As the property market continues to fluctuate, how can investors determine the fair value of real estate assets?
As major property markets like Sydney and Melbourne declined, negotiation tactics used by investors to determine a fair value for an investment property have ultimately “changed a bit”, according to buyer’s agent Robert Skeen.
Where months ago, buyers in auctions typically strive to wrap up a purchase during the first week, they could now take their time, see a campaign through and even negotiate post-auction.
According to Mr Skeen: “Back then, for properties going to auction, you really wanted to move quickly to cut out a lot of the competition that the property may pick up over the three or four weeks of the campaign. In a bullish market, buying on the day usually means buying a bit over market value.”
“In markets that have slowed down, like today’s markets, investors can take their time. They could lay in some low offers leading up to auction day, get the property in, then negotiate once it has failed to be sold. By then, the owner’s all, ‘Oh my, I have spent all this money on advertising’. Then you’re in a better position to buy the property.”
“Of course, if it’s a bargain in the first week and they’re quoting it and it’s an absolute steal, you might want to buy it that first week. Otherwise, let it go through the campaign then negotiate it post-auction.”
While a lot of investors might be reluctant to offer low prices for a property, Mr Skeen strongly encouraged them to “take the emotion out” of the negotiation and simply maintain a respectful atmosphere throughout the purchasing process.
Be open to counteroffers and avoid being too aggressive when negotiating a lower price, the buyer’s agent advised.
“They just want to make a sale. You might start off a bit tough in terms of the low offer, but like anything when it comes to negotiating, you need to be respectful and courteous. There’s a nicer way that you can say things as opposed to being aggressive and saying, ‘Here’s the offer. We’ve seen something else. If you don’t like it, go stick it’.”
“You want to be respectful about it, so you just open the channel of negotiations. Most good agents realise that it’s a starting point,” Mr Skeen highlighted.
The buyer’s agent also encouraged investors to be transparent when negotiating and, ultimately, learn to make smart decisions quickly, especially when buying properties from an auction.
While property buyers can take their time when the market is slowing down and competition is scarce, the fact remains that good bargains come in few and far in between, particularly in major property markets, which makes speed an important part of maximising wealth-creation opportunities.
As a property professional, Mr Skeen sees to it that, once it’s determined that the property is well priced, deals are closed within 24 to 48 hours.
For him, “speed is king” when trying to snatch a bargain from the property market.
He explained: “Agents and owners themselves, if they get a fair offer early in their campaign and it’s in writing, they’ll take it. Owners are typically reluctant to keep their property in the market for four weeks – there’s a lot of stress and emotion. I think if they get a good unconditional offer early and it enables them to do what they want to do, they’ll take it.”
“Similarly, for real estate agents, if they can spend the minimum amount to realise the same result, they’d do it. Selling in one week versus eight weeks means the vendor pays less on marketing and the agent spends less time transacting it.”
“Speed is of the essence and it’s one of the tools that you can use in your arsenal to help cultivate a sale,” Mr Skeen concluded.