From: Michael Croft
Just a quick one on how the game can be played when you are confident of your market knowledge.
In November last year this particular property (suburban fringe) was valued at $440k by the banks valuer for the other potential buyers. Yes I had been talking the value down to all who would listen at the time by emphasizing only the bad points and glossing over the good.
As you know property booms start in Sydney followed quickly by Melbourne and not so quickly by the rest of the capitals and then the regional centers. For example Brisbane usually (sometimes it misses one) follows Sydney with a 18 month to two year delay. The same 'pebble in a pond' rule to cap gain applies within cities ie. boom starts in the center cbd works its way out to the outer suburbs and eventually rural fringe (there are some distortions to this but the rule generally holds true).
Any way with this knowledge in hand I paid $55k over valuation - the asking price in fact, shock horror! There goes my reputation as negotiator. The rest of the deal was that we got a 12 month settlement with unrestricted access and exchanged on a deposit bond. The vendor went for the full asking price and long settlement, rather than the $460k offer by the other potential buyers.
So I am $55k plus $17k of stampduty behind in the game from day one. Not off to a promising start you say - and I agree. 6 months pass and the people selling have their valuer through for a GST valuation as they held the property in a company. Valuation for GST purposes comes in at $505k (Yes I talked it up a bit), I ask the valuer two things Q. how much would you value it at for financing? A. $560k (this is getting there) Q. And what would you do to the property to get it up over the $600k mark? A. I'd paint it, do something about the kitchen and main bathroom.
So the valuer has just told me that if I spend $9k on a reno I will add $40 plus to the valuation.
Well the bottom line is that I am in the process of doing the reno and will get the same valuer back and the price will come in at $610 - $620k.
So my question to you all is was I an idiot to pay $55k over the asking price? Conventional wisdom says I was, but I will be about $80k in net equity better off for the experience.
Michael Croft
Just a quick one on how the game can be played when you are confident of your market knowledge.
In November last year this particular property (suburban fringe) was valued at $440k by the banks valuer for the other potential buyers. Yes I had been talking the value down to all who would listen at the time by emphasizing only the bad points and glossing over the good.
As you know property booms start in Sydney followed quickly by Melbourne and not so quickly by the rest of the capitals and then the regional centers. For example Brisbane usually (sometimes it misses one) follows Sydney with a 18 month to two year delay. The same 'pebble in a pond' rule to cap gain applies within cities ie. boom starts in the center cbd works its way out to the outer suburbs and eventually rural fringe (there are some distortions to this but the rule generally holds true).
Any way with this knowledge in hand I paid $55k over valuation - the asking price in fact, shock horror! There goes my reputation as negotiator. The rest of the deal was that we got a 12 month settlement with unrestricted access and exchanged on a deposit bond. The vendor went for the full asking price and long settlement, rather than the $460k offer by the other potential buyers.
So I am $55k plus $17k of stampduty behind in the game from day one. Not off to a promising start you say - and I agree. 6 months pass and the people selling have their valuer through for a GST valuation as they held the property in a company. Valuation for GST purposes comes in at $505k (Yes I talked it up a bit), I ask the valuer two things Q. how much would you value it at for financing? A. $560k (this is getting there) Q. And what would you do to the property to get it up over the $600k mark? A. I'd paint it, do something about the kitchen and main bathroom.
So the valuer has just told me that if I spend $9k on a reno I will add $40 plus to the valuation.
Well the bottom line is that I am in the process of doing the reno and will get the same valuer back and the price will come in at $610 - $620k.
So my question to you all is was I an idiot to pay $55k over the asking price? Conventional wisdom says I was, but I will be about $80k in net equity better off for the experience.
Michael Croft
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