Understanding the value of a property can be your most important negotiation tool when buying. Determining what a property is worth can be a difficult task even for the most seasoned professional, let alone most buyers who only ever buy one or two properties in a lifetime. Failure to do the proper due diligence will leave buyers either missing out or seriously overpaying for a property that will take years to achieve a return on investment. Here are four tips for determining what a property is worth:
1. Know the neighbourhood. Make sure you narrow your property search to three suburbs. By limiting your search, you will be better able to understand the suburb, planned infrastructure and better streets.
2. Don’t compare asking prices. Don’t compare private treaty asking prices in the area. Only compare factual sales data. Make sure you are comparing like-for-like houses and personally view the homes that have recently sold.
3. Value the property as it is today. Make sure you value the property in the current market, not what it might be worth in the future. Many people overpay for a property by factoring in the unrealised returns based on possible renovations or capital growth. This only eats into your profits.
4. Consider qualified advice. How qualified is the advice you’re listening to? Don’t just talk to your local real estate agent, consider engaging a professional to conduct a fair market valuation. (These are very different to your local real estate’s CMA which is just a computer generated report estimating what a property could possibly fetch based on historical sales data).
Understanding what a property is worth can be your most powerful negotiation tool when buying property. Don’t miss out or regret poor judgement simply because you weren’t informed.