Buying below 'market value' - how?

[Inve5ter]

Hi guys and gals,

new to the forum so not sure if this has been covered much before, but from what I can see, by the time property hits the market (i.e. Internet, in store advertising etc) it is already too late to buy it at 'below market value'

So my question is, for all these peeps that are buying property under value, is this done purely by knowing someone, who has a mate, who is desperate to sell? or?

From an outsider looking in, it seems that the only way to grab a bargain, is to either have a real estate agent in your pocket, or simply through an offline network and to grab the property before it becomes knows to the shoppers who are happy to pay retail.

 

[macca446]

Hi guys and gals,

new to the forum so not sure if this has been covered much before, but from what I can see, by the time property hits the market (i.e. Internet, in store advertising etc) it is already too late to buy it at 'below market value'

So my question is, for all these peeps that are buying property under value, is this done purely by knowing someone, who has a mate, who is desperate to sell? or?

From an outsider looking in, it seems that the only way to grab a bargain, is to either have a real estate agent in your pocket, or simply through an offline network and to grab the property before it becomes knows to the shoppers who are happy to pay retail.

Hi,
Welcome to the forum,I do not see myself as a astute investor but I have relative good knowledge all I do is make lots of low offers if I snag even 1 it is worth waiting for, I am very close to getting one now.
Macca446

 

[HD_ACE]

Hi guys and gals,

new to the forum so not sure if this has been covered much before, but from what I can see, by the time property hits the market (i.e. Internet, in store advertising etc) it is already too late to buy it at 'below market value'

So my question is, for all these peeps that are buying property under value, is this done purely by knowing someone, who has a mate, who is desperate to sell? or?

From an outsider looking in, it seems that the only way to grab a bargain, is to either have a real estate agent in your pocket, or simply through an offline network and to grab the property before it becomes knows to the shoppers who are happy to pay retail.

Theres oportunities with Out of area agents that dont know key facts like zoning or proposed zoning. Or substantial council improvemnts/anouncements etc.


If its a long term strategy, why not concentrate on sourcing properties that will outperform overtime and increase faster with compounding growth, rather than a 10 or 20k discount.

unless of course you can sourse both

cheers

 

[travelbug]

Hi, it's not necessarily knowing someone.
Some properties arte marketed very poorly resulting in people not viewing them.
I bought one like this. VERY poorly advertised and only 3 people at the auction. It needed work also which scared people off.

Another one I just missed was advertised by an out of area real estate agent who obviously didn't know the area. I rang as soon as it hit the net but someone was already driving there with a deposit.

Some agents list places cheaper to get a quick sale. Some vendors are unaware of prices and a guided by the real estate agents estimate. You'd be surprised how many people wouldn't think to look on the net to see what houses like theirs are selling for.

Speed is the key as well as knowing your market. If you know the area you know when a place is priced under market. Then you can pounce on it.

In this market it is more difficult. In 2008 I looked at LOTS of properties that were just sitting there with prices dropping as people weren't buying. We put in a pretty low offer on one which was rejected. The agent rang us 3 weeks later and accepted our offer. The next year we could have sold it for a tidy profit.

 

[see_change]

I think it's a catch phrase that marketers like to use to promote deals or their services . I've never come across a list of properties for sale that are available to some people and not to others ( oops maybe I'm one of the others ....)

Eg recent 50 % land banking thread . You were getting a " Discount " because you were taking a risk.

Many discounts I've seen were discounts off unrealistic asking prices .

Some times you will get " good deals " because you are able to buy when others can't or aren't prepared to take what they perceive as a risk . We made a very good buy just after the GFC hit . Most people weren't interested in buying at the time and we had money available in a LOC facility so we made a very low offer and then negotiated up slightly . Was it below market . No . That's what the market was prepared to offer and they accepted . They didn't have to accept our offer .

Cliff

 

[Inve5ter]

Wow... so much more info i was expecting to get back! thanks all. keep it coming!

My strategy is coming along nicely so im hoping to start the ball rolling in the next few months!

 

[Peter 14.7]

Hi guys and gals,

new to the forum so not sure if this has been covered much before, but from what I can see, by the time property hits the market (i.e. Internet, in store advertising etc) it is already too late to buy it at 'below market value'

So my question is, for all these peeps that are buying property under value, is this done purely by knowing someone, who has a mate, who is desperate to sell? or?

