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How To Buy Property Below Market Value

Wise Real Estate Advice - Buyer Agents Melbourne > How To Buy Property Below Market Value

The Melbourne property market in 2023 has undergone significant shifts, transitioning from a seller’s market to one favoring buyers.

Informed buyers and investors are aware that they can boost their investment returns by acquiring properties at prices below the market value.

For those interested in mastering this approach, this article outlines strategies employed by professional buyer’s agents to pinpoint potential bargains.

We simplify the process into three straightforward steps, focusing on the fundamentals of a sound investment and recognizing an excellent deal before engaging in property negotiations

How To Buy Property Below Market Value In 2023

‘Real Estate 101’

“Real Estate 101” refers to the basic, fundamental concepts and knowledge in the field of real estate. Achieving a good return on investment (ROI) when buying property involves several key strategies:

 

Stay away from new land releases. 

The outer suburbs of major cities often feature newly developing areas, where purchasing property can be appealing due to lower prices and brand-new houses.

However, buyers may face challenges such as stagnant or slow capital appreciation for extended periods and the potential devaluation of land by developers through the release of new plots.

The complete development of a suburb can span decades.

Essential amenities like train stations or major highway access might only become available after a significant amount of time, potentially taking a lifetime to materialize.


Look for lifestyle amenities.

Who wouldn’t enjoy a Saturday morning coffee crafted by a skilled barrister? Amenities like coffee shops, boutique stores, shopping centers, restaurants, and scenic walking paths along beaches or creeks all drive demand. The proximity of a property to these kinds of facilities can often lead to an increase in its value.

Good Schools

If real estate is located in a highly rated public school zone, this can increase property prices from 5% to 12%. You can check the ratings of public school and check there zoning on the MY SCHOOL website. 


Close to a train station or major city

As the population in the suburbs of major cities grows, traffic issues have become more prevalent for local residents.

Properties situated within walking distance of a train station, a significant employment hub, or a Central Business District (CBD) tend to see higher rental yields and purchase prices. Future train networks of Melbourne. 

Future train networks can greatly enhance accessibility to different regions, making it easier for people to commute for work, education, and leisure. This can lead to more balanced development across regions. Areas near future train stations often see an increase in property values due to improved accessibility and desirability.

 

Identifying Sellers Open to Negotiation.

Target properties that have spent time on market


A good starting point is often properties that have been on the market for 60 days or more.

Initially, when a property is new to the market, the owner tends to have a high reserve price, bolstered by confidence in their advertising strategy and the selling agent.

However, as weeks and months pass without a sale, the seller’s mindset shifts from when they first listed. This change in perspective can open the door to the possibility of a lower offer being accepted.

Overpriced property

Real estate agents often overestimate property prices to secure business. Their approach includes gradually bringing the sellers to an understanding of the real market value, especially if the property risks becoming a stale listing.

So, what exactly is a stale listing? It’s a property that has been on the market for over 45 days, typically overpriced, attracting fewer buyers. Its advertising impact diminishes as newer listings take precedence in the area.

There are several factors that can hinder a property’s sale:

  • The vendors may not allocate a sufficient marketing budget for the agent.
  • Poor presentation of the property.
  • Vendors overestimating the value of their property. Once the asking price drops to the actual market value, interest often wanes, leading to a stale listing.

These scenarios present a chance for adept negotiators to further reduce the price, especially as sellers at this stage are often eager to move on.


A Renovators Delight

Every buyer ideally seeks a property that is move-in ready and requires no additional work. Such properties consistently command higher prices, even in a declining market.

Opting for a structurally sound home that needs some work can present an opportunity to purchase at a significantly reduced price.

Sellers of such properties are often more open to negotiation, recognizing that the buyer will need to invest additional funds to upgrade the property to standard.


Target properties that are not listed for sale (off market)

An off market listing is a property that is for sale without the public selling camping.
The benefit to a buyer is there are no other buyers pushing prices up. This is a great opportunity for any buyer.

How to find this kind of listing:

  • Buyer’s agents and real estate agents have access to these types of listings. 
  • Doors knock a street you like. 
  • Websites like ‘Buy My Place.’ 


Use A Buyer’s Agent

The primary role of a buyer’s agent is to secure properties at lower prices. Often having backgrounds as real estate agents, they prioritize the buyer’s interests instead of the seller’s.

Their effectiveness lies in their negotiation skills, honed to navigate the dynamics of real estate transactions.

Being emotionally detached from the properties, they can concentrate on factual aspects and are adept at timing their exit from a deal when necessary.


Spot A Quiet Achieving Suburb

Popular suburbs increase in price quite quickly, while the neighbouring suburbs are the quiet achievers. It’s only natural for buyers to default to the next suburb if prices are too high in the boom suburb.

Buyers can achieve better capital growth in these types of suburbs because they don’t have the premium price to begin with and growth rates are still very strong.


Leverage a negative building and pest inspection

Utilizing the Findings of a Building and Pest Inspection to Negotiate. A savvy negotiator or property buyer often makes the sale contingent on a satisfactory building and pest inspection.

Should the inspection reveal even minor issues with the property, it opens up additional opportunities for negotiation.


Bank Sales

Mortgagee-in-possession sales, these occur when a property owner defaults on their mortgage, leading the bank to repossess and auction off the property.

Advantages of this sale type include:

  • Reduced competition as these properties are often not in prime condition, deterring some buyers.
  • Typically, a lower reserve price is set.
  • The property is required to be sold, often leading to more favorable buying conditions.

 

State Trustees

One of the most challenging aspects for real estate agents is managing sellers who have emotional attachments to their property, leading them to value it above the market rate.

Often, properties from retirees or deceased estates are managed by ‘State Trustees,’ a government entity that oversees the sales on behalf of the sellers.

The advantage of dealing with State Trustees is their lack of emotional attachment to the property, ensuring that it is sold at a fair market value.

Checkout the State Trustees website for current properties that are for sale: State Trustees Property For Sale.

Create Your Own Luck.

Like any hustle in life, the more doors you knock on the higher chance of success when buying a property below market value. It takes a bit of hard work by focusing on the facts and figures and not letting your emotions take over.

Some of the strategies used in this article are what expert buyer’s agents use to target a potential bargain. If you’re interested in finding out more about how a buyer’s agent can help, WREA offers you a complementary first consultation.

In the meeting your consultant will establish your buying criteria, assess your ability to enter the market and give you a few options of the type of property that suits your criteria.

For more information on the service please call us directly or leave your details on the enquiry from below.

Questions? Feel free to ask them here.

    >>Next Article: 

    How to negotiate a property purchase. 

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