DARWIN - Discounted by 22% and I'm still Hesitating...

I need a house. (PPOR)

Found one, ticks all the brain and heart boxes.

Comes with a granny flat for extra income.

Tropical house designed for tropical conditions in the better part of town.

Was 650, I can get it for 510.

Market tanking in Darwin....

The Dilemma is..

Do I Take the 22 percent Discount now,

or

Do I bet on the housing market here going down 35% or more next year?....


The Darwin market is dropping, but by lowballing i could be prempting the decline?

22% is a big drop...

Thoughts?

 

Is $510 the asking price, or have you negotiated to that? If it's the asking, I'd totally low ball and see what they say. They may be getting desperate, especially if it's been on the market for ages and it keeps dropping in front of their eyes....

That bit more off gives you some SANF too.

 

SANF?

 

Found it.. Sleep at Night Factor.....

 

Was listed at 650, then a couple of weeks later went to "offers above" 550

Now listed at 535.

 

You my friend need comparable sales and ask for an 5% to 10% additional discount for good measure. Tanking market == desperate vendors.

 

Sounds lile they really want to sell.
Make an offer, even 505k and see what they say. Sounds like there isnt much interest otherwise.
If it ticks your boxes and even comes with a bonus granny flat, I would go for it if I were you.

 

If this for PPOR, then hold it for the long run. The issue is you feel this is bargain, adrenaline and emotional attached. Are you able to keep your poker face?

How long it has been on the market?

Try offer $500k, see what the reactions. I'm sure the agent will say no as this is your first contact.

Usually in falling market patience is virtue. Revisit again in 2-4 weeks time, to show that you still have the interest. If you still have a room, then offer $505k. Same as before, wait 2-4 weeks and contact the agent again but stick to your offer. At this stage you can raise urgency saying "I've another interest on other property, so please let me know. I'm prefer you can still get the commision". 8/10 agent will be your friend at this stage.

Don't try to outsmart the agent, and rush it.. Its better to sell the fact that Darwin been down for 1,5 years, dunno when it will be back again. Maybe next year its still down, and both of REA and owner will feel more pain (lower commision, lower price), this election will bring un-certainty, not clear about the budget etc.

 

Question though, is doing this for that 5k worth it? He can say straight up he has an interest in another property too, even on the inital offer.

 

@Beano had some very nice words about paying a premium for something good, not paying something good for something mediocre.

If you are looking at this property with a frame of mind of: "I am saving this much money", well are you really "saving", or are you just buying something that might not be best for you?

I would look at the math and if the math works out and you think the capital gains are going to be good, then I would buy it. I would not buy it because of an attractive discount. A discount frame of thinking means you're more likely to impulse buy..

 

True.. I dont have all his variables such as budget, etc. If he happy with $535, then by all means. There is no 100% guarantee in all scenario, but usually in falling market you have more options to choose. If he can't get this deal, who knows the market still failing and there is better house in the next street?

 

If you are buying in the same market what is the issue? you are selling at a discount but you are also buying at discount as the market is depressed.

Economy is not improving, and when markets tank it can take up to 7 years plus before you see a recovery.

MTR

 

You really need to look at comparable sold prices. Ignore the alleged 22% discount as the initial $650K may have been wildly optimistic.

It is now listed at $535K which should now be regarded as the starting price. Check out how that compares with other properties on the market.

As said, I would be offering in the very low $500Ks to start with.
Marg

 

Agree @Marg4000.

 

Thats me. But bought in a depressed market and sold in a stronger market.

Same with my sister* too.


*I have a few sisters... this is not the Wagga one. That part of Wagga is a forever seemingly depressed market.

 

Thanks for the feedback guys,

Comparables are at 560k. @ 510k it's currently a bargain. I've done the research.

We went and saw the property again last night. The renos are extensive...it was essentially turned into a new house 5 years ago. Even the metal cladding has been redone. The previous owner must have spent over 100k sorting it all out.

The biggest bonus though is the granny flat. Granny flats up here rent out at $250+ per week.
Even If we budget for $200 per week it's still an outstanding return.

Basically we get a house and an IP in the one hit.

On the negatives, the fibreglass pool is cactus, and Darwin as a whole is a negative (these houses were 650k not that long ago).

Although major drops have happened...Townsville/Cairns like prices are indeed still a possibility.

If it dropped to 400k, it would hurt. Maybe it will...maybe it won't? Hot boxes are heading towards 400k...but they are in need of fixing and a dime a dozen. Elevated houses are becoming rarer and are what everyone up here wants...

We can wait another year if need be.

Houses seem to be like busses. If you miss one, another will be passing by in 10 mins...

Doing. My. Head. In.

 

When you did sales comparisons did they also have granny flats ? If not then look at the added value this will bring

 

The granny flat may be worth about $110k to put on (at the lowest).
But that doesnt always add $110K to the value of the property so i would be cautious in terms of valuation,
on the other side if you are living there long term ?!!_use the extra cashflow to pay the mortgage down quick -thus negating some of the stress of the market (possible/potential )drop

 

Hell. I'd go for it. But thats me.

 

Agree completely. The asking price is simply their offer to the market. It can and often has absolutely no baring as to the value of the property, more so in soft markets.