July 27th 2009
by Neil Jenman
This is an article for property buyers who are interested in saving money; which means, obviously, that this is an article for all property buyers.
Despite what you may think - or what some agents may tell you - there are discounts galore to be found in the property market.
If you know what you're doing, you can buy a terrific bargain these days.
Here's an example (and I admit this is one of the best): How would you like a 63 per cent discount off the asking price of a property?
This is a genuine sale - a mortgagee-in-possession property (in Perth) - that has been reduced in price from $3.3 million when it was first offered for sale in October last year to today's current asking price of $1.19 million. An offer of a million dollars might snare it. And, yes, it's cheap at this price - a bargain.
Most property buyers are not experienced. They don't buy or sell real estate every day of the week, so they don't really know what they are doing. They are gullible and easily persuaded into paying more than they need to pay. They don't know the right questions to ask, they don't know how to do the right research. And they sure don't know how to nab themselves a bargain.
Now, a whole book could be written on how to teach buyers to buy well (I've written two); but, for now, we'll focus on just one of the best ways to find bargain properties. Here's the four word secret that, if you work it well and follow it properly, should easily save you several thousand dollars: Look for stale properties.
By 'stale' I mean properties that have been for sale for more than, say, 60 days.
Now, please, do not make the big mistake many buyers make; they think that 'stale' means 'bad'. This is not a fruit market where the product goes rotten when it's been on the shelves too long, this is the property market where the longer the property remains for sale the more ripe it becomes for bargain hunters.
The best properties all have owners who know that their properties are the best. Now, naturally, these owners all want the best price. But here's where thousands of them make a dreadful mistake which often costs them thousands of dollars. They start off by asking far too much for their properties.
Let's say, for example, that a top quality property is offered for sale. And let's say the fair price for that property is a million dollars. Most owners will start out by wanting far more than a million dollars. Often they'll set an asking price (or a reserve price if they are silly enough to auction) of say, $1.2 million dollars, perhaps even more.
What this does, of course, is attract a huge amount of interest from buyers who, while they might love the property, are turned off by what they often describe as a "silly asking price".
After two or three months - and the property is not sold - the owners start to panic. And so they lower the asking price to, say, a million dollars (the price it should have been in the beginning). But now, it's too late - the property has been for sale for too long and the agents in the area and the buyers are all starting to think "there's something wrong with that place".
Because it's been for sale for a few weeks and hasn't sold (or, worse, has been passed-in at auction), the home has a stigma attached to it. Some real estate experts refer to this stigma as 'the Lemon Factor'. A beautiful property has suddenly - and quite innocently - been turned into a lemon. Buyers shy away from it.
The owners are now in real trouble (they have other commitments) and are getting desperate to sell. Suddenly, the only way to attract buyers is to cut the asking price - often to less than its fair value.
So, a home that, a few months ago, was fair value at a million dollars is now being offered for sale at, say, $900,000. Often if a shrewd buyer - one who has been 'following' the market - turns up and makes a cash offer of $800,000, the now emotionally exhausted and frazzled sellers will accept it. (Please note: All real estate offers are "cash" because cash is always paid for real estate; even if the cash came from a bank loan, it's still cash. That's why shrewd buyers often add the word "cash" after the amount of their offer - it sounds enticing.)
Now, the question remains. How do you find out how long a property has been for sale? How do you track its original asking price to its current asking price?
The best way to do this has been to get multiple copies of newspapers and property magazines going back from two to six months and, also, to spend dozens of hours each week tracking the on-line property asking prices. Yes, it's time consuming but worth it.
But now there's a better way.
One of Australia's most respected and skilled property researchers is Louis Christopher. He heads up a firm called SQM Research. And he has just launched what could be the greatest value real estate investment product of all time.
For a mere $40, buyers can now buy a full report on any postcode in Australia and see properties that have been offered for sale for more than 60 days together with the changes in the asking prices.
That's how I found the property that has been reduced from $3.3 million to $1.19 million. These SQM reports cover properties in all price ranges.
Here's another example. Back in December 2008, a home unit (in the Sydney suburb of Strathfield) was offered for sale for $168,000; today it's got an asking price of just $75,000, a massive 55 per cent discount from its original asking price. This is bargain buying.
Let's be clear about one point. These discount properties are not 'duds'. Far from it. As said earlier, they are some of the best properties. There is nothing wrong with them other than that the owners made the mistake of pricing them too high to begin with.
Thousands of property sellers unknowingly set themselves up for shrewd bargain hunters. These sellers price their properties too high in the beginning which causes them to sell for too low in the end. It's a simple fact of real estate economics. All shrewd bargain hunters know this strategy.
And now, thanks to Louis Christopher and SQM Research, this strategy is available to every property buyer in Australia.
So, buyers, invest $40 in a report on the postcode of your choice - and go hunting for bargains. Click here for more details.
Footnote - SQM Research is an advertiser on the Jenman web site (we're proud to have them). Neither Neil Jenman nor the Jenman Group receive any fees, commissions or kickbacks from the sale of Discount Reports.
Also, it's possible (highly likely) that the examples quoted in the article may have sold by the time you read this article. Bargains usually sell. But, of course, there will always be others.