Overpaying will come back to bite you!

Overpaying will come back to bite you!

Just last week we bought a great property with magical views over middle harbour for $1.6million. The vendor bought it in 2003 for $1.55million. Ok, yes we bought about 100k below what we feel was fair money for the property (not easy to do in such a strong market). However the question that came to mind was how much did the vendor overpay by 7 years ago?

It’s not easy to work out however based on comparable sales in 2002 and 2003 and factoring in market growth since in the suburb we feel around the $1.3million mark would have been fair money in 2003. In short, after factoring in buying and selling costs the vendors have lost a substantial amount of money. So how does that happen?

Well if you remember back 7 years ago we were in what is referred to as a boom market and some were paying far too much for properties. It wasn’t uncommon to see people paying 10 – 20% above what they should have.

With the market currently on the move I’ve been seeing this trend re-emerging with more and more people paying above what they should pay to secure a purchase. Yes the market is on the rise, demand is high and supply short however that is no excuse to skip conducting detailed research on value.

Deciding to outbid the other buyers, who you assume have done research, by a few $1,000 isn’t a wise strategy considering most are often employing the same approach. The result is two or more uninformed punters (yes I called them punters as without research that is what they are doing) paying some very high prices that are clearly well over the odds!

If you don’t have the time to conduct thorough objective research then invest in someone who can such as a buyer’s agent. If not you could end up paying too much, which will come back and bite you!

Categories: Sydney Market