Case Study: Buying an overpriced property for under its value
There is an old proverb that a bird in the hand is worth two in the bush. This is often a term selling agents use with their vendor when there is a lower offer that is unconditional and ready to exchange as opposed to a verbal offer or one in writing that is higher.
Buying an overpriced property for under its value is one of my favourite buying conditions in any market and this two-bedroom, 1,42sqm Manhattan style apartment close to Sydney’s CBD with two car spaces was no exception. We saw it in its final auction week and originally I had discounted it as it was above my client’s budget at $1,475,000 plus.
Most buyers in the Sydney real estate market will add 10 per cent to any price they see quoted in an auction campaign. This property was being marketed to the wrong buyers.
After inspecting the property several times with my clients we moved in to our due diligence phase. This entails thorough pricing , DA checks, strata search reviewing, reporting, contract review and anything else we may find out through our industry contacts.
After finalising the price research (which is market value) I estimated that the property had been misquoted and it was realistically worth between $1,425,000 – $1,450,000. The agent still had it listed at $1,475,000 plus.
There had been two previous offers one at $1,420,000 and another at $1,430,000. However the property was still listed at offers above $1,475,000 plus. This process took eight weeks in total.
When my clients were 100 per cent committed we moved forward. My strategy was to make sure that we were in a position to unconditionally exchange and then talk $$$. I had done some pre negotiations with the agent based on discrepancies we found in our research.
I bought the property for my clients for $1,401,000. We were the bird in the hand!