In today’s show Cate Bakos, a buyer’s agent, has some great advice about how you can determine the true market value of a property without having to rely on your own judgment and the advice is FREE.
Kevin: It’s so difficult when you’re in the market to buy a property just to get a handle on what the prices are doing. In recent times, we’ve seen some crazy prices coming out of Sydney and Melbourne. How do you get a bit of a handle on this, and how do you know that you’re not paying too much when you’re going to buy a property?
I’m going to talk now to Cate Bakos who is a buyer’s agent. No doubt, Cate, you face this challenge all the time, every time you’re helping someone buy a property.
Cate: Every single time. Yes, that’s right, Kevin.
Kevin: How do you work your way through that?
Cate: The first set of analysis that I’ll conduct once we’ve found a property that seems to tick all of the boxes or fit the brief is to conduct a comparable sales analysis. What that means is you look at sales results that have taken place in the area for properties that are on similar land size, offering a similar number of bedrooms or layout, and then obviously, you can pinpoint where you think the subject property sits in relation to the ones that you’ve assessed.
It gets pretty tricky when you have a property that is very unusual or doesn’t have a lot of comparable sales or, more importantly, recent comparable sales. You can look at a property that sold a year ago, but in this market with the pace that we’ve been enduring, a one-year-old sale won’t really be helpful because the market has moved quite a bit. You can’t just put a blanket growth percentage on an old sale.
Then you have a few other things that you might look at doing. Obviously, if you’re not feeling up to doing the analysis yourself, you can speak to a buyer’s advocate or you can speak to a certified valuer who will give you a proper valuation report. But there are other avenues that you can go down to get a good idea of where the property value really sits without necessarily having to pay a professional.
Kevin: Are there any cost-effective ways that we can get a handle on that price, Cate?
Cate: Yes, absolutely. Aside from doing your own analysis, there are professionals out there who you can tap in to, and you don’t necessarily have to pay for their advice; you just have to be nice to them.
One method that I’ll sometimes utilize myself is chatting to other agents in the area – obviously, agents who are in competition with the agency that is listing the property. They may or may not have been through that property and had an opportunity to list it themselves, so not only have they met the vendors and they’ve assessed the property, but they will have conducted their own research, as well. Obviously, a local agent with local knowledge is a highly valued person to have on your team when you’re trying to assess what price tag a property could go for.
The other person I find really valuable in this circumstance is a rental manager – not necessarily one from the same agency who is selling the property, but a rental manager who is dominant in the area. If you can get an idea of what sort of rental appraisal they would assess the property with, you can then look at the going yields in the area. Knowing your rental yields calculates what price tag that could deliver you.
Obviously, assessing these methods in tandem is really helpful because that can give you a range of prices, but it also gives you some data to overlay.
Kevin: I remember talking to you a couple of weeks ago, Cate, about putting a value on a property. I think we talked at the time about a property that you’re going to buy and live in is probably one that you may end up paying a slight premium for because of your requirements. But certainly, if it’s an investment property, it’s more of a business decision. Is that the way you look at it?
Cate: Every day, absolutely. Any investor who’s looking at an investment property with even an element of emotional criteria can really get themselves off track. Whether it be something that they could put their children in or something that they could one day live in themselves, it will muddy the waters, and it will take away their ability to be pragmatic.
It’s vital to get the numbers right and to remain focused on the numbers and your reasons for selecting the property. Obviously, you have growth, yield, and vacancy rate targets that you’re looking to achieve. Try and keep the emotional hat off and put the business hat on only.
Kevin: Great stuff. Cate Bakos from Cate Bakos Property. Thank you so much for your time. I look forward to catching you again soon.
Cate: Thanks for calling, Kevin.