From an outsider looking in, it seems that the only way to grab a bargain, is to either have a real estate agent in your pocket, or simply through an offline network and to grab the property before it becomes knows to the shoppers who are happy to pay retail.

Whoa there.

Ok, with no disrespect, lets say you are a Newbie just learning, like we all were once. OK? This is rolled gold

First step.

NO 1 There is technically no such thing as buying under the market legally. What you pay, IS the market, someone pays less, that is the market. What you want is Cash Flow Positive Property. I.e. it pays for itself.

So read this thread>

http://somersoft.com/forums/showthread.php?t=89018

NO 2, if you do'nt have the time to learn but the money to buy. Buy the skill.

Find a really good, trustworthy buyer agent working the area you want and if it is an IP then the area you want is the best, so personal taste is 99% irrelevant. No Buyers Agent can do all of Aus, that is rubbish.

So with no connection at all other than knowing her to be a trusted operator and long term forum member try Jacque. Will post link. Must be member of Buyer agents Association. But don't be cheap, A good independent one will cost $5000 at least.

NO 3 REALLY IMPORTANT, what is your Goal then make Strategy to achieve that.

Seriously, that is the key to success. Not knowing that earlier cost me $$$$ in tax, fees, sale costs, etc...I should charge for this stuff.

AND Lucky last

Anyone who has deals in far off locations, wholesale pricing, "free" seminars and courses costing but then want something for it, is a 99% of the time, a scam. Any one calling themself Property Processor, Guru, etc.. are to be watched closely with doubt.

If you can spend the time to learn, not panic, get a goal and strategy , you will succeed. If you rush , you may get lucky and succeed, or you get scammed you will lose 10 years of growth.

My 2 cents from an investor with more that one IP , Peter 14.7

PS A rule I used as a Newbie was when someone was giving me advice was this ask " so how many IP do you have?" 80% of the time, NIL!!!!! Run Away!!

PPS of those gurus wanting money if they are THAT good when do they charge??? The Serious Investors here, who have made it in property are too busy: playing with boats, vintage cars, farms ( tick me) , travel ( another tick), golf, sports, etc and dont need or want to be selling you their time as a coach / guru etc...

 

[Peter 14.7]

http://somersoft.com/forums/showthread.php?t=89996

Buyers Agents Thread. More reading.

Peter

 

[see_change]

Bad marketing happens . Agents are humans . They talk about the three d's for motivated vendors . You can add a forth , depression , to that list and it can apply to the agents as well as the vendors .

Extreme example for us was a buy in rocky which was probably around 10 % under market . We had an appt to see a property with an agent but when we got there we were told it wasn't available.
I asked him if he had anything else for sale .
He said no.
I asked him " what about the one in the window ".
He said " Oh that one .... Yes that's still for sale "
I asked him " has anyone else seen it "
He said , " no I haven't shown anyone that one ..."

Bottom line was the agent was recently seperated and badly depressed . We saw him about two months later and he'd been to his GP and was on antidepressants. Totally different person , happy , chatting , First comment to us was " wow , you guys got a good deal on....... "

We always try to get the agent on our side . They're meant to be working for the vendor , but selling a house is stressful and some vendors can get frustrated with the agent. The agents are only human .

Cliff

 

[attrill]

It costs nothing to make offers. I heard a talk by a guy who made 10-20 a week. Every once in a while he would hit a motivated seller just at the right time and get a property for less than it was worth.

It could be divorce, deceased estate, relocation, has to move overseas, etc etc. There are plenty of reasons people have to sell for less than they would like to.

From my own experience, last June (2012) an identical unit 2 doors from a unit of mine was for sale for $470k which was about right. Seller had to settle before the end of June and so when he got a cash offer of $360k with a few days to go he took it. I was miffed as I was about to sell mine but held off for a year to let a few more sales go through.

The buyer did a quick reno and it's back on the market for $475k now after having 8%+ return as a rental for a year. Should clear a profit of $50k for a few weeks work.

The deals are out there but you don't find them very often if you just cruise the net at lunchtime. You have to be out there looking.

Just a thought..

