Only a few months ago, property buyers were under the pump. Prices were leaping at the fastest pace many of us had ever seen and properties were being snapped up as soon as they came on to the market.
Property owners could almost be guaranteed their price expectations could be exceeded by buyers competing to purchase property before the price went even higher.
My how things change . . quickly
Now, of course, things have changed. We’re in a market that is under pressure by rising interest rates, global uncertainty and the economic pessimists are having a field day.
The reality is a little different. Yes . . the property market has cooled, but there are many factors buffering further price drops, making this type of market much better for buyers.
On the upside, there’s a little more time to shop around for the best purchase . . .but when it comes to making an offer, buyers are still facing the tricky issue of deciding on what price to pay for their dream property.
Assessing price has always been a dark art in the property industry, and it’s still the sneaky secret driving the market across Australia.
All players use price to their advantage – banks control valuations to determine lending limits, vendors have emotionally high price expectations, buyers hope for bargains, and agents use all this to achieve their own goals.
Not always the villains . . but close this time
While it’s easy to point to selling agents as the villains, it’s important to firstly acknowledge their role is to achieve the best possible price for their vendors.
Good agents know how to do this professionally, but current market conditions are providing the perfect excuse for the big issue buyers will never know they’re facing = under quoting.
There’s a legal definition for under quoting which relates to overt misleading of the market, but it’s very difficult to prove in ‘normal’ market conditions, let alone in today’s fast changing market.
The game agents play
At the start of the selling process when an agent agrees on a sale price with a vendor, they will agree to a price band. Then – to attract the maximum amount of buyers – the agent will allocate a ‘guide price’ that will be on the lower end to appeal to buyers.
This will mean the property attracts a range of buyers, creating competition, driving the price up. Then . . .surprise . . the property sells for well over the price guide.
The other tactic you will see is properties advertised with ‘reduced pricing’ . .when the guide price isn’t actually a reduced price.
Buyers can take control
Looking for bargains, buyers will be attracted to the ‘reduced’ or underquoted price which creates competition and gives agents the opportunity to drive prices up.
Love them or hate them, real estate agents are playing this to their clients’ advantage . .which is actually what they’re supposed to do. As a buyer, you can’t expect them to be on your side.
But there’s something you can do – as a buyer – to take control. Understand pricing.
How to determine price
In the current market one of the pivotal skills you need to protect yourself and make a successful purchase is to know how to run good comparisons and determine the price to pay for a property.
Get this right and you’ll save countless hours wasting time on property that will never perform, won’t meet your requirements, or just isn’t right for you.
Many buyers think they have a ‘negotiation’ problem, when really success is all about assessing price correctly.
Once you know how to assess price, you then have the ability to compile an attractive offer or confidently participate in an auction that you’ll have a much higher chance of winning.
We have developed a handy guide which outlines the information to consider when assessing price. Use the guide to help decide what price to pay for a property and also to help select the best properties to buy.
Access the guide here.
About the author
Debra Beck-Mewing is the Editor of the Property Portfolio Magazine and CEO of The Property Frontline. She has more than 20 years’ experience in buying property Australia-wide and has extensive experience in helping buyers use a range of strategies including renovating, granny flats, sub-division and development. Debra is a skilled property strategist, and a master in identifying tailored opportunities, homes and sourcing properties that have multiple uses. She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business. As a passionate advocate for increasing transparency in the property and wealth industries, Debra is a popular speaker on these topics. She is also an author, podcast host, and participates on numerous committees including the Property Owners’ Association.
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Disclaimer – This information is of a general nature only and does not constitute professional advice. We strongly recommend you seek your own professional advice in relation to your particular circumstances.