Would you like to avoid being ripped off on your next home or investment property? Absolutely! But for one buyer paying $100,000 too much was the costly penalty for not understanding the market or engaging a buyer’s agent.
Two nearly identical properties sold – but one buyer pays $80,000 more
Recently two almost identical riverfront inner city apartments were sold by the same sales office, within six weeks of each other, but one of the buyers paid $80,000 more.
The apartments were almost exactly the same – they had the same river views, balcony and carpark size. The only factors separating the two were: 6m2 internally and one unit was renovated.
The sad news for one of the buyers was they over-paid by $80,000 for the unrenovated apartment. If you add the additional cost of $5000 for stamp duty and a very modest amount to renovate, say $15,000 to upgrade the floor coverings and internal painting, that equates to a $100,000 over-spend.
How could this happen?
The bottom line is that the poor buyer had a good sales agent who “saw them coming”. They knew the person was from Sydney and had no real idea of the Queensland market. (For more details about the apartment and how the buyer was drawn in by the agent read my post here.)
Read what this high profile sales agent is claiming in their marketing:
“We spent significant time building strategic partnerships with investment firms in Sydney and Melbourne so we could get a direct flow of serious, cashed up Sydney buyers willing to pay a premium for Brisbane investments. These relationships have benefited our owners tens of thousands to date.”
If I was selling a property I would want this agent to sell my home.
If I was a buyer I would be extremely concerned. Sales agents do not act on the buyer’s behalf – it is in their interests to get the best price possible for their seller. They will also take advantage upon the lack of knowledge and/or frustration of buyers who are sick of looking for a property.
Still not convinced? Here is another high profile sales agent’s comment in their marketing:
“We’ve experienced quite a number of buyers stating that they have looked for some time and now just want to secure a property quickly. These sorts of buyers are pure gold – I can’t tell you how many times I’ve seen a buyer search for months and when they’re starting to become frustrated, they will virtually buy the next home that’s in front of them…and pay a premium price because they can’t be bothered looking anymore. We’ve already seen many instances of this so far this year.”
Now if I was selling my home I would absolutely want this agent acting on my behalf, especially if they were skilled enough to profile the buyer and capitalise on this behaviour!
Could this happen to you?
The simple answer is yes – if you are not experienced at buying property, and if you are not from Brisbane and understand the market dynamics at play here.
Let’s face it, any of us only know what questions to ask, and what to look for, based on our existing knowledge-base. The most powerful lessons we learn in life are from our mistakes. How many times have you caught yourself saying in hindsight, “I would have acted differently – had I known that”. I call it “20:20 hindsight” and I experienced it after building my first home and I catch myself experiencing it now as a father guiding my son and teaching him right from wrong.
The good news is you can avoid this mistake
The good news is that you can avoid these mistakes and gain quick and easy access to some 20:20 hindsight of your own by engaging a Buyers Agent. As buyers agents we are constantly looking, researching and transacting on behalf of our clients. We have heard enough stories and seen enough mistakes to know what to avoid and we know when to walk away.
At Brisbane Buyers Agency we recognise and seize upon smart buying opportunities on behalf of our clients (see our Buy of the Week articles, here is just one of them)
Many of my clients have come to me saying they are sick of the time and effort searching for their perfect home and how bamboozled they can get when properties are not even listed with a sales price.
I have no problems if a property is listed without a price, by expressions of interest or for sale by auction, It does not overly bother me if the sales agent is unhelpful or aggressive in their sales approach. I can identify homes which are easier to renovate and which homes are easier to demolish and build or what makes a good buy for a property investor… this saves my clients thousands.
I also enjoy the negotiation process. One of my golden rules of negotiation is to keep your eye on the prize despite the challenges and not be influenced by emotional thought processes that can lead to irrational decisions. You can learn some negotiation tips here
Probably the best way to demonstrate how a buyer’s agent can save you money and achieve positive growth is to share how we worked with Phil and Anna.
How we helped our client make a smart buy and achieve positive growth
Imagine buying 70% more land for $15,000 less than your budget and immediately renting your investment out.
Phil and Anna were referred by a Sydney-based mortgage broker and were looking for an investment property in Brisbane. They had previously had a very negative experience dealing with an investment group so when they came to us they were very nervous about investing.
What did we achieve?
We helped Phil and Anna buy an extremely attractive investment property only 7kms from the city with city views on a piece of land 70% bigger than anticipated for $15,000 less than their budget. The house was also rented immediately – giving Phil and Anna the peace of mind that rental income was coming straight in. Eight months later this home is now worth approximately $640,000 based on a recent sale, of a comparable home, across the street.
How did we do it?
Phil and Anna came to us saying they were looking for a low maintenance brick and tile home in the outer suburbs. We looked at their brief and using our Smart Buyers Index found them a home much closer to the CBD on 70% more land paying $15,000 less than their budget.
When it came to purchasing the home our negotiation skills made all the difference. In fact, we were not the highest bidder but our conditions were considered more favourable. We also negotiated access to the home during the conveyancing period so that Phil and Anna could rent their investment property out as soon as possible. A suitable tenant was found and moved in only one day after settlement occurred.
Our experience in valuation and quantity surveying meant we were able to give Phil and Anna an accurate sense of future maintenance costs. The home was lined predominately with plasterboard linings (minimizing asbestos) and the kitchen was dated but usable. The 3 bedrooms had built-in cupboards. It had a renovated bathroom and a freshly painted exterior. All supporting posts were concrete not timber, which eliminated any chance of future re-stumping. The electrical wiring was upgraded from traditional rubber cabling. However, the plumbing was copper pipe not galvanized steel pipe. This was a warning sign to us and helped Phil and Anna understand what their future costs might be for replacement. In addition, this home had a patio extension which attracted some tax depreciation benefits of $15,000 accumulative over 10 years.
What to do if you want to avoid over-paying for real estate?
So, if you are a home buyer or property investor what do you do with all of this? How do you avoid overpaying and make a smart choice?
If you don’t have the time or skills to do the necessary research – then engage a buyer’s agent. On average our fees at Brisbane Buyers Agency are paid for in terms of the time, energy and frustration you would spend in trying to find yourself a good deal and negotiating the right price through smart negotiation. By working with us you get the benefits of our 20+ years’ experience in the industry. You get access to our expertise and insights and are fully advised of everything you need to know. We help our buyers make smart decisions that set them up to for their financial future.
For more information on the benefits of using a buyer’s agent read my post here.
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