It’s in uncertain economic times like these that many investors are out hunting for bargains, seeing what’s fallen over at auction and who is desperate to sell before the bank forces them to. I’m not. I’ve done the maths and have worked out that while it’s great to bag a bargain, more often than not, the bargains are either in outer regions or at a high price point. There are bargains in the outer regions because there’s less of a shortage of land, more properties to choose from and most of the properties are similar. At the expensive end of the property market, many have lots their jobs or are trying to cut back and no one wants to take on a $2m+ mortgage. All in all, these are volatile properties that come crashing down in the tough times.
My property investing strategy has been to target median priced properties in very high capital growth suburbs, which are often found 5-15kms from the major cities. The advantage of these properties is that they generally hold their value in the tough times and are the first to recover and grow quickly in the good times. The downside of buying these is there are very few on the market and because there is such a great demand for them, even today, they often don’t go cheap. In fact, it’s the exact opposite: many of these properties are still selling to emotional homebuyers that fall in love with them and pay way over the valuation.
For this reason, I spend most of my property investing time trying to find silent sales – ‘unlisted properties’ or property transactions that the general public don’t get to see. Of all the properties I see, 90% don’t fit my exact criteria and so I need to make sure when I come across the 10% I do like, I can get it off the market as soon as possible. Being a buyers’ agent, as well as buying property for myself, I also buy similar properties for my clients who are trying to build portfolios too. That means that I bulk buy a lot of property and that does make it easier. But the lone investor can do it themselves with a bit of effort.
While I am hunting silent sales to find the right property, silent sales can also mean bagging a bargain at the same time. It all depends on what your strategy is.
Why are properties sold silently?
If you are a vendor and want to get the best possible price for your property I believe you need to hire the best possible agent. Someone who knows the local area, can get rid of any untidy tenants (as they’ll put off buyers), style the property so it creates the right look and then spend some money marketing your property so that everyone finds out about it.
However not everyone has the same thought or understanding of property, and that’s why silent sales happen. Here are more specific reasons why:
- Some vendors don’t like agents and think they are overpaid for doing very little. Why pay someone else when they could do it themselves? If they can sell it quickly to a friend, family member or anyone else who saves them time and money, they will.
- Some vendors don’t want to spend any money on marketing and sprucing up the property and so agents often say to them that they can test market it first and offer it to the people on their database.
- Some vendors need to sell quickly and haven’t got time for a full 4-6 week selling campaign. They ask their agent to find them a quick buyer. It’s more about getting a quick guaranteed result than getting the highest possible price. They’ll get more money from an agent than they would if the bank sold it.
- Some vendors don’t like the thought of an auction and the pressure that comes along with it. What if no one turns up or bids – what will we do then?
Who snaps up the silent sales?
If you ask an agent what it’s like dealing with the average property buyer they will often say that the majority of people are tyre kickers, are not ready, don’t know what they really want, are not pre-approved for finance or just cannot make a decision. If an agent needs to make a quick sale, taking a property to the average buyer will be a lot of hassle and they’ll have no guarantee of a sale until it’s done.
So often they sell to professional buyers’ agents or investors that have bought a number of properties from them before. They take it to them as they know these professionals can recognise a deal when they see one, have developed a mindset where it’s all about the numbers, and don’t let their emotions (loving the colour of the curtains, for instance) make their decision for them.
How the average buyer get access to silent sales?
If you are a buying property for yourself and want to get access unlisted properties you need to get clever.
- Become better friends with your local real estate agent. The key contact between sellers and buyers, agents are the first to be aware of properties for sale yet so many people are shy about handing over their mobile number at open for inspections. How are you ever going to get made aware of deals or changes in a vendor’s expectations unless you make contact with the agent? You need to persuade the agent that you are very serious about buying property and can make a quick decision. Make sure they know you are pre-approved for finance, are serious about buying and can make a quick decision followed by a signed, unconditional contract. People are often scared about telling an agent what their budget is as they think the agent will make them pay more but I always say that I can buy up to any amount if it’s the right deal but I am only prepared to pay what it’s worth and will get an independent valuation to double check that figure.
- Letterbox drops. Do what the agents do and letterbox drop in the areas you want to buy. Say that you are a serious buyer for the right property and the vendor can save time and money by going direct to you. It takes more personal effort and will cost you some money but spending a few hundred, or even a few thousand dollars, could get you a great property at a great price. While a lot of vendors always think theirs is the best property in the street and want a fortune for it, some don’t keep up with the market and want something more realistic.
- Get organised. Make sure you are ready when the right deal comes along. Get pre-approved for finance and have your valuer, building inspector and strata inspector all ready so they can check you are buying the right property at the right price. As a professional investor and buyers’ agent, I see the amount of people that have deals staring at them in the face but can’t recognise them is unbelievable. You’re never 100% guaranteed of any deal when it happens and so at some point you’ve got to make a decision and jump in. The more organised you are, the more likely that decision will become easier.
- Tell your friends, family and colleagues you are looking to buy. Often those close to you will know of someone else looking to sell, so spread the word. Most people love talking about property and so if you mention you are looking every time you talk to someone, it won’t be long before someone gets you the right connection.
- Pay a professional. Just like some vendors will try and save $10-20k on a professional agent and marketing campaign – yet lose $50k on not getting the price their property is really worth – many buyers will try and save $10-20k on doing it themselves when a professional buyers’ agent could get them a much better property or at a much better price. If you buy property once every few years and a buyers’ agent does it every day and has all the industry contacts, who do you think will buy better? Sometimes you’ve got to spend a dollar to make two.
In this time of national fiscal restraint and further job losses, more and more vendors will be looking for further ways of getting out of their properties quickly. This will lead to more silent sales in the coming months.