How to buy a house - Part 3 | Home I Own, Aussie Real Estate Blog

In the part two of “How to buy a house” series I covered stages four and five, deciding what kind of house you need and what amenities you’d like to be close by. Coming to the stage six, you should have only one or two suburbs left on your list - those you will be examining very closely.

Stage six: Do your homework

This is the time to start looking at the property listings of your target suburb in domain.com.au or realestate.com.au and also to start gathering some statistics. Here is what you will need to find and save, week after week, until you find your home:

A. Gathering property sales data for the suburb, such as

checking weekly sales results and noticing how many houses were sold and for what prices,
how many private sales there were and how many auctions,
in the auctions how many houses were passed in (that means the house wasn’t sold because of lack of interest),
what was the reserve price and what was the vendor bid.

B. Gathering detailed sales data

Any suburb is divided into areas and the prices in every area will be different. Usually the price range for each area is affected by the amenities it offers. At this point it is a good idea to visit a real estate agency in your target suburb and ask the agents about the areas and their names - it will make your job much easier. Ask them to circle and name the areas on the map and get familiar with them. Then use the recent sales data to see what the price range for each area is - this way you will quickly understand what areas are in your budget and what are beyond. The goal of this little research is to narrow down your search inside the suburb - to save as much of your time as possible.

Let’s talk about A - general data for the suburb.
Why do you need to get into those details? For several reasons:

Reason 1. If you track the number of sold houses in your target suburb over time it will tell you if the market is going up, down or sideways. If every week they sell less and less houses - it means that your bargaining position will be better because the vendors get restless, desperate and maybe willing to drop the price to sell faster. On the other hand if there are more and more houses are selling every week - then you shouldn’t expect to negotiate the price down much because properties in your suburb are in demand.

Reason 2. If there are more auctions than private sales - it indicates the popularity of the suburb and implies that you are more likely to buy your house in an auction than in private sale - so you should start going to auctions to see how they work and start getting used to the idea of buying via auction. Being psychologically prepared to bid in an auction is important because many factors will affect you, the stress, the tension, etc. Also the contracts of private sale and auction are different, for example private sale has a cooling off period - and auctions hasn’t. One more thing - all the inspections have to be done prior to the auction, when private sale doesn’t has such condition.

Reason 3. Houses being passed in are interesting for 2 reasons - first, if there are any of those it can be a sign of weakening market and second, it can be your opportunity to get in touch with the agent, negotiate the price down and buy it via private sale.

Reason 4. The reserve price gives you an idea what no one was willing to pay for that house - or in other words what price is too high for that property and vendor bid will tell you how much the vendor wants to sell for. Take is as the upper limit and negotiate the price down.

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How to buy a house - Part 3