there investment 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 will 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 home owner may just feel the need to get the darned thing over and done with.