How to know if you’re paying a fair price
We all love the idea of nabbing a bargain property, but for most home buyers the real issue is whether they’re overvaluing a place – and paying too much in the process.
Buying a home is an exciting prospect, but it’s perfectly natural to have a big dose of nerves given that you’re likely committing to spending hundreds of thousands of dollars (or millions!).
But with a bit of research, and some other handy tips below, you can help protect yourself when the bidding or negotiations begin.
Why it’s important to pay a fair price
Paying above the odds for a home can have serious financial impacts.
The more you pay, the more you may need to borrow to fund the purchase. That can mean paying higher loan repayments, potentially leaving your budget thinly stretched, especially if interest rates rise again.
Worst case scenario, you could get caught out by a bank valuation that comes in lower than the purchase price – leaving you facing a funding shortfall.
The question is, how do you know if the asking price for a home is in line with the market, or if it’s completely over the top?
Research helps you nail the market
One way to hone in on what a home is worth is to have a pre-purchase valuation.
This involves a professional valuer examining the property and arriving at a value based on factors such as the location and size/condition of the home.
The catch is that a valuation can cost between $200 to $600.
It also takes time to organise, and in a fast-moving market the delay could see you miss out on a property.
A cheaper option is to do plenty of your own research.
Websites like realestate.com.au or domain.com.au can show the median house and apartment values for individual suburbs.
This gives you a good starting point, though as each home is different you’ll need to drill down further.
Factors that can impact market value
Some factors can see broadly similar properties have very different market values. Things to watch for include:
– The lot size a house sits on.
– The number of bedrooms and bathrooms.
– The condition of a home.
– Availability of parking (off-street parking is a plus!)
– Orientation. North-facing homes receive more natural daylight, and so often require less artificial lighting or heating.
– Energy efficiency. PropTrack found three out of five (59%) buyers say eco-features such as solar panels are important to help save on power bills.
– The street. Be wary of streets that become a commuter parking lot on weekdays.
– Views and outlook.
– Zoning and planned developments.
Bearing all these features in mind, check out recently sold properties similar to the one you’re planning to buy.
Pay particular attention to the final sale price – not the asking price. It is the selling price that sets the market.
Don’t be afraid to negotiate
If you have done your homework, you should have a reasonable idea if the asking price of a place is close to the mark or wishful thinking.
Remember, you may also have scope to pay less by negotiating on price. Bear in mind though that the longer negotiations take, the greater the danger of someone else jumping in and snatching the property from under you.
Get in touch with us about pre-approval
Last but not least, give us a call to discuss some of the benefits of home loan pre-approval.
It can help you act quickly when you see a home you’re interested in buying, and it sets a buying limit so you can negotiate with confidence.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.