Buy low + sell high. Agree?

I still don't believe that in all circumstances a property is sold at market value.

Example: my mate put an offer on a property in Bayswater for $799,000. According to your theory, he is the market, so the market value is $799,000. His offer was rejected and the property sold. The final sale price was $779,000. My mate was ******.

How is that market value? The sale price is the sale price. We can agree on that. But you claim that every sale is market value. That's where we don't agree.

 

What's your process for this?

I'm looking for the easiest way to be alerted to good deals. The focus for me is buying low at this stage of the journey.

 

How do you do this search?

 

Hours on re.com.au. It's not efficient and not easy.

Find every agent who is selling in your target areas and get on their mailing list. I have been emailed heaps of off market deals. I don't bother right now because I am busy with other projects but I have seen some great deals come and go.

 

But that doesn’t change anything. The price the vendor took at that time was the market value. Perhaps time had passed since your friend made an offer, perhaps your friend made an offer with terms not suitable to the vendor.

Perhaps the vendor didn’t like the look of your friend? Whatever the reason the market price was what was accepted. Given your friend made an offer of 20k more then perhaps it was a good buy or perhaps your friends offered overs?

I just hate the word. I think it’s a marketing con Word. “We find properties 20% under market value” sounds a lot better than “We find good price properties”

 

I agree.

Even in a distressed sale, only one side of the transaction is distressed - if there were multiple buyers, the price would be bid up. So when a distressed property sells cheap, why was there only one bidder?

In a private treaty sale, if the vendor thought they could get more, they would have gone to the market.

Still market price.

All of that said, there is still good value and poor value, so we might be splitting hairs.

 

No! Stand your ground.
I’ve been too far too many wars to lose a good soldier this easy.

Don’t make me don the blue face paint to deliver my speech. “They May take our lives! But they will never call it Under Market!!!!!!”

 

No you've just got a bee in your bonnet and plenty on here agree with you and it's very cool to trot out that what the property sells for is the market value.
While I agree that this is true 99.99% of the time, there are exceptions and there are people who are able to find them and jump at them. If you don't believe this, how can you say that you or anyone else is better at this game than the others who blab on about buying in a rising market and get themselves and everyone else all confused??
BUT - it's not the distressed sales where you go looking.
AND - you don't leap before you look.
You have to spend TIME looking and going over and over the same properties.
EVENTUALLY - you find that same property that was priced way ABOVE market value for way too long, where the owners had NO IDEA what they were doing. It's sat online for months, years - over- priced.
It's the wrong colour, the garden needs work, the bathroom is mid-century.
The REAs are ALL fed-up with the owners who have rejected every offer made, including resonable, realistic offers made by local tradies.
The photos are crap and the REAs don't take potential buyers there because it's a waste of time.
The market has been soft for years, maybe there's some recent upward movement but still no bites.
NOW the owners are desperate.
You make a low-ball. Rejection.
You move on. Time passes. Nothing happens. You try again.
BINGO. You just bought a house BMV in a rising market. Well done.
You are in that 0.01%
It takes perseverance, reslience, a little nouse and determination.

 

I think if we can agree to 2 decimal places that in 99.99% of cases the sale price is the market price, I can't imagine we have a quarrel.

 

@WattleIdo Haha I really do have a bee in my bonnet.

Just seen way to many spruikers sell on this statement and I absolutely hate it!
Even if you have an argument for .01% then just call it a great buy. Why we muddying the waters??

 

The artificial deadline set by the bank. I have bought a house in this situation and there were 2 bidders. The problem was time to negotiate. I had my offer accepted on 10pm Thursday and the bank was foreclosing on the next Monday if the property didn't sell. The seller wanted more and I was prepared to pay more but there was no time to negotiate. With more time the sale price would have been higher.

I'm not claiming this happens often because it doesn't. But to claim it never happens is dishonest and I find that annoying.

 

Crystal clear waters, all good. I definitely agree that the lone resi-buyer or the odd low-profile BA is the go, not the spruiker variety.

 

I think you are getting mixed up between 'market value' and 'market price'. A property always exchanges at market price. Market value is different.

Market value is a concept distinct from market price, which is “the price at which one can transact”, while market value is “the true underlying value” according to theoretical standards. The concept is most commonly invoked in inefficient markets or disequilibrium situations where prevailing market prices are not reflective of true underlying market value. For market price to equal market value, the market must be informationally efficient and rational expectations must prevail.

If you expect a buyer and seller to act rationally then a property will exchange at market value. I have sold below market value because I didn't behave rationally. I listed my property for $270,000. I got 2 offers. One for $264,000 and one for $269,000. The lower offer had a slightly shorter settlement time but otherwise the offers were identical in terms and conditions. If I had behaved rationally, then I would have accepted the $269,000 offer, which is the market value. Instead, I behaved irrationally and took the $264,000, which is the market price.

The other assumption is that 'under market value' means it is a good deal. It wasn't. The buyer of my property sold 3 years later at a loss.

I hate 'under market value' as a marketing term too but I put that aside and think about whether it is possible to truly buy under market value or not.

"Market value" is defined.

Fair market value generally means the highest price, expressed in dollars, that a property would bring in an open and unrestricted market between a willing buyer and a willing seller who are both knowledgeable, informed, and prudent, and who are acting independently of each other.
​

Think about the factors:
- open and unrestricted market
- willing buyer
- willing seller

If a property is sold off market then it may or may not achieve market value. We don't know unless we put it to the market and the market decides. How about a forced sale with an artificial deadline?

There are lots of factors that can affect a sale. It's important to me to understand them because it has helped me secure two fantastic deals.

 

That's basically what I bought. Listed for $580,000 12 months before and I bought it for $485,000 because the bank was going to foreclose 2 business days later.

It takes all those but also understanding the market and that things don't always sell at market value if the normal process is interrupted in some way, for example with a bank threatening to seize the home.

 

Perthguy,

Good post.

The problem is market price is something we can measure; but market value is subjective. And I think that is where we are talking across each other.

Buffet talks about "price" being what you pay, "value" being what you get. This is a pretty good way to capture it.

In any event, whatever we want to call it - you got yourself a good buy per your story. So well done.

Cheers,
John

 

@albanga and @John_BridgeToBricks I do understand why you don't like the term though. It is a technical term which seems to be widely misused.

There is an API article "16 ways to buy below market value"

16 ways to buy below market value - Australian Property Investor

Basically none of those are talking about true 'below market value' deals. They think if you buy a property 'cheap' then it is below market value. That is not the case at all.

Oh, and @John_BridgeToBricks, I would not market as being able to secure 'below market value' deals either. First, because because market value doesn't mean it's a good deal. Mostly because true below market deals are very rare.

 

I've had this out with you @albanga before re bmv

I for one definetly believe in it for the simple fact that the real estate markets at times are inefficient . Ive bought places that were not on the market for X reason and if it was, would definetly have fetched more . One time the reason the gentleman gave was he wanted to keep his privacy and sell off market even if that meant getting less. I had a relationship with the selling REA and we wrapped up the deal less than what he could have gotten on the open market based on comparables . I offered a quick, hassle free sale and it was done. Now to you and I that may be ridiculous - who forfeits money ? All sorts of people and situations out there .

There are plenty of other reasons why bmv can happen.

The real question for me is not "does bmv exist' but " how many ppl are able to achieve it and how often ?,

I'd say alot less than is being spruiked by "property professionals".

 

@Sackie lets not bring up old wounds.
You and I have moved on. I don’t want to relive Somersoft 2012! Hahaha