Most of Australia’s capitals are at or near the bottom of the property cycle, potentially creating ideal conditions for value-hunting buyers to pick up a bargain.
The average time it takes a home to sell has increased by 38 per cent in Sydney and 11 per cent in Melbourne over the 12 months to April, according to Domain Group data, meaning buyers have better bargaining power if vendors urgently need to sell.
The bottom of a property cycle is the point of maximum financial opportunity, and with prices now predicted to rise or remain stable in every capital city, a well-timed purchase could prove advantageous.
Bargain hunters shouldn’t be reckless, because cheap properties may turn out to be lemons. But if the vendor of a quality property is genuinely motivated to sell, it can mean they are more open to price negotiations.
How to find a motivated vendor
Vendors can be motivated for a variety of reasons, according to buyers’ agent and Mayfield Property Buyers director John Carew.
“A motivated vendor might be someone who is upgrading,” he said. “Maybe they’re in an apartment, maybe child number two is on the way. They’re not testing the market, they’ve got to sell because the baby is due.”
“If someone’s getting divorced, they’re not testing the market either, they’re going to sell and they will meet the market, whatever that may be.”
Bargain hunters may find clues to a vendor’s situation in listing descriptions, and keyword searches can provide a starting point.
An analysis of property listings on Domain revealed that 2196 established properties — 1 per cent of all listings Australia-wide at the time of publication — include the word “motivated”.
Brisbane has more motivated vendors than any other city, with 1.6 per cent of all listings featuring the word. In Sydney, “urgent” is found in 0.6 per cent of listings, the highest proportion of all capitals.
The degree of motivation is hard to judge from a listing description alone, and catchphrases may simply be a marketing ploy, according to Carew.
“It’s obviously an agent’s job to increase the exposure of a property and people turning up to an open home,” he said.
Serious bargain hunters should do a bit more digging.
What to ask the real estate agent
As the conduit of information between a buyer and seller, the real estate agent can help buyers determine whether a vendor is serious.
Buyers should always ask the agent why the vendor is selling, according to Belle Property Surry Hills director Mark Foy. He says buyers should be persistent because many agents try to avoid the question.
“In this marketplace, you’ve got a lot of uncertainty and vendors testing the market,” he said. “As a buyer, you want to know if you should spend time on this property, or if it’s one that’s actually going to sell.”
While upsizers who have already bought their next home are usually the most motivated, buyers may also find success bargaining with downsizers, according to buyers’ agent and OH Property Group principal Henny Stier.
She says downsizers are often focused on favourable conditions such as extended settlements, and buyers who are accommodating may be able to negotiate a lower price.
“They’ve typically owned a property for 20, 30 or even 40 years,” she said. “In those circumstances, they don’t usually care about an extra $20,000 or $30,000. They often want it on their terms.”
Carew said it’s useful to know if a vendor’s expectations are realistic.
“There is still a chunk of vendors on the market holding onto boom-time prices,” he said. “If they’re not genuinely motivated for a particular reason, it’s unlikely they’re going to sell unless they get a premium price.”
Are mortgagee-in-possession and deceased estate sales always bargains?
Australia-wide, there are 232 properties listed including the word “mortgagee” representing 0.1 per cent of all homes for sale. This generally indicates a “mortgagee-in-possession” sale, where the lender has repossessed the property to sell, usually due to a loan default.
Perth has the highest proportion of listings including the word “mortgagee” at 0.2 per cent of properties.
While buyers may expect a bargain in these situations, lenders are still required to market the property well and sell it for a fair price.
“Generally mortgagee-in-possession sales have the lowest reserves,” Carew said. “As long as lenders recover what they’re owed, their job is to move the asset on.”
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Buyers may also expect a bargain in deceased estate sales. This aspect of the property is frequently marketed by agents, and the word “deceased” is featured in 0.1 per cent of all listings in Australia.
Executors of deceased estates often take properties to auction, so buyers tend to pay market value. Lower prices are usually due to the dated or unrenovated condition of the home.
In these situations, the biggest benefit to buyers is the knowledge that they’re dealing with a serious vendor.
“Those types of sales are very good examples of someone who is not testing the market,” Carew said. “They are genuinely committed sellers.”
Carew said buyers shouldn’t target bargains just because they’re cheap or have been listed for a long time. A lack of interest can indicate actual problems with the property.
“If you’re getting an absolute bargain now, it’s possibly going to be a bargain in 10 years time when you go to sell it.”