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Ways to bag a bargain
Your next property purchase could be a steal if you adopt the right approach. Follow our step-by-step guide to sniffing out a great buy
Remember that as with so many things in life: forearmed is forewarned. When a bargain arrives, the first buyer to spot it will be the victor, so if you don’t recognise the opportunity immediately, someone else will run off with it
Markets are all about supply and demand, and a property’s value is a fixed figure reflecting a balance of both. Right? Well, mostly yes, but there are ways to push your advantage so that you end up paying less than you may have expected. What you want is to land a great buy that will fill out your portfolio and at the same time provide you with plenty of opportunities for dinner party gloating at your next social engagement. The key is to get smart, get ready and back your judgment.
Here are a few ways to help you look back on your next property purchase with self-satisfaction.
One of your best options is to look for an eager vendor. A seller under distress is the most obvious component of a cheap purchase. There is no moral high ground here – often it’s simply that the seller needs a quick disposal and is willing to cut back on the price in order to move the bricks and mortar on. While it isn’t pleasant to see another party in a sticky situation, you may be doing them a favour by relieving them of the property and you can regard the process as you would any other business transaction – if you don’t move on it someone else will.
Here the best source of information is often the seller’s own representative. If you quiz the agent you’ll get to the point where he’ll start telling you that little bit extra... don’t forget that agents, despite everything else, are there to do a deal. You’ll be able to tell pretty quickly whether or not the client is in a hurry to sell.
There are any number of eager seller situations, one of which is that the vendor has bought elsewhere. Gun-shy buyers will contract on one home before selling their current abode and will include a ‘subject to sale’ clause in the dealings. As settlement draws near, they become eager to dispose of their old property and that is the time for you to leap. Drive hard on the bargain – particularly when you’re armed with a cash contract free of conditions.
You will also find that people involved in a divorce settlement can be keen to sell. No one enjoys seeing these situations come to a head, but the end of a relationship is often punctuated by the cutting of ties and the settling of assets. Even where the separation is amicable, there is often an eagerness to move on and this means disposing of assets at a quick sale price. The effect can be amplified in acrimonious endings where both parties are eager to part ways as quickly as possible.
You’ll also want to keep an eye open for mortgagee sales. Costs of living pressures, interest rate rises – these are all catch phrases that have put further stress on those trying to service a mortgage and keep their head above water. Unfortunately, an overextended buyer may receive an unwanted knock on the door from the financier looking to recoup their loan. Watching out for a ‘Mortgagee in Possession’ sale is one strategy, and another is to seek out an owner trying to consolidate his assets and settle his loan.
Deceased estate can also provide the canny buyer with a win-win opportunity. In the situation where property is willed to the next of kin, there may be many recipients to consider. While this is sometimes a sticking point, it’s common for family members to agree that a quick disposal of the property will help put the estate to rest. Another consideration when multiple beneficiaries are involved is that the value of their share becomes diluted, so any reduction in the offer can appear minor. For example, a HK$3.5 million home divided between four siblings will reap HK$875,170 per share. If a cash unconditional offer of HK$3.2 million is forwarded, a HK$280,073 saving to the buyer means each sibling now gets HK$805,210 – not too dramatic a fall in the scheme of negotiations.
Of course finding a buyer, who is eager or even desperate to sell, is not the only way that you can hope to pick up a home at less than market price. Remember that as with so many things in life: forearmed is forewarned. When a bargain arrives, the first buyer to spot it will be the victor, so if you don’t recognise the opportunity immediately, someone else will run off with it. If your realtor calls with a ‘bargain’ for you to view, drop everything. Go see the property immediately and, if you are knowledgable about the market, you will be able to get down to signing a preliminary contract there and then.
Essentially then, know your market. Set your criteria on what you want and get informed. If you know that your next investment is to be a two-bedroom renter in Sheung Wan, get real about what such properties sell and rent for. Dig, dig, dig so you become the local expert. When the right property comes along, you might be surprised to find that both the vendor and your competing buyers have scant idea as to what a great deal a property offers.
Thirdly, be prepared. By taking care of a few of the basics, you can remove uncertainties and move quickly. Arrange your finance before you start hunting your prey. Know how much you can afford to borrow and get it organised. Now is the time to shop around for finance, not when your unconditional day of reckoning is imminent.
Also, go through the exercise to work out what sort of rental you need to achieve on your property to help service the loan. This is an important step that can stop prospective buyers in their tracks if they haven’t taken the time to consider the return on the investment.
Form a relationship with professionals whose help you’ll need when snapping up a deal. Most bank valuers will be happy to discuss their general expertise and what they look for in a property, and can stand at the ready to provide their services quick-smart when they know you’re likely to call.
Fourthly, look for the angles. Bargains aren’t always obvious and you may have to dust off a little dirt to find the gold seam. Try thinking outside everyone else’s square to see if you can make a go of a property possibility.
Bargains may also be had by considering other angles for savings. Purchasing a home from a family member or buying the property you currently rent may circumnavigate the need for agents, thus saving on commission. In the latter case, you may also come to an arrangement where you’re compensated for upgrades you’ve carried out on the property yourself.
Finally, stick with the basics: bargains aren’t bargains if things go sour easily. Avoid buying property situated on main roads and adjacent to rail lines. These homes don’t sell in a soft market. The rule is: a window of opportunity comes around to sell a dud property about once every seven years, so avoid them like the biblical plague.
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