How You Can Buy a Half-Price Property

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There are huge bargains to be had in the property market right now. I’ve seen some apartments slashed by almost half – and at the top end of the market in some cities you can do even better.

The key to getting the best deals is knowing where, and what, to look for. But that’s something that few people in the real estate industry are interested in telling you about.

I’ve got a lot of mates who are real estate agents – some good, some bad and some lazier than teenagers.

Yet in the slow dance that is residential property negotiating, I’d back these blokes every time – reason being that they do it every day for a living and therefore have an edge over buyers, who mostly do it only a few times in their lives.

Plus, agents frequently lie.

In most cases they know the questions a buyer is going to ask before they open their mouth, and they’re experts at pushing the psychological triggers that get people to pay up more – which is exactly what they’re employed to do (and exactly why their profession is one of the least respected).

There are times, however, when they lose control of the negotiation process – and that’s exactly where the best bargains are to be had.

Here’s how it happens

A real estate agent meets a seller who believes his home is “special” and therefore should command a premium.

Good agents will try and educate the seller to set a realistic price; average agents will sign them up and hope they find a buyer.

The property then sits for sale with little interest. After a month or so, the vendor may decide to reduce the price to a more realistic level. But by the time this happens, the negotiating power has shifted from the seller to the buyer.

Buyers wonder what’s wrong with the house – why hasn’t it sold?

After a few months on the market the house has become stale, so cutting the price makes the seller look even more desperate.

The problem is compounded when the seller has made another commitment and has to sell. That’s when astute buyers can go in and pick up a bargain – and it happens more than you’d think.

Knowledge is power

All you have to do is track hundreds of properties from the time they list, and keep a spreadsheet of the changes in quoted prices. Or, if you can’t be bothered doing that, you can head over to the handiest website I’ve found since Paris Hilton.com – www.sqmresearch.com.au. The site tracks properties Australia-wide that have been for sale for longer than 60 days, and details their price movements – all for $40 a postcode search.*

Knowledge is power when it comes to investing, and the internet has levelled the playing field for smart property buyers. With a click of a mouse you can find out a history of comparable sales in the area at www.rpdata.com.au*, while Google Maps will show you the proximity to any number of amenities.

Going rates

I am writing this column from the Gold Coast, where the property market is being hit hard.

Louis Christopher from SQM Research says there are more than 900 properties that have sat unsold for more than 60 days.

One top-end mansion in Surfers Paradise with a 22-metre pool, gymnasium, home theatre and four-car garage was listed for $7.9 million in March 2008. Today it remains unsold, and the price has been slashed to $4.5 million – and in true Gold Coast style the agent is marketing the property with the headline: CONTRACT COLLAPSES!!! DEVASTATED VENDOR WILL CONSIDER ALL WRITTEN OFFERS!!!

Another property, an inner city Melbourne one-bedroom, one-car space apartment, is marketed as “spectacular, looking straight out over the river to Crown Casino and the bay”.

According to SQM, it was listed in late March for $798,950.

The property has sat vacant and unsold now for more than five months, and the seller has slashed the price to $415,000 – or a 48 per cent discount from the original asking price. I reckon a sneaky (but genuine) offer of $395,000 may secure the property.

Bagging a bargain

It’s important to reiterate that no one sets out to sell a home for less than it is worth. Therefore some of the huge discounts that you see on sqmresearch.com.au may really just be sellers who have been hit with the reality stick and being forced to price their properties rationally.

Yet, after a long drawn out sales campaign that has generated little interest and lots of stress, a crafty, opportunistic bid that’s priced below the market can result in bagging a bargain (which is exactly how I bought my present pad).

Smart investors know that you make money when you buy, not when you sell. Interest rate rises in the next 12 months will throw up many opportunities for cashed-up bargain-hunters who have done their research.

Tread your own path!

* Neither Scott Pape nor Barefoot Investment Management Pty Ltd receives any commissions, fees or boozy corporate box seats at sporting events for mentioning this or any other website. Do your own research, and always read the fine print.

Photo: www.flickr.com/photos/shakethesky/4104894504/

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