Under Market

Under Market Value

Reasons why a property could be priced at under market value

Under MarketThe Estate Agent often disproportionately prices properties in need of modernisation or repair. If you add the cost of works to the purchase price and then compare this to the expected end value you will, more often than not, find the end value to be significantly higher. In a world of convenience people tend to over estimate the effort required to do a job when it’s a job they wouldn’t want to do themselves. The average Estate Agent is ‘suited and booted’ and maybe averse to getting down to the ‘nitty gritty’ life of grime:- the life of a property renovator. To the ‘suited and booted’ Estate Agent the property could truly look bad, to the serial property renovator or builder who does the work it is just another day at the office.

The Estate Agent got the price wrong: Estate Agents do get the price wrong, lets remember an Estate Agent isn’t a it or a thing it’s a person, a human with all it’s built in faults. If you ask three independent Property Surveyor’s to give valuations on the same property you will get three differing answers, the same goes for Estate Agents. The chances of a wrong priced property increases when the vendor relies on the first Estate Agent that walks through their door, and lets face it they do ‘talk the talk’; the vendor might say ‘he’s a friendly chap and seems to know what he is talking about lets not waste anymore time and cancel the other two Estate Agents and put the house on with him’ or say ‘the others won’t beat his Estate Agency fees lets go with him’.

By the law of averages some vendor’s will need to sell their properties quickly. This might be because the vendor has a new job in a different town or country with a specific start date. It could be a vendor who has lost their buyer and in order to buy their dream home and close the property chain they need to act fast by securing a new buyer without delay. Divorce, separation and death are events that are very distressing. The burden of selling a property can be great at any time so the opportunity to sell to a landlord who has no chain and can complete within four weeks can provide stress relief.

I am not an advocate of buying new build properties partly because the majority of our successful landlords have found real success in the second hand property market. But credit must be given where credit is due; if any of us bought new build properties 5 years ago with no money down then without any renovating work or clever property/market analysis we would have made a tidy sum. Landlords in the new build, off plan market can be very successful with the emergence of collective bulk buying through Property Buying clubs. These clubs will go to a developer and negotiate a hefty discount, typically 5% to 20%, for agreeing to purchase several units.
Property Buying Clubs have been known to purchase 10, 25, 50 or even 100 properties from a single development.

You don’t have to rely on Property Buying clubs I have known individual landlords to cunningly search out new developments that have only one or two units left to sell. They will offer low prices to quickly take the units off the developer’s hands knowing full well the developer is only interested in developing i.e. Moving onto the new development. Another good time to offer a developer a low price for a unit(s) is at the end of the developers tax year. If the developer is a registered company then the accounting year will be publicly available through Companies House www.companieshouse.gov.uk

Warning: People like new not old. Everything we buy that is new has a premium; new car, new TV and more importantly new home. If you are offered a discount on a new build property then do your home work and establish whether the discount being offered is a genuine discount. Ask yourself, how long will this new property remain the newest in the area i.e. does the developer intend to build a phase two?

You have to remember that whilst you maybe taking advantage of others peoples misfortune you are indeed solving their problems. A vendor’s problem maybe very pressing and immediate so if you can step in and solve that problem you may well find getting market value for the property is less important to the vendor.