I’ve mentioned a few times that I plan on buying another property this year, even with all the talk of recession and an approaching housing crash. I still think there is money to be made in the property game whether it be in the interest of long or short term investment, but only if the right property is in question. ‘The right property’ for me is a property that is significantly under priced and situated in a prime rental location.
I’ve Seen A house I like
I’ve been looking at a few auction websites for properties in a particular location that will shortly go under the hammer. It’s not necessarily an upcoming ‘hotspot’; it’s already a well established area. However, there is great rental return in the area and properties with in that area rarely go under the hammer. That tells me that there isn’t much repossession going on there, which is good because it means the area is most likely going to sustain its value. If a location is being haunted by repossessions it probably means that it’s going through a meltdown. That’s never a good sign.
I’ve spotted a house that is extremely under priced, and the area is extremely sought after by tenants. It’s not clear whether it’s a repossessed property, so I can’t determine whether it’s being sold by a private owner or a lender. The particular auction house that has taken control of the sale is a bit ridiculous, in my opinion. Even as a bidder, you need to register and pay an excessive registration fee. Apparently the commission they make from the sale alone isn’t enough. Selfish gits.
Approaching The Vendor Directly
What I plan on doing
probably isn’t ethical, but it is legal, and it’s a good way of avoiding certain costs and getting in there first. I’m going to contact the seller directly and see if I can cut a deal without using 3rd party mediums. I hope that the property hasn’t been repossessed, but the vendor is at the stage where he/she needs a quick sale. I’m going to knock on the door in attempt to turn over a few stones.
The Benefits Of The Direct Approach
From my experience, a desperate vendor would rather sell directly to a buyer due to the added bonus of a super quick sale and the abolishment of extortionate fees from the middlemen. So I have nothing to lose. If it doesn’t work out, then it doesn’t work out. But there is no harm in trying. In all honestly, I’ll probably always try and contact the vendor directly in all my pursuits this year. Eventually someone is bound to strike up a deal with me on the aside because private sales can be so much quicker and cheaper, and you get the luxury of not having to deal with snake oil agents.
It can be a gamble
My method is a gamble because I could end up offering more than what it would have gone for at auction and vice versa. However, i’ll still be getting a discount property and i’ll still be paying what I can afford to pay. And most importantly, it’s an opportunity for me to get in there first, consequently reducing the chance of missing out on the deal.
Is what I’m doing ultimately praying on the vulnerable?
I’ve heard that argument before. The psychological state of a desperate vendor is exactly that, desperate. So I can understand why people would think I’m taking advantage. But the truth is, the vendor needs a sale one way or another. The vendor doesn’t have to take up on my offer, I’m just providing another option for a quick-sale.
What about the Estate Agents and Auctioneers lost profit from your direct approach?
Exactly. What about them? They’ve had an easy ride in the last decade and they charge extortionate amounts. Why should they be the only options available?
Buying Property Cheap
I definitely plan on buying this year, but I plan on buying cheap. Approaching vendors directly can be a good way of getting a good deal, especially if their home is going to sell at auction. I’m looking for “cheap” to the point where the property is approximately 20% under current market value, so I can afford to penetrate a hit by the market (if shit happens). A lot of people are scared to death of property right now and that’s why it’s a perfect time to buy. I guess I should thank the media for that (but I won’t).
Has anyone else ever been a sneaky little shit and contacted the vendor directly to strike up a deal? Let me know your story!
Disclaimer: I'm just a landlord blogger; I'm 100% not qualified to give legal or financial advice. I'm a doofus. Any information I share is my unqualified opinion, and should never be construed as professional legal or financial advice. You should definitely get advice from a qualified professional for any legal or financial matters. For more information, please read my full disclaimer.