Keep Missing Out on Property?
Australian property on the increase
The real estate environment currently seems overheated to say the least! COVID-19 has had a big impact on the property market in a way that not many anticipated or saw coming, especially those that initially predicted a significant tumble in residential values and prices who got it terribly wrong! Now we are starting to see media reports blaming the RBA for reducing the cash rate so much that this has caused buyers to spend more money for properties!!
If you are baffled with what seems to be ever-increasing property prices and you keep missing out on that property purchase, there’s likely to be a number of contributing factors.
The most popular being that in a heated market such as this, property price guides are usually not aligned with their eventual selling price, yet buyers take an advertised price range at face value, expecting to buy the property within that range, certainly not more. This rarely happens, which leads a ‘bash your real estate agent’ campaign which is really unwarranted and unfair.
As a buyer, you need to understand how property price guides work – it really is that simple.
The REIV sets marketing rules which are clear as per the government guidelines – a property cannot be advertised for more than a 10% variance of what the vendor’s ‘reserve’ (or selling) price is. So, when an agent pitches for a property listing, they also incorporate the same information that every other agent has accessed from the same sources regarding values, comparable recent sales etc to secure the listing. Once a selling price (the ‘reserve’) has been agreed on with the vendor, the agent then sets the price range, usually based on comparable sales and the 10% rule as the guideline. i.e.
If the estimated reserve price is, for example $660,000, then working backwards by 10% brings the estimated starting range is about $545,000 and top end of range $600,000. So, it is not unreasonable for the agent to advertise the property price guide as $550-$600K, knowing full well the vendor is hoping for somewhere around $660K.
This is where so many people get disappointed and start screaming “underquoting” and demand the media investigate! The agents are actually working within the guidelines provided- ironically, it’s the buyers that don’t fully understand how it works! As a guide, buyers should be prepared that a property can often sell for around 10% above the top-end of the advertised range – if there is much competition, it can go higher
Another factor is emotion – how many times have we witnessed serious bidders really competing for a property and keep on putting their hand up, driving the selling price higher and higher. Nobody can predict how high these bidders may be prepared to go to secure that property, it’s out of the agent’s control!
Our tip is to get your broker involved early, understand how the process works, and do your research to avoid constant disappointment and always being the underbidder!
The RBA has again kept the cash rate unchanged this month. Common consensus is rates should remain low for a couple more years however many lenders have started to increase fixed rates, so you should seriously be considering locking in a rate when you get your loan approved these coming months.
April already! Please feel free to call me on 0438 041 111 to arrange a confidential discussion and get things started.
As always, enjoy life, work hard, play safe and remember that we are always here to help you
‘Take the Confusion Out of Lending’
South Melbourne VIC 3205: a suburb often wrongly referred to as Southbank, or even South Wharf of late. South Melbourne is historically known for its fresh food market and interesting architecture, the historic butted up against the very new. Bordering with Albert Park, South Wharf, Southbank and part of Melbourne 3004 precinct, the location is popular amongst those wanting to live close to the city without being in the actual city. Cafes, markets, beaches and so on are all within easy walking distance or easy tram ride. Property values went through the roof early in the 2000’s but have settled down somewhat and now seem to be more realistic for what you get. Short term capital growth is negated by lifestyle which is why many seem to flock to this location. Certainly, worth a look.