Despite some recent headwinds, property markets across Sydney continue to remain very strong.
That’s highlighted by fierce competition for good quality properties in blue-chip areas.
In markets that are strong, we are still seeing buyers continually making one important mistake and it’s something that you actually have the power to control.
Substantiate the Value of a Property
For the most part, most buyers put far too much weight in what the sales agent tells them a property might be worth. This is normally in the form of the ‘price guide’ and in many cases, this isn’t really worth taking into consideration at all.
Firstly, it’s important to understand that a sales agent’s job is to market the property well and get the best possible price for the vendor. The most effective way for them to do that is to create competition between buyers in the hopes of a dutch auction of sorts, which will drive up the final price of the property.
One way they do this is to place a price guide at the lower end of the scale. This might encourage more people to bid at auction or at the very least attract more interest.
The other issue with the price guide is that you are effectively letting an agent tell you what a property is worth.
The problem with that is that you’re trusting a real estate agent with the largest purchase that you’re likely to make in your lifetime. You’re basically letting an agent substantiate the value of a property.
If I was spending one, two or upward of three million dollars on a property I would want to know that I am getting some serious value for my money and the property is worth what a sales agent claims it to be.
Personally, I would much prefer to have a clear understanding myself as to what a property is worth. If I can substantiate the value of the property myself, I will then know whether I can afford it and whether it presents good value in the current marketplace.
Throw Out The Guide
My advice for buyers when they begin their search for a property is to pretend every property you look at doesn’t have a guide price.
That means it falls on you to go away and do your research and understand what comparable properties in that area are selling for and how those prices impact your property of interest.
You can do this by looking at recent sales history in the same suburb for similar types of properties. Break down the micro-market and even start looking at how different streets in a suburb might impact the price. Become an area expert and know your market better than the sales agents do.
This is something that might take some time but the more you do it, the better you’re going to get at estimating a property’s value.
Then when you start attending open homes, don’t ask for the price guide, start working out your own estimates and comparing that to what the property actually sells for.
If you’re close on your estimates, you know you have a great understanding of the current market in that area and you should feel confident that you can buy well when the right property comes along.
If you’re not that close, you might be having some issues about how you substantiate the value of a property and that’s when it might be worth getting some help from a buyers agent.