The comments below were published on Talking Property with Domain.com.au in response to a blog posting “3 surefire ways to secure a property bargain” by Alex Brooks.
Alex, I definitely agree with you that fair value is hard to pin down. As Buyers’ Agents, my colleagues and I come across this ‘hunt for a bargain’ mentality quite regularly.
However, we always remind our clients that the goal is to secure the best possible property at the best possible price – and not simply to secure a perceived bargain (for the very reasons you have outlined, Alex).
As an example, only a month ago we purchased a property in North Shore which was in a wonderful location (directly opposite a huge field, children’s park, walk to excellent schools, easy access to public transport etc.) On Auction Day, there were 10 registered bidders – a reflection of the enormous appeal of this property. Obviously such properties of ‘true quality’ will not be found with a bargain sticker – even in the current economic climate.
Understanding which properties will perform well is much more important in the grand scheme of things. Chances are, this well-located property will continue to see strong and consistent growth in the future.
Having said this, we definitely also always keep an eye on properties which present good opportunities for our buyers (either in terms of purchase price, possibility to add quick value by doing simple renovations, or to generate extra income in some way).
Bottom line though: when you spot the right property, you must not be scared to pay a fair price to secure it. Missing out because the property cannot be obtained for a ‘bargain price’ may end up costing you more in terms of opportunity costs.
The tricky parts are (1) identifying the right property; and (2) knowing what the ‘fair value’ to pay is. The line between bargain/fair price/overpaying is gray and not black and white.
About Oliver Stier
Oliver J. Stier is the Director of OH Property Group, a leading Sydney buyers agency. He studied Quantitative Economics and Finance at Cambridge University (UK), University of Toronto (Canada) and Princeton University (USA). In addition to being a licensed real estate agent, Oliver also holds the Chartered Financial Analyst (CFA) designation.