How to spot a bargain

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Everybody likes to get a bargain. Whether it is everyday goods, such as food and clothing, or more expensive items, such as cars and real estate, there are bargains to be had.

It is relatively simple to spot a bargain when shopping for food, clothing or even cars as all you need to do is compare prices and brands. It is not so easy when looking at real estate, but the rewards when you do find a good deal can be tremendous.

There are five tips to consider when looking for real estate bargains:

Keep your eye on properties for sale
Search the public trustee, deceased estates and mortgagee sale websites
Recognise any renovation potential
Understand the development potential
Ask the right questions

Keep an eye on the properties for sale in your area You need to keep an eye on the properties for sale in your area and, in particular, the time they spend on the market. The longer a property has been for sale, the more chance you have of picking up a bargain.

However, this is not always the case. A property that has been on the market for a long time but whose asking price has not changed is unlikely to be a bargain. This indicates that the vendor is not willing to budge on their price. On the other hand, if you see that the asking price has continually dropped over a period of time, your eyes should start to light up as this is a sign that the vendor is flexible and could be willing to negotiate as they have to sell.

Search the public trustee, deceased estates and mortgagee sale websites When people are forced to sell, due to a death or mortgagee sale, the property can often sell for less than it would under normal circumstances.

A deceased estate can be off putting to many potential buyers. The property is often not presented in its best state as it may have been vacant for a period of time and the house has a musty smell, the garden is overgrown and the faults of the house are very evident. In the end, the sale price will be determined by how quickly the beneficiaries are keen to receive their money.

In a mortgagee sale, the bank has a duty to try and achieve the best price they can. This is so that it can recoup its money and then the vendor can keep any funds that are left after all debts have been paid. However, in a buyer’s market, which is what we are currently experiencing, it is the buyer that will determine the final sale price, not the seller.

As mentioned earlier, forced sales will often result in properties selling at lower than expected prices. However, low prices don’t always mean that it is a good buy. For example, buying bruised fruit at half the normal cost doesn’t represent a bargain. Nor does buying imitation top brand names at a fraction of the real cost. Buying something cheaply doesn’t always represent good value.

Recognise any renovation potential Bargains are often bought because other people don’t see the potential of the property. Most people will walk through an old house and only see the peeling wallpaper, ugly carpet and an old fashioned kitchen. Renovators will see an opportunity to paint the walls, rip up the carpets, polish the floorboards, expose the authentic fireplaces and put in a modern kitchen. Many people choose not to see the opportunity as they don’t know how to renovate and think that the costs of a makeover are too prohibitive.

Understand the development potential Most people will drive by a property and see a run-down house on a large block of land. Those who are familiar with property development and know the rules and regulations of the local council will see a unit site. To the novice it may seem daunting at first to contemplate building units, but it is just a matter of confidence. Knowledge will build your confidence. You only need to know a little more than the rest to be able to pick up a bargain.

Ask the right questions “Why are they selling?” is the best question you can ask. If they don’t give you an answer, continue to ask open-ended questions. An open-ended question will force the sales person to give you more than just a “yes” or “no” answer.

For example, you will gain a better insight into what price the vendor will accept if you ask: “If I make a cash unconditional offer with a short settlement, what figure do you think they will accept?” Rather than: “Will they accept $350,000?”

The first answer may reveal the lowest offer they are willing to take, whereas the second question will only provide you with a “yes” or “no” reply.

Peter Koulizos is a university lecturer and author of The Property Professor’s Top Australian Suburbs. You can buy Peter’s book at our online bookshop.

To read Peter’s other columns, visit Peter’s property pep talks