Purchasing a property in Sydney is a significant undertaking and there is a lot that can go wrong. If you are not an expert at buying properties in Sydney, then how would you know what to do? Once you have found the right property, one of the biggest challenges is to determine how much you should pay for it. I am going to help you with this process by providing some useful insights into how we evaluate property at Buyer’s Domain Sydney buyers’ agents. By using this information which we rely on everyday as Sydney buyers’ agents, you will find it easier to work out how much to pay for a property.
Assessing the Property
At Buyer’s Domain, we are Sydney property buyers’ agents, not valuers. We do not provide valuations of properties. However, we do provide our opinions on how much we think the property may be likely to sell for given the current market conditions and how the property relates to the recent comparable sales.
The purpose of assessing a property is to understand what is being sold and how it compares to other similar properties. This sounds simple but the comparable sales analysis is not an exact science, nor are vendor expectations or market behaviour.
The first step we undertake as Sydney buyer’s agents is to understand the full scope of the property you are considering in detail. This process starts with inspecting the property, assessing the immediate surroundings, and extracting information from the selling agent. Ideally, you will also need to review the Contract to check the Deposited Plan or the Strata Plan (in the case of a strata titled property) as these are the legal documents which outline the extent of the property you are buying including any additional features along with any limitations. This will help you to form a view of the pros and cons of the property so you can more accurately assess how it stacks up against the comparable sales.
The most important pros and cons that you need to assess in a property are the strength of the location; the type of property; and the property’s main features (which include the number of bedrooms, bathrooms and car spaces as well as the property’s size). Here is a list of some of the considerations we use as Sydney buyers’ agents. This list will help you accurately assess the property against recent comparable sales:
- A, B or C grade street: Is the property located on one of the best streets, an average street, or an unpopular street in the suburb? If you don’t know, Google and Facebook search the street and see what commentary is available for the street in question. Alternatively, speak with other selling agents or even local members of the community to find out their opinions.
- Amenities: Can you walk to the supermarket, local school, cafes, restaurants or parks for example?
- Public Transport: Can you walk to a train station? Or if not, are there direct bus routes, Light Rail or other transport options nearby?
- Noise: Can you hear car, plane, or rail noise from inside the property? In the yard? Can you hear your neighbours?
- Privacy: What do the windows look onto? Can you see your neighbours from inside or from the yard of the property?
- Size: Are the land size and the internal property size going to appeal to a broad range of buyers? Does the size of the property provide scope for improvement or is it small and restricted?
- Layout: Does the floor plan flow and allow functional and enjoyable living inside and out?
- Parking: If there is no parking, is there decent street parking?
- Condition: Is the property renovated, or outdated? Is it functional and liveable as is?
- Age: Is this a character, post-war, or modern property?
- Light: Are the floor plan and design maximised to allow ample natural light to the living areas? What is the orientation of the property? The most desirable aspects for properties in Sydney are North and North East facing.
How do you find the details of recent comparable sales? One way is to visit Domain.com.au or realestate.com.au and visit the “Sold” listings. Search the high-level details including the type of property, the number of beds/baths/cars and look at the recent sales in the last month or so.
If you find there are less than 5 search results which are comparable (which is not uncommon), you may need to broaden the parameters. Expand your search to include bordering suburbs; extend the search date back to 3-6 months; and consider including other attributes including other types of properties. At this level of analysis, you will need to make allowances for any features which are not directly comparable. For example, if the subject property has parking but you find a recent sale which does not have parking but is otherwise comparable, consider how valuable a car space is for the area and estimate a dