Buying a property – is it a bargain, a discounted one or is it below it’s fair market price?
You make money when you buying a property not when selling it.
So how do you make your money upfront?
You hear people say “I bought my property at a discount”. Someone else brags about “buying a property at a bargain price”. Then you hear someone saying “I bought my property below its fair market price”.
Let us consider the definitions of these three terms.
Buying a property at a discount simply means you buy a property for less than the asking price.
It is the norm because most selling agents and their vendors add a bit of a “discount” buffer to the desired selling price.
It is a giveaway amount by the selling agent to secure the sale at their desired selling price.
By getting the agent to yield to your “negotiating prowess” and agree to your discounted offer, you the buyer feel good about your offer, even believe you have negotiated well when it is possible your discounted purchase price is still too much to pay for the said property.
This scenario is common when the vendor and their selling agent advertise a property below or at its real value.
It happens when the property is being promoted by an outsider – a selling agent from another area or district who is helping their ?local? vendor to sell their outpost property without the necessary local knowledge.
The second reason is when the vendor is keen to sell the property quickly for a variety of reasons such as a distressed developer or a vendor moving overseas within a short period of time or even a next of kin who just wants to get rid of the property.
A third reason would be that when buying a property that requires a very small amount of renovation to elevate it to the next price bracket. For example, a $750,000 property benefiting from a $10,000 renovation that would place it in the +$800,000 price bracket.
This is the tricky definition. It is based on what the other or next buyer is willing to pay for it and if borrowing, what your lender’s valuer will price it at.
We recently bought on behalf of a client a $1,160,000 apartment that was priced by the lender’s valuer at $1,205,000.
Now this is a property that was purchased below its fair market price.There is no one single type of property, or a suburb or a district when buying a property that it?s price will be below it?s fair market price.
It is really about knowing the market you are buying into, it is about being able to recognise the hidden positive components of a property that cannot be seen with the naked eye or by your average Joe.
It is about having a clear position that if you cannot achieve, you would walk away from the transaction and go back to the market and start all over.