 

[MarkB]

Sometimes you can see / do things that others cannot:

Like when we bought our PPOR, we paid $250k and the initial valuation was for $250k too. When I pointed out to the valuer that the section was subdividable (at the time I worked for the local council so I had easy access to both the council files and planners) he immediately revised his valuation to $285k (instant $35k equity boost).

Or some people I know who recently purchased 98 Ha of farmland @ $25,000 per Ha (which was appraised UCV). It's prime dairy land and the person they bought if off did not have a dairy shed on site (so it was unrealised potential). They already owned the farm across the road (which does have a dairy shed on site) - so with the stroke of a pen they made close to $1m, because that same land, now attached to their dairy shed, is worth $37,500 per Ha.

 

[Peter 14.7]

These examples are more value adding than below market although all very good. Knowing the market and low balling a distressed seller can work but you really need to know the real value, have finance, have deposit/equity and know the real costs and rental.

Mate recently lowballed a 230k ask at 150k. First said no way , two months later, took it. CF+ result

Peter

 

[Singo]

Peter and others have said all. Just summarising

1. Know the market: One cannot spot a bargain without knowing about the houses and prices in that area.
2. Know the people: Make contact with that area RE agents when you go to house opens. Keep in touch. Let them know what sort of properties you are looking for.
3. Be prepared to move fast: quick settlements are preferred in such sales, so have the finance ready. Building and pest inspectors and/or electrician may be needed for due diligence. Have your contacts ready as well.
4. Look beyond what you see: Typical bargains such as mortgagee sales and deceased estates are sold "as is" and may look inhabitable. One should be able to know what can be done and how much it will cost.

Good luck.

Singo

 

[Deltaberry]

By knowing the market VERY well.

 

[MarkB]

These examples are more value adding than below market although all very good.

I look at it like this....

re: My PPOR

In economic theory a perfect market is said to exist when (among other conditions) perfect information exists (both buyers and sellers know everything there is to know). In real estate of course, this doesn't exist. When I bought my PPOR I knew more about the property than both the vendor and the REA (they should have known it was subdividable, but didn't). So I used my better information to my advantage.

Re: the Farm

The market value for the seller was $25,000 per Ha.
The market value for the buyer was $37,500 per Ha.
From the sellers perspective, they got their market value.
From the buyers perspective, they bought it at a 33% discount to their market value.

 

[see_change]

Following on the low balling idea .

Practice making low ball offers . It's funny the first time you make one , watching the reaction of the agent . Some are matter of fact and say they'll pass it on but it's below expectations etc and be quite business like about it.

Some will be affronted and say that it's way too low / they won't pass it on / try to talk you up etc. I just repeat that it's what we prepared to offer and say they have a legal obligation to pass it on ( which they do unless the vendor has specifically told them not to pass on offers below x....) .

Depending in the circumstances we might say we really like it but that's all we can afford . Not a bad line for first home buyers .

One way to do this is to make offers you can afford on properties you can't. As has been said , most properties with highly motivated vendors don't have that on the adds , though occasionally they do.

Cliff

 

[BayView]

The ironic thing is that as soon as you pay "below market' then all the same properties in the immediate area become the same value.

Just ask the Bank valuers.

 

[Deltaberry]

Lots of people will say the "true value" is the value pay buy for, because that's what the market was prepared to transact at the time. To me, that's just a lazy way of explaining things or someone is stuck on some liguistics or academic point. It's like saying Warren Buffett - who has a knack for identifying future earnings where the market coudn't - it not really buying undervalued stocks.

 

[see_change]

Thinking about it , we have bought one property which could be considered under market.

Two units being sold in one line . A two bedder and a one bedder . Deceased estate and the money was going to an institution . Executor , against advice of the agent , wanted to sell them as one so less hassel for him . This took out everyone who was interested in buying one which was the vast majority of intersted buyers . We could have bought them and on sold each unit individually for a profit .

Cliff

 

[MTR]

I purchased in a rising market and the area was going nuts, then along came an absolute screaming bargain... shock, horror, at least $80,000 below true value. Selling agent was a lazy, out of area real estate agent who did not have a clue on the true value. He had multiple offers on the property, no surprises here.

Unfortunately I did not secure the property it was a RE agent who jumped on it and paid $5000 above asking price, made an instant $75,000. BTW the house has jumped up by at least another $80,000, damn good return within 12 month period.

They don't come along often but I have seen a few and definitely take note if it is an out of area agent.