Welcome to the final instalment of my series about accurately assessing a property’s market value.
In my earlier videos and blogs, I discussed the essential elements for determining land value and considerations related to the house and improvements. If you haven’t seen this content, please click this link and check out parts one and two of the series.
So, this week it’s about assessing the influence of the market on a property’s value and why you might choose to be more, or less, bullish with your offer.
The three influencers
I want to look at three elements which affect the fair value of a property, both to you and to the open market.
First up is the granular market sector.
Property markets are driven by the economic fundamentals of supply and demand, but what some people fail to realise is that you must study these at a micro, not macro, level.
When media talks about the current market being all doom and gloom, they’re looking at very broad data normally encompassing entire regions or states. Some even publish metrics for the whole of Australia!
That’s fine for selling papers and attracting eyeballs to a website, but professionals know that you need to understand the data specific to your subject property if you want to make an informed decision on whether to secure it.
If there’s an imbalance between supply and demand for the particular property type, price point and location you’re interested in, that market will rise or fall regardless of what’s happening in other parts of the country.
The second element is the emotional value you place on a home. If, as the buyer, you have an emotional connection to a property you want to live in, that will factor into your offer considerations. Some may say you should be unemotional or you might pay too much. However, if during the inspection you get a gut response that has you looking forward to arriving home here every day, enjoying time with the family and walking to your favourite leisure spots, don’t ignore it. It’s not necessarily a bad thing to be willing to go the extra mile when securing a home that feels right for you, so long as you have guidance from an unemotional advisor such as a buyer’s agent. They can find a balance point for your offer that shows you’re serious about purchasing without giving away too much dough in the process.
The third consideration is in the same vein as emotion and I describe this one as “purpose”. Finding a home that ticks every one of your wish-list boxes is hard. You will have obviously written down your list of “must haves” and additional elements that would be nice to have. Perhaps you’re a family of five and space will be a premium consideration with the ability for the kids to escape to their own living room. Maybe it has to be within a certain school zone or must have undercover parking for three cars.
If you unearth a home that meets your brief to a T, it would be perfectly fine to extend yourself in some way to secure it.
A recent example
The influence of these three factors was brought into stark contrast by a recent transaction we handled.
We had been offered an off-market opportunity that was ideal for our client. It was a character Queensland home that had been fully renovated and was on an 800 square metre block. It had separate living spaces plus a pool and was exactly what our buyer had imagined.
We were in negotiations with the agent and had come to an impasse on price. What we were offering and what the vendor wanted seemed too far apart and the selling agent was suggesting we drop the deal and let the seller take it to auction.
Our client knew that the average Days On Market (DOM) in the suburb was 62. They reasoned that, based on the DOM figure, walking away was a good idea, because 60 days later they could purchase at a discount.
But I needed more information, so I did a little research.
I looked specifically for similar homes in the suburb and studied listing volumes, transaction numbers and average DOM. It turns out that only five properties that would meet the client’s brief had come onto the market over the past two years. In addition, the homes that sold had an average DOM of 14 days.
This valuable information helped us and the client decide that if we let this opportunity go to open market it would garner a lot of interest and likely sell prior to the auction at above what they were currently asking.
In the end, our clients were very happy to secure the property before others even saw it.
Assessing the value of a property both to the market and to you personally is crucial in the home buying process. As a buyer’s agent, we can take a clinical, technical look at a property’s market value. We also determine how well it meets your criteria and whether it’s worth paying a slight premium now to avoid long-term disappointment.