How much should I pay? is probably one of the most difficult questions for property buyers to answer. Everyone wants to get the best deal when they purchase.
But how do you know what a good deal is? Before you can decide whether you’re getting a bargain or not, you need to do some research to work out the market value of the property.
Comparative market analysis is extremely powerful when you’re trying to negotiate the best possible price.
So how do you do it and what’s involved?
You need to see as many properties as you can in preferably a four to eight-week time frame as two months is a long time in real estate.
As a rule I suggest you inspect at least 100 properties and document all relevant features. One hundred properties, I hear you say.
Yes, that’s only around 15 to inspect each week. If you’re serious about getting a good deal and saving yourself thousands if not tens of thousands of dollars, I’m sure you’ll find the time.
Forget about buying property over the internet or sight unseen as you’re bound to get stung on the price and/or the quality. You need to physically inspect property you’re going to buy or engage someone independent to do it for you.
Now I don’t suggest you look at 100 properties across a dozen suburbs -“ just select your top three and take good detailed notes on each one. In particular, write down the asking price, number of bedrooms, bathrooms, car spaces etc. and what you feel they were worth, and follow them up after they have been sold to see how accurate you were.
By the time you have inspected 100 properties you should know exactly what the market value is for the particular type and style of property you’re interested in.
Seriously, it’s the only way you’re going to know what properties are worth. If I or members of my team are looking for a property for a client we do the legwork and inspect at least 100 properties.
I’ve purchased properties all over Sydney, in different states of Australia and in all different price ranges, and I always stick to this formula.
Remember, you’re comparing apples with apples so stick pretty much to your desired criteria plus or minus say 20 percent of the expected purchase price you’re looking at.
Why 100 properties? Well, if you only do 50 you’re probably not well enough informed. From my experience 100 properties is enough for the average person to be on the ball about comparable prices.
You have to be disciplined and stick with it because inevitably you’ll fall in love with the 27th property you look at.
Remember during your first 100 properties you’re looking for research purposes, not to buy. If you go ahead and buy now, you can’t be sure you’re buying at a good price because you haven’t looked at enough comparables to determine fair market value.
Over this search time you’ll really start to develop a clear understanding of what property in your search area and price range is worth. It’s a very empowering feeling.
So once you’ve completed your research you’ll be able to confidently assess fair market value and you’ll have the data to back up any offer you submit.
The research data is a huge asset when it comes to negotiating on price. Should the property be going to auction you’ll also know what a sensible maximum bid is.
There’s no denying it: inspecting 100 properties is a lot of work. You need perseverance to get through the research; however, it’s the most certain method of making a good buy.
I see people pay over and above fair market value all the time. However, if you’ve done your research it won’t happen to you.
And you’ll be able to spot the bargains too, provided you’ve done your research, of course. Remember it’s important to do the research thoroughly as with real estate there are no small mistakes, just very expensive lessons.
Patrick Bright is the owner of EPS Property Search and author of The Insider’s Guide To Buying Real-Estate. To purchase a copy of the book, visit your major bookstores or www.epspropertysearch.com.au or call 1300 SEARCH.