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How much is below market value?

Discussion in 'General Property Chat' started by househuntn, 22nd Aug, 2016.

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  1. househuntn

    househuntn Well-Known Member

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    Instead of making up an unrealistic figure, what is a realistic below market value for a property?

    Thanks
     
  2. Greyghost

    Greyghost Well-Known Member

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    Paying less than other comparable recent sales in a close vacinity.
     
  3. househuntn

    househuntn Well-Known Member

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    But how much less? $1000? $10,000? 2%? 10%?

    Or is this a pointless question due to many other factors influencing the price such as distressed sale, run down property, etc?!
     
  4. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Market value is what ever two people agree to exchange goods or services for at an agreed point in time. In my experience it's very rare that people can truly demonstrate they've bought 'below market value'. Usually they've set the market value by buying the property.

    Do your research, figure out what it's worth to you. Figure out if there's some reason they'll sell it for less and offer that.
     
  5. WattleIdo

    WattleIdo renovating Premium Member

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    Median house value 240K
    House advertised (eventually) for 200K
    House purchased for 148K. Admittedly, there is a lot of cleaning and painting to be done but all cosmetic except for rainwater drainage.
    In my view, timing plays a large part. Other attributes which help are initial unrealistic expectations, bad photos, unkempt tenants, mould, deceased or elderly vendor, divorce and/or poor money management, vendor inter-state. When two or more factors blend in a depressed market they can lead to a stigmatised property which is very difficult to sell until well after the market really picks up agin.. Add some slow negotiating to the mix and you have true bmv.
     
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  6. Scott No Mates

    Scott No Mates Well-Known Member

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    Whatever you agree today is market value. If you sell tomorrow that too is market value.
     
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  7. WattleIdo

    WattleIdo renovating Premium Member

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    If it doesn't sell, it doesn't change nothing. Hopefully you set the new bechmark yourself.
     
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  8. Scott No Mates

    Scott No Mates Well-Known Member

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    But if you're buying BMV you're to blame for dragging the market down ;)
     
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  9. New Town

    New Town Well-Known Member

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    Technically one dollar under market value is BMV. But anything more than say 5% to 10% I would be happy with.
     
  10. Stoffo

    Stoffo Well-Known Member

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    All good posts.

    But as WattleIdo said, "In my view, timing plays a large part. Other attributes which help are initial unrealistic expectations, bad photos, unkempt tenants, mould, deceased or elderly vendor, divorce and/or poor money management, vendor inter-state."

    Poor signage and advertising also play a part.

    5 years ago I bought PPOR in Sydney :D
    Divorcing couple, neither handy with maintenance for 10 years, very poorly signed (was at the access point up ROW on a side st instead of on st at front property) and poorly advertised (we found it on the flyer out front of the agents office two suburbs away), I literally had to search for the house and it was the owner who showed me thru.......

    Moving from Geelong it was A LOT of money, but after looking around I think we got it 10-15% below market value (now up over $500K in 5 years;) by bank valuation)

    So unless I figured I purchased for 5% or more BMV I wouldn't make claim that it was, otherwise it would be Fair Market Value:rolleyes:
     
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  11. Perthguy

    Perthguy Well-Known Member

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    Agree with @Stoffo about presentation. I bought 50% of this house. This is an actual picture from inside exactly as presented for sale without us doing anything. Presenting a house like this for sale will never get you top dollar.

    04 demo small.jpg
     
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  12. albanga

    albanga Well-Known Member

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    What a brilliant post! I couldn't agree more!
    Market value is what the market is prepared to pay for a property. The notion of "bought under market value" makes little sense to me.

    I think you can buy well and purchase a property for less than comparable sales but I think the market value of THAT property is set when you buy it.
     
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  13. Perthguy

    Perthguy Well-Known Member

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    I have to agree with this. The pic posted above was for a property that almost got 2 offers for the exact same amount on the same day (market value) except we offered $5k more. Technically we paid $5k above market value for the property, which is well below comparable sales.
     
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  14. hillsguy

    hillsguy Well-Known Member

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    I really struggle with understanding when people say "I paid below market value".

    You as the buyer in my opinion "are the market". If you are paying a certain price that no one else is willing to pay ... then you are "the market".

    A lot of people like to get a bargain (me included) but this below market value is fantasy in my view.
     
  15. joel

    joel Well-Known Member

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    Where I'm from, people seem to bid more for houses like this. They must want to star on The Block
     
  16. WattleIdo

    WattleIdo renovating Premium Member

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    Of course this is true ... in theory. But it's the turn-off factor that makes it bmv because most people can't bring themselves to buy something that no-one else wants.
    ;) Meanwhile, the bmv buyer gets a deal, it goes up on the net, suddenly everyone wants a house or apartment for that price and guess who bought at bottom of market!
    @Perthguy those half renovated houses are screaming out for some bmv bargaining!
     
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  17. Perthguy

    Perthguy Well-Known Member

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    This is a lower socio-economic area, so there wasn't too much interest. Just another investor. Not sure if they would have done this to it though ;)

    20160815_141735.jpg

    I would have tried to bargain but there was another party that also wanted the property. I have seen them around because we work in the same area and I know they are aggressive. Still, we are talking around $100k below the initial list price, so it was way under what "market" value should be if it was better presented. Big if though. Those boxes of materials for the reno are dated 2004, so someone didn't get around to having them installed.
     
  18. Azazel

    Azazel Well-Known Member

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    Paying less than the previous people paid is a good indicator.
     
  19. MrFox

    MrFox Well-Known Member

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    If you buy something and can resell it next day for more would be below market.
     
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  20. Brady

    Brady Well-Known Member

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    Yes and no :)

    Agreed that it's the market value as it was available on the market and you paid the price to purchase - therefore market.

    But I find a lot of clients and myself buy BMV when the
    - Property hasn't been correctly marketed (not advertised with block size, correct number or bedrooms/bathrooms, no mention of corner block / development potential etc)
    - Motivated sellers who're willing to accept quick sale for personal reasons (seperation, litigation, retirement, estate etc)

    There is also a line that's probably a little grey where a lot would say it's BMV as it needed so work, post renovations it's worth a lot more than the purchase price + renovation costs.
    But in this case I believe the purchase price is the market value, the property just had 'add value' potential. (haha which is why some would say BMV)
     
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