Stepping into another state with the help of a buyers agent

[BuildingBlocks]

Update:
BA I hired came back with three properties after looking at many (I hope).
1. Property 1: Originally asking $$386,000, now reduced to $379,000
2. Property 2: Asking $369,000
3. Property 3: Originally $377,000, now reduced to $360,000 plus
All 4 bedroom, 2 bathroom, double lock-up garage.
He favours the Prop 1.
It is 7 years old has a tenant (a single mum) who is on a periodic renting at $340 per week – this rent was reduced when the property went on the market so the tenant would allow easy access to potential buyers.
The property has a Council easement at the very back of the property.
According to his current market valuation (CMA) - not a professional valuation - using his research software. The resulting ‘Sales Estimate’ is $376,521.
He sent through Comparable Sales, Most Recent Sales and all Sales in that street. According to the other stats the asking price appears reasonable. Unfortunately all “Sales in that street” are 2009 sales.
He is suggesting to buy for $370K offering $360K.
I told him that even I (as a simple dad) can get at least 5% reduction in price so he has to do better.

Any expert advice would be highly appreciated.

Regards,
devank
ps: I did identify the Prop1 (out of three) as a good value for money at earlier stage. He didn't like other two for various reasons.

I normally go in a bit lower to start negotiations, however I don't know which area you are talking about, maybe the asking price is reasonable.

What are comparable sales prices for the last few months for the same type of property?

Is the $340/wk the reduced rent price, or the price before it was reduced? What is the market rate, as that is where you need it to be back at, and as soon as possible.

Assuming it is periodic and you can move this tenant out if they can't afford to pay market rent, how hard is finding a tenant for this type of property? However, I assume being somewhere in South Brisbane it will be relatively easy to rent out at market.

 

[Propertunity]

According to his current market valuation (CMA) - not a professional valuation - using his research software.

Just for the record CMA stands for Comparable Market Analysis

I told him that even I (as a simple dad) can get at least 5% reduction in price so he has to do better. Any expert advice would be highly appreciated.

Whilst it os perfectly OK to expect a BA to get you a good price, if he has done his/her homework and this is the 'one' for you, what do you think he is going to do to get you a discount? Sure the sellers may be distressed sellers or whatever, but what of they are not? What if they are prepared to wait for the right buyer with the right offer? No-one, BA included, can force a seller (or trick, or cajole) into accepting any price just because as a buyer, you have certain expectations.

Nevertheless, all the best with the offer - hope you get it.

 

[devank]

What are comparable sales prices for the last few months for the same type of property?

- clad house with one less bed room went for $360 in Oct 2010.
- 40sqm bigger & one more bath went for $410 in Nov 2010.
- further from the station & less nicer property went for $352 in Feb 2011.

Median price of for this area is about $345K

Asking price of the considered property is $379. It has 4 bed, 2 bath & 2 car with 640 sqm land. It is also 7 years old. I believe it is better than a 'median' house.

Is the $340/wk the reduced rent price, or the price before it was reduced? What is the market rate, as that is where you need it to be back at, and as soon as possible.

Yes. $340/wk is the reduced rent price. Real estate agent claims it can go fro 370-390 /wk.

Assuming it is periodic and you can move this tenant out if they can't afford to pay market rent, how hard is finding a tenant for this type of property? However, I assume being somewhere in South Brisbane it will be relatively easy to rent out at market.

I’m not very comfortable to increase the rent or chucking a single mother out. I know I’m weak.

Whilst it os perfectly OK to expect a BA to get you a good price, if he has done his/her homework and this is the 'one' for you, what do you think he is going to do to get you a discount? Sure the sellers may be distressed sellers or whatever, but what of they are not? What if they are prepared to wait for the right buyer with the right offer? No-one, BA included, can force a seller (or trick, or cajole) into accepting any price just because as a buyer, you have certain expectations.

Nevertheless, all the best with the offer - hope you get it.

I can perfectly understand the frustration from the BA’s point of view. He also strongly (may be very strongly) expressed the same view
However, there is nothing wrong with trying to get a lower price.

 

[Jacque]

Update:
BA I hired came back with three properties after looking at many (I hope).

Hi Devan

Glad to hear you're receiving some shortlisted properties- however your above sentence concerns me somewhat. You "hope" that he's been looking at many? Every property that's inspected (whether shortlisted or not) should be sent to you in the BA's regular updates. It's important that you know every property that's been considered, as it builds a more comprehensive picture for you of the search and available stock. We do this for our clients, and maintain a detailed file of every property that's enquired upon- which can run over 100+ at times.

As far as value goes, I have to agree with Prop and others here- it's not always about the discount you can get off the price but the fair market value. After all, as I'm sure others have had experience of here, sometimes a 20% discount can still be overpaying whilst paying full price can represent a bargain. It comes down to knowing your values and what represents a fair price to pay. Best of luck with it all

 

[Jacque]

Yes. $340/wk is the reduced rent price. Real estate agent claims it can go fro 370-390 /wk.

Be careful here. I'd be asking the agency's PM to write you a rental appraisal letter backing this up. Also ask your BA to present you with some examples of current rentals as sales agents often "over-estimate" likely rentals to increase appeal to the buyer.

I’m not very comfortable to increase the rent or chucking a single mother out. I know I’m weak.

It's not about being weak. However, keep in mind that you're purchasing an investment property and you need to approach it this way. Increasing the rent in line with the market is essential if you're to maintain a desired yield. Don't make the mistake of keeping it cheap because it only makes it harder to increase by larger amounts eg $50 a week- later on.

 

[BV]

Devank

How far away from the CBD are you looking
and are you avoiding the flooding suburbs
or you don't mind those as long as the property is on a hill?

cheers

 

[BuildingBlocks]

It's not about being weak. However, keep in mind that you're purchasing an investment property and you need to approach it this way. Increasing the rent in line with the market is essential if you're to maintain a desired yield. Don't make the mistake of keeping it cheap because it only makes it harder to increase by larger amounts eg $50 a week- later on.

Further to this is just comes down to, are you happy donating $200/month to this tenant? Because that is what you will be doing.

If the answer is yes then make sure you calculate this into your rental yields etc and see how everything then compares.

 

[devank]

Every property that's inspected (whether shortlisted or not) should be sent to you in the BA's regular updates. It's important that you know every property that's been considered, as it builds a more comprehensive picture for you of the search and available stock.

That didn’t happen. However I received information about three properties I thought were good value for money within 3 hours. There aren’t many properties on sale which fit my criteria. So I assumed he has seen other properties which are similar what I’m looking for.

Be careful here. I'd be asking the agency's PM to write you a rental appraisal letter backing this up. Also ask your BA to present you with some examples of current rentals as sales agents often "over-estimate" likely rentals to increase appeal to the buyer.

Yes... I received them without asking. Still.. the real estate agent is trying to sell the property right! I asked for the rental history records.

Don't make the mistake of keeping it cheap because it only makes it harder to increase by larger amounts eg $50 a week- later on.

Very true. I should treat this as business.

How far away from the CBD are you looking
and are you avoiding the flooding suburbs
or you don't mind those as long as the property is on a hill?
cheers

This is about 30 mins from the CBD. This area didn’t have floods this time. He said always considered flooding issue when he selects property. I’m sure all other BA’s also do this as a normal practice. Flooding can happen anywhere... so yes it is good to be on a higher ground.

Further to this is just comes down to, are you happy donating $200/month to this tenant? Because that is what you will be doing.

True. That put things into perspective. I guess we should be reasonable/fair with existing tenants.

 

[Ed Barton]

True. That put things into prospective. I guess we should be reasonable/fair with existing tenants.

yes you should be fair with tenants. the rent was reduced for the marketing campaign to get a cooperative tenant. once you buy it the reason for the reduction has ceased and rent should be returned to normal. what is that? (let me guess you weren't told that. ie it was not reduced.)

 

[BV]

This is about 30 mins from the CBD. This area didn’t have floods this time.

Ok thanks but why so far from the CBD and why south?

 

[devank]

Ok thanks but why so far from the CBD and why south?

Basically it comes down to my budget & requirement...
My budget is ~ 350K.
Wanted a newish house.
Wanted the cashflow ~ 5% yeild
Wanted decent capital growth in long term.

 

[devank]

Update:
As I mentioned before, this particular property was initially advertised for 386K. Then reduced to 379K.
BA suggested offering 360K with a hope of buying around 370K. Even though I thought we could do better we agreed to make the offer of 360K.
Finally the offer of 362K is accepted. Contract is going to be exchanged tomorrow.

 

[Jacque]

Update:
As I mentioned before, this particular property was initially advertised for 386K. Then reduced to 379K.
BA suggested offering 360K with a hope of buying around 370K. Even though I thought we could do better we agreed to make the offer of 360K.
Finally the offer of 362K is accepted. Contract is going to be exchanged tomorrow.

Congrats Devan! Hope it all goes well and it's been a great experience for you. Glad you stayed within your budget as well

 

[devank]

Hope it all goes well and it's been a great experience for you. Glad you stayed within your budget as well

It is not over yet

In the contract the rent is specified as $320!! Apparently the agent 'thought' the rent was $340. Agent said that he will re-check and let the BA know. He apologises if he proves to be wrong. What a joke!

Anyway, the market rent is about $380. All other similar properties are listed for around 400.00. Since the current tenant has been living in this place for last 5 years and a single mother I was going to offer a discount and ask only $370.00 but she doesn’t want to pay more than $340.00.

After discussing with the BA, we decided to get another tenant (paying market rent) as soon as possible. That means the current owner needs to give the existing tenant 30 days notice after the contract is unconditional. Settlement will take place 45 days from the date of contract.

 

[devank]

It is almost coming to the end. Rent was $360 and reduced to $320. So it is ok.

I have attached the lot diagram (lot 37) with easement showing. It is 3 meters from the back fence.

Any thoughts on the council easement?

 

[Jacque]

It is almost coming to the end. Rent was $360 and reduced to $320. So it is ok.

I have attached the lot diagram (lot 37) with easement showing. It is 3 meters from the back fence.

Any thoughts on the council easement?

Hi Devan

As long as it doesn't affect future extensions (including pools) it wouldn't present a concern to me. Always keep your future buyer in mind for resale.

 

[devank]

Update:
Building & pest inspection came out good. We signed the contract today.

Submitted the mortgage application with a different bank this time. Interestingly, the existing bank, which gave us only 0.8% discount, is going to give me 1% discount now

 

[BV]

Devan
Good work mate, can you share which lender you are using and if you went direct or through a broker?

 

[BuildingBlocks]

Update:
Building & pest inspection came out good. We signed the contract today.

Submitted the mortgage application with a different bank this time. Interestingly, the existing bank, which gave us only 0.8% discount, is going to give me 1% discount now

Congrats

 

[devank]

Devan
Good work mate, can you share which lender you are using and if you went direct or through a broker?

I'm going with Bankwest. It is the no frills one but getting an offset account for $5 a month. Thinking of using the offset account for all the transactions to make record keeping easier in the long run.

I used a broker this time. We play tennis together. He is the one told me that I should be getting 1% discount from A&Z and asked me to demand it. He saved more than $2000.00 a year!