Buying properties under market value is still possible in today’s market. Ben recently purchased one for $80,000 under market value. Here’s the secret to finding under market value properties yourself.
Ryan: And Melissa, to you, is asking is there a special trick to buying under market value?
Ben: There’s a couple of tricks to buying under market value. The first one comes back to being laser focused on one area. I think the most common mistake that the average investor makes is being too broad, so they’re looking at more than one suburb at a time.
When I’m buying for myself, I’m obsessed with the suburb for about six months, literally just don’t even look outside that suburb for that period of time. To buy under market value, the first thing you need to do is establish what market value is, and it’s definitely not what’s on RealEstate.com or Domain.
It’s more, this is what has sold, this is where the bottom of the market is, this is where the top of the market is, this is where opportunities in the market exist, like, for example, buying a $400,000 home, when there’s other houses selling in the suburb for 800k that are literally the same home raised with a nice renovation type thing, so establishing where opportunities in the market lie.
So once you’ve got that data point or you understand what market value is, it’s like working the local agents and briefing them on exactly what you’re looking for, it’s about setting up the alerts on RealEstate.com and being first to market in responding to those opportunities as soon as they come up.
And then it’s also being able to identify an out-of-area agent, a divorce estate, like, a separation estate, some sort of just distressed estate or something from, like, a public trustee or a Queensland government, because there are always gonna be able to sell for below market value.
Alternatively could be a marketplace that’s at the bottom of the market cycle, and there’s just people that are still bleeding there that bought at the top that just have finally decided to sell out now that things have settled and so, you know, perfect, for example could be an opportunity to someone that’s looking to buy well below market value because there’s still a lot of people over there holding that are still losing jobs, that are still moving over here.
Ryan: So, how do you find those people? So, first, I totally agree with you. You need to understand the area inside and out, you need to understand what’s the cheapest property in the area, what’s the most expensive property, work out the disparity between unrenovated properties or renovated properties, work out where those opportunities are.
But assuming that you’ve done that, how do you then find a property that you can get for under market value? Assuming, as well, that you know what the discount average and the discount is in the area, so you know that property’s actually selling 10% below their listing price, how do you find that one property that will accept more than that discount?
Ben: So, um, one of the ways that you can do that is, again, establishing the relationships with the agents and telling them, quite often, like, probably two times a year in a suburb where there’s a hundred sales, there’ll be one or two properties that sell for an absolute steal, like, I’m talking 70, 100, 150 grand below the market value if that’s a 500k suburb.
So, by establishing what market value is, the day that a property comes online that is significantly below market value for any number of reasons, it’s about inspecting that property and buying it.
Alternatively, you can go to the local agents, the top performers that are selling 80% of the stock. You’d be surprised that, let’s say that a top performing agent sells 30 properties a year, most top performers would be selling another 30 properties completely off market, that never go on RealEstate.com, that never hit the market, just because that’s the nature of the business. A lot of stuff sells that the general public doesn’t know about.
And so, it’s about briefing them in on what you’re looking for, like that ugly duckling, that very cheap property the divorced place and then being in that agent’s ear on a weekly basis, until they either get the [sheets 00:04:00] with you and just bring you something so that you stop calling them, or they go and find that for you, door knock, letterbox drop, these agents have amazing relationships in the suburbs that they focus on and can often go out there and actually find it for you as well.
There’s a lot of people that bought for $70,000 twenty years ago that don’t need to sell for 500k. They can sell for $400,000 dollars and still put 400 grand tax free in their pocket and that’s enough for them. There’s a lot of people that do that, they give young people a heads up and a start in life as well. Not everyone is trying to achieve top dollar.
Ryan: Yeah. And as well if you’re ready to go, so you go your loan pre-approvals and you’ve got your deposit and you’re ready to jump, then that’s gonna put you in a much better position both when you’re talking with the agents as well as when you finally get the property and you’re doing negotiations.
If these are distressed properties or divorced or whatever and they need it to happen quickly, if you can jump in there with your deposit, with your loan pre-approval, maybe with a shorter settlement than other people are offering, then you increase your chances as well of a lower price being accepted.
Ben: Here’s a direct example. In December last year, which is a great time of the year to buy a property because there’s more supply and less demand at that time of the year, there’s also people that have wanted to sell a property, haven’t been able to and just wanna move it on before Christmas, I’ve been following this suburb in Brisbane 9k’s from the city for a long time, my team went out and had a look at something on the day that it came online and it was, like, a three-bedroomed home on a nice big block in really good condition.
I thought the price point for the property was low already, and then I looked on the agent’s profile. They’d made two sales in the last 18 months. They were out-of-area agent, which, their office was literally two and a half hours from the property, which meant they don’t wanna be up there.
I jumped on the agent, printed out a blank contract and physically walked in the door, understood what I needed to understood and then put an offering on the property for myself. I probably bought the property that day 80% below. I made them sign off on it, like, the agent signed off on it that day-
Ryan: 80% below, do you mean 80 grand below?
Ben: 80 grand below, sorry, not 80% [crosstalk 00:06:15]. 80k below and then the next day, ’cause the agent had no idea about the area they were, ’cause they’d priced it so well, there were 120 groups that walked up and they got 15 offers, literally 80 to 120 grand above what I put in. And so that agent obviously made a big mistake. They tried to crush my contract, but because the contracts-
Ryan: So had you already, so you got it signed that day by the owners of the property as well?
Ben: I got it signed that day. The biggest part of buying below market is getting it done the second that you see an opportunity, because that opportunity is gone. [crosstalk 00:06:52]
Ryan: So do you get it done in one day? Do you say to the agent, “This offer only stands until 4pm today?”
Ben: “This offer stands until 4pm today,” and ’cause I was pre-approved because I put down a nicer deposit for them, because I had really good terms, seven days building and pass, I think at that time seven days finance, ’cause I was ready to move.
I wrapped it up and I just, ’cause I knew the agent was very green, I just put massive pressure on them to close it, ’cause I knew they hadn’t been making many sales and, she was trying to impress her boss and keep her job. She helped me get it done.
You sound like a bit of an arsehole when you do this stuff ’cause thinking about it like that someone else’s property that I bought, but, again, they didn’t have to sell that property at that price point, either, and I think it was an [in-estate 00:07:38] investor that was selling it, so, it wasn’t, like someone emotionally attached to that property and living in it, but agents do this all the time, they just see the commission, they see maintaining their job and they sell stuff for prices they shouldn’t.
Ryan: Yeah, so, I think to sum it up, there’s a trick. First it’s know the market inside and out, know your suburb inside and out, and when something does come up that already looks under priced, jump on it straight away, put pressure on the agent to get that deal done and to get it signed before anyone else has the opportunity to even view that property, negotiate or anything like that, so you’re the only person … you’re putting … ’cause so many people would just make an offer but not put the pressure on that you do, like, “This is only valid until 4pm today,” like you gotta be willing for it to maybe not work out and that maybe 4 o’clock passes. But-
Ben: See, from a negotiation perspective, when buying below market you really need to be strategic with the way that you approach negotiating, so I put in a price, it was, like, 8 in the morning as soon as I saw it. I started down and said, “We’re gonna get this done now.”
I put in the price 80 grand below what I was prepared to pay. She presented it with really shocking terms, then I put in a price much, much, much closer to where I wanted it to be within five grand, with great terms and then she went and presented it and then she came back to me and said it’s close and I gave her an extra $2,000 so that she felt like she’d had the win with the best terms that I could possibly provide and then her client feels like because she’s gone back three times that she’s done all that she can do as an agent.
And then I put a time crunch on her to actually close it up and physically sat in the house until she got it done. And the combination of all of that pressure plus that strategy of I feel like I’ve done all I can do to get this done was enough to sort of get it over [line 00:09:40].
So, again, most people don’t spend enough time thinking about presenting a really bad offer, a much better offer and then one final offer just to give them that concession to show the client that they have worked as hard as they can to get what they want. They don’t have to know that someone else would pay an extra 80 grand the next day.
Ryan: Yeah. And that’s something that you are amazing at and that I’m not as good at that. I’m just, like, “Here’s what I’m willing to offer.” And then they’re like, “Come back to negotiate.” I’m like, “No, no. I told you this is all I’m willing to offer.” I need to-
Ben: You buy hundreds of things a year and you put offers in on a thousand things a year. You’re gonna figure out how to do it, man, you love learning and we love playing that … I love playing that game as well and seeing what works and what-
Ryan: Yeah, well, that’s the thing, I’m really good at other things that are worth a lot of money. But negotiating is probably not my strongest point.
All right. So let’s move on. I thought that was a really good answer and a really great question, so, thank you, Melissa, for that question. So …
Hi guys, I hope that you enjoyed the answer to this question, which came from my live Q & A episode with Ben on YouTube. We will be doing more of these in the future. If you wanna check out Ben, and he is offering free strategy sessions to On Property listeners.
To find out more about that, go to OnProperty.com.au/session, and you can see all the details over there.
That’s it for today, and until next time, stay positive.