Figuring out what a property is really worth..
If a property is listed without a price how do you know what it’s worth?
Build affinity with the agents
When agents pitch for the vendors business, they will generally have to come up with a range of comparable properties, similar to the one for sale, to back up what they think the property will sell for. A lot of good agents will share these comparable sales in a fact sheet at the open for inspection.
Even if they don’t, there’s nothing to stop you asking the agent for details of those comparable sales. Check them out online for yourself and see if they do compare and consider ringing the agent that sold those properties and ask them how they it compares to the property you’re looking to buy.
The more rapport you build with the selling agent and the other agents in the area, the more they are likely to share their genuine thoughts as to how good a property is and what it might sell for. They might also warn you off properties that look good on the outside but have some hidden nightmares that you may not discover until after purchase.
Contact a few property managers
It’s best to try and build up a relationship with a property manager who is connected to the selling agent as they are more likely to give you an unbiased opinion of what a property will likely rent for and what price it also might sell for. Property managers have a wealth of information as they are in the market every day and understand the demand and supply of various types of properties. They are still worth contacting even if you’re buying a home and not looking to rent it out.
Some Websites have ‘Sold’ sections on their sites which enable you to check out which properties have sold and at what price in recent months. This is a great way to build up your knowledge on what properties have actually sold for as opposed to the estimated price they were quoted for.
Online pictures don’t always show the true picture, so try and at least go and drive by the property to see its exact location and also try ringing the agent that sold the property to get a clearer picture of its pros and cons.
Frequent the streets
It takes at least 50 – 100 property inspections to really familiarise yourself with an area and to know which are the good and bad properties. It’s best to keep a simple spreadsheet to summarise the key features of every property, how much the agent was quoting and what the final sales price was.
Start trying to estimate the price they’ll sell for after you’ve viewed them and see how you perform after the property has been sold.
Auctions can be a great place to find a bargain but they can also be a great place to get caught out and pay well above the odds if you don’t know what that property is really worth. Before buying, attend as many auctions as you can in the area you’re looking to buy to get a strong idea of how much they’re selling for and how many people are bidding. A property can sell for well above the reserve price for a whole number of reasons, however this doesn’t necessarily mean it’s what the property is worth.
Obtain a valuation
Hiring a valuer to physically inspect the property might cost you around $500 but I think it is well worth it. Don’t skimp and pay the cheapest valuer as you want them to spend as much time as possible on gathering comparable sales and making sure there’s nothing negative about the property. Valuers do have a reputation of being on the conservative side, but if you do manage to buy within their price estimate it will give you peace of mind that you’re making a sound investment.
Use a buyer’s agent
A buyers’ agent can do the legwork for you when looking for your investment property. Why pound the pavement every weekend scoping out 100+ properties when a buyer’s agent with specialist knowledge in the local market can do this on your behalf? Buyers’ agents have strong relationships with real estate agents, and have many sales comparisons to back up their auction bids. As they are in the industry they often know which ones to target and which to avoid. They often buy properties before they go on the market and negotiate from a non-emotional ground which is essential in a strong market.