Am I about to be had?

[lumina]

Hi, I'm looking at buying a lovely property that ticks all the boxes for me... except, my research has thrown up something I'm not at all comfortable with.

Here's the thing: The property, a two bedroom in an inner city suburb is listed for $550k. The current owner did up the kitchen. He bought it in May 2006 for $400k. Being extremely generous and saying the kitchen cost $20k, the rise is still over 30%. Research indicates property values in the suburb have risen 9% since 2006. Is the listed price unreasonable? Should I have it professionally valued?

I love the place, but I hesitate to be the one to throw $150k the owner's way for just sitting on it for 3 years!

I'd appreciate your comments...

 

[evand]

The market will resolve your dilemna. It always does.

Hi, I'm looking at buying a lovely property that ticks all the boxes for me... except, my research has thrown up something I'm not at all comfortable with.

Here's the thing: The property, a two bedroom in an inner city suburb is listed for $550k. The current owner did up the kitchen. He bought it in May 2006 for $400k. Being extremely generous and saying the kitchen cost $20k, the rise is still over 30%. Research indicates property values in the suburb have risen 9% since 2006. Is the listed price unreasonable? Should I have it professionally valued?

I love the place, but I hesitate to be the one to throw $150k the owner's way for just sitting on it for 3 years!

I'd appreciate your comments...

 

[Andrew L]

look for some equivalent properties to make your mind up.

Also why pay for someone elses reno - can you buy one for mid 400's and ad the value.

 

[steveadl]

Doesn't matter what he bought it for 2 years ago and if you feel that's 'too much' profit. What are similar properties in the area selling for? I assume not $150k less?

 

[HappyCamper]

Lumina, is this Sydney you're referring to? Assuming this is the inner city of Sydney and not on a busy road, it sounds like a good buy. If you're a bit iffy about throwing the vendor a $150k CG, please send me the address of the house and I'll be happy to do so.

 

[Propertunity]

The property, a two bedroom in an inner city suburb is listed for $550k. The current owner did up the kitchen. He bought it in May 2006 for $400k. Being extremely generous and saying the kitchen cost $20k, the rise is still over 30%. Research indicates property values in the suburb have risen 9% since 2006.

I admire your researching - good work. Where you have made a slight mistake is that last piece of data "property values in the suburb have risen 9% since 2006".
This is an average %. In reality some of the properties may have fallen 3% while others went up 20% - to reach this 9% figure.

The only way to work out a property's worth is by comparable sales. That is what a valuer would use too.

 

[RumpledElf]

Should I have it professionally valued?

Well, you could always do that. You'll need it valued by the bank anyway if you are getting a loan for it.

Its really up to you, can you afford it? Do you really really like the place? Or are there others that are cheaper and will do just as well?

 

[marg4000]

It really doens't matter what the previous person paid for it.

Maybe he/she got the bargain of the century?

Maybe he/she bought it from a relative for below-market value?

You will never know.

Do your research, check comparable values, and if the previous owner has made a killing then that is his/her good luck or good judgment.
Marg

 

[jaycee]

Hi, I'm looking at buying a lovely property that ticks all the boxes for me... except, my research has thrown up something I'm not at all comfortable with.

Here's the thing: The property, a two bedroom in an inner city suburb is listed for $550k. The current owner did up the kitchen. He bought it in May 2006 for $400k. Being extremely generous and saying the kitchen cost $20k, the rise is still over 30%. Research indicates property values in the suburb have risen 9% since 2006. Is the listed price unreasonable? Should I have it professionally valued?

I love the place, but I hesitate to be the one to throw $150k the owner's way for just sitting on it for 3 years!

I'd appreciate your comments...

If they are selling for that price, they are selling for that price..... Imagine the profit margin if he had bout t with casino winnings of $40k 20 years ago....

Worry about whether it's the right price and righ property for you - probably abut what other similar properties are selling for now will be the answer to right price..

You may be lucky to make 30% profit in 3 years too, it's quite a common aspiration to make money off property

 

[Property Meister]

+1 agree

it really shouldn't matter what they paid for it x years ago,

maybe they got a bargain, maybe it was a mates rates deal...

so according to your theory, if the owner had received the property has inheritance, since he paid ZERO for it, then you will refuse to buy it all!

its what price YOU can get it for !!!!

the bigger the discount the bettter, but in todays FHO market, getting a big discount or even a discount might be a bit hard, you have to consider the market we are in as well!

 

[lumina]

thanks!

thanks everyone, all the advice is coming back saying the same thing, and that's reassuring! thanks for helping.

 

[nationt]

The unit i was renting was sold at $440k, inner city 2 bedder. That was last October. The price was jacked up to $495k for similar unit in the same building. That was in March. Now, the similar unit in the same building is asking for $550k. Must be the FHOG.

 

[Propertunity]

Now, the similar unit in the same building is asking for $550k. Must be the FHOG.

Just remember "asking" price can be anything they like - its a free market economy. "selling" price is a different kettle of fish. Probably is the vendor trying to cash in on the FHOG but even if they get a FHB to offer the asking price (not a hard ask )- they still need a valuer to agree - and that's where a lot of these deals come unstuck.

 

[Jacque]

FHB Boost has pushed up values in some suburbs quite sharply this year. Compare sale price of other similar properties from same period in 2006 and you'll start to see a pattern appear. Market has changed a lot in the last 6 mths alone. If you're really concerned, then get a 2nd opinion either via a valuer or a BA. After all, half a million dollars is a large investment

 

[bobbiemenzies]

Its important to remember that in 3 years, the vendors interest bill would have been quite considerable. Think of that before getting mad at him for "making all that money and doing no work".

 

[evand]

Do BA's value properties? I think a BA is not a viable alternative to a registered valuer if seeking a value on a property (as opposed to just an appraisal).

Having said that, i would value my own research over either of them.

If you're really concerned, then get a 2nd opinion either via a valuer or a BA. After all, half a million dollars is a large investment

 

[Token Funder]

Call me crazy but perhaps the implied yield might provide an insight into a reasonable value of the site. You know, rent and stuff.

 

[JamesGG]

Call me crazy but perhaps the implied yield might provide an insight into a reasonable value of the site. You know, rent and stuff.

You're crazy.



Although, I do tend to agree. Neither asking price nor previous purchase price generally have anything much to do with current value. Yield could be part of the equation; as could potential or a number of other factors.