08 Jun How much to bid on a house
QUESTION: What does the median house price mean when I am working out how much to bid for a property?
The median house price for an area is not a good guide to the price of any individual property. It may mean that the property you are looking at is better, and has more value, than the average, or that people generally are buying less or more expensive properties in that suburb.
The Valuer-General’s capital value is also not a good guide. This can be several years old, based on indexation of building costs, or made without reference to the particular property’s features and benefits.
The best guide to the property value is a valuation done by a licensed valuer, which may already have been done, if you have been pre-approved for a loan by your bank. Even then, the bank valuers tend to value on the low side to give the bank more safety margin between the value and the amount borrowed.
Even if you hit the exact correct market value with your offer, you will still lose money if you were to re-sell it within a few years, because of the stamp duty payable on settlement, and agents fees and advertising costs if you sell. You will need to see a significant increase in value if you turn the house over within about 5 years, in order to avoid a large cash loss.
If the house is what you want, and it has the features you need to enjoy your life while living there, and you know you will stay for 5 years or more, then it may be worth the additional cost to you. However, houses are like buses. If you miss one, another one will be along very soon. If you fall in love with a particular house, you will pay too much.
Check whether the home has desirable features, such as:
1. 2 car garage
2. Large workshop
3. Wet area in the workshop
4. Walk-in pantry
5. 2 living areas
5. Good street appeal
6. Polished wooden floors
9. Ceiling roses
10. Renovated kitchen
11. Modern benchtops
11. Solar panels
12. Close to public transport
13. Fruit trees
Does the property have development opportunites, such as is the frontage and land area enough to split into 2 blocks (must be 9m or more frontage per block. You need to check the development code and zoning for the council that it is in to see what block size is permitted.
You can ask the agent to give you a list of recent sales in the area. They get this from RP Data. You can also go to the RP Data website and get a fee suburb value report, and for a fee you can get a “desktop” valuation report. Check the houses out online and on Google Earth to see if they have similar features and match with the actual sales price (not the asking price). This will give you a good idea of the value in your own mind.
For about $15 you can get a report online from S A government website “property assist”. this gives all title details, valuer generals valuation, last selling price and current owners details. It will also show whether there are any easements, mortgages or defects in the title.
I hope this is helpful for you.