Does the possibility of buying a four bedroom, two bathroom house at a 64% discount appeal to you? It’s hard to get price-cutting much better than this.
The four-bedroom home in excellent condition and sitting on 3.3 hectares first came onto the market in October last year with an asking price of $3.3 million. It is now selling for $1.19 million with the mortgagee in possession.
If you are not looking for a rural retreat in Western Australia, what about a 60-year-old beach and lakefront home at Avoca Beach on the NSW Central Coast? Sure, this property needs plenty of work but the position is highly desirable and the asking price has been slashed by 45% since it came onto the market more than three years ago.
The Avoca property, which is on a huge block, was first listed at $3 million and is now on the market for $1.65 million; a staggering $1.35 million cut in its asking price. And who knows, the price could fall further as the owner attempts to snare a buyer.
These houses are known in the real estate industry as stale properties because of their time on the market. Without doubt, the identification of stale properties that are being sharply discounted is a great place for buyers to begin their bargain hunting.
A strong caveat exists, however. Heavily discounted stale properties do not necessarily equate to bargains.
A stale property is broadly defined as one that has been on the market for at least 60 days. And buyers face a smorgasbord of them.
Louis Christopher, managing director of property adviser and forecaster SQM Research, says that if a property has been on the market for a long time, “something has gone wrong with its marketing campaign”. And Christopher believes that the fault generally involves the vendor asking too much money from the beginning of the campaign.
“No matter the quality of a property or location, it has a value,” Christopher says emphatically. And he believes a buyer can be found if the property is correctly priced to the market.
“[But] often where vendors go wrong is that they put the price on their properties that they are hoping to achieve with no regard to the market fundamentals,” he adds.
Christopher says that if properties are on the market too long, agents may lose interest in trying to sell them. While this lack of interest as a property turns stale is terrible news for vendors, it potentially creates excellent opportunities for astute buyers.
As a property becomes progressively staler, Christopher says, they can potentially be regarded as lemons – even if nothing is wrong with them.
“Vendors start reducing the price even below market value,” he adds. “And if you track these properties, there is the potential to pickup a bargain.”
“In my opinion, the best way to research a local market is to analyse the listings and see how the prices change. And then you could be ready to make an offer.”
Christopher emphasises that painstaking research of the property market also reduces the probability of being ripped off.
Does the slashing of a property’s asking price point to possible lemons or dud properties? Christopher thinks not: “Even if a property has termites, it still has value – even if it’s down to land value.”
Building reports and quotes for any repairs may give a would-be buyer leverage to negotiate the price down even further.
Christopher says some vendors always over-price their properties in both bull and bear markets. “The asking price is relative to the market at the time,” he explains. “There are always over-priced properties.”
SQM Research has a new online service that identifies houses and units that have been on the market for more than 60 days. It lists how long a property has been on the market, how its advertised asking price has changed since the beginning of the marketing campaign, when the property was last sold and, in most states, its last sale price.
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