Distress sale of off-the plan apartments. How would you play it?

Think of the scenarios

Worst case scenario for seller - default and lost the $58,000 deposit. If your offer is not a better outcome from this, it's unlikely for you to get the property. They're desperate maybe, but I doubt they're stupid.

On 500K offer, seller's lost
$58,000 deposit
$22,000 from purchase price
$22,000 stamp duty + legal + agent commission
Total loss $100K+
Why on earth would they choose this outcome?

On 560K offer, sellest lost
$20,000 deposit
$22,000 stamp duty + legal + agent commission
Total loss $42K+
Better than 58K but hell, that's a lot of effort to have approx. $10K less damage.

On 580K offer, sellest lost
$22,000 stamp duty + legal + agent commission
Total loss $22K+
Better than 58K but they rather have no loss!

On 600K offer, sellest lost
approx $2K plus legal + agent commission
Total loss $2K+
Minimum loss - hard lesson learned.

 

If it was a few weeks before settlement then maybe. But something 40% below similar sales evidence, with 3 to 4 months to go before settlement is just not going to be entertained.

 

This make a lot of sense. I actually didn't know they needed to settle... I don't think market is cool enough and they might find someone willing to pay what he/she is asking

 

I guess all it takes is for one low ball offer to be accepted and then it's worth it. It is difficult in a strong market though.

 

If they don't sell , they forfeit deposit and vendor can come after them for any shortfall .... And they can go bankrupt ... That's their worst case scenario.

It's your job to get the best deal for you , not to pick up their short fall .

You can always make a really low offer and see what happens . You can make another offer . If they reject it , ask the agent to get them to make a counter offer .

Waitara ? Hornsby ?

Unless this is a property that you would want anyway , I'd low ball and see what happens . I see no urgency to buy at the moment in Sydney .

If we are already starting to see these sales , it will only get worse ( or better ) depending on your view point in the not too distant future .

Cliff

 

In Campsie 2194, red brick unit of 2/1/1 used to sell for 560-600K 2 months ago. Now some are selling with asking price between 500-540K

 

Same here, I don't feel urgency to buy that particular apartment unless I can get it for a very good deal.. More supply is coming to the area so a lower price, I think, will give us some protection...It is hard to know if the demand is higher though... How do you measure demand in an area?

 

1 ) Ring up and talk to the agents and ask them what is happening in the area . Most are honest . I find if i talk to a number of agents most will give the same story and a couple will exaggerate .
2) look at listings in you area of interest , see how long they're taking to sell
3) go and look at open houses and see how many people turn up .
4) look at sqm's free data which includes number of properties on market

in late 2013 I knew our part of sydney was getting close to taking off and we were looking to buy a down a downsizer . we were going to all the local opens most weekends and we saw a fairly sudden change with an increase in number of people at opens and places selling on the first open .

when our perfect property came on the market , we " stalked " the first open . went back in when everyone had left and made our offer . At that stage , I don't think the agents had clicked that things were changing and we were able to negotiate a sale prior to the next open.

IF you don't want to wait and buy now t i'd be conditioning the agents . go in and look at your properties of interest and make one really low offer and no follow up bid . that way you get the agents used to you not making a follow up offer , so when that one desperate vendor asks the agent " do you think you can get more " their answeris " no he only makes one offer then moves on "

I don't know if that actually works , but it makes sense , But I do know that it will make you much more confident at making low ball offers , and i've found that very helpfull.

Cliff

 

Depends what city it is. In some cities, there is a huge oversupply of OTP apartments and you may not want to be involved in any. I would consider buying them at cost.

 

Now, I am not sure of this analysis but if i buy the unit BMV then, wouldn't that price become now the benchmark for the complex?

 

There is an offer for 1 bedroom in the Pearl Development at Doncaster East. Nominees sale at Cost. How should I play it?

 

Put a fair offer in- not saying market value but something that is a win/win scenario. Ask the agent what they will sell at, Cost price (incl stamp duty etc sounds fair) just remember you are not the only person the agent is speaking to, so if you dwell on it for too long and muck them around with low ball offers they will not want to deal with you or take you seriously

 

Get a valuation done. The 'at cost' might be too high and just walk away