Why asking prices are irrelevant and what to do about it

I often hear people referring to their home or investment property purchase in regards to how much they ‘saved’.  When I ask a few questions and dig a little deeper (it’s my nature I just can’t help it) more often than not I discover they’re referring to A) the amount of money they were able to negotiate off the asking price or B) the amount of money they were able to negotiate off the sales agent’s price guide.

How can I make this judgement call?  Well, when I ask them how much research they did to formulate the purchase price they paid or were prepared to pay most hadn’t done a quarter of the research that myself or my team would have done before presenting a property’s value range to a client, and we have a base of area and pricing knowledge behind us before we even start the research.

An asking price or a price guide is just that - a guide that the selling agent and vendor has come up with to stick on the property. More often than not that price is an inflated figure, particularly when the selling agent has talked up the value of the property to the owner in order to ‘buy’ or secure the property listing. By way of example, achieving a $50,000 reduction when the asking price is $100,000 over true value is hardly a good buy.

So what do you need to do to ensure you don’t over pay? The answer is research. Unless you have reviewed a significant number of comparable properties in your target and neighbouring suburbs then you simply won’t genuinely be able to assess what a property is worth. In my book “The Insider’s Guide to Buying Real Estate” I detail how to go about this and I do recommend in it that you view around 100 comparable properties within a two to three month period (10-12 a week) – quicker if you can. Remember in any market prices can vary by five and up to ten percent in that time frame so you need to be confident that you’re basing your value assessment on current data.

Is all the hard work worth it I hear you ask? Well, as I always say before making a buying decision, do the numbers! If you save yourself say five percent off what you would have paid on a 1 million dollar property which is all too common in the Sydney market – that’s $50,000. Not a bad return on a few months part time work… Of course if you don’t have the time then send me an email and my experienced team and I will do the hard yards for you and yes we do have access to many more properties that may suit your requirements that are not publicly advertised. And yes we will tell you which properties to avoid and why along the way. And yes we are likely to save you far more than the cost of our fees and do a significantly better job whilst you get your weekends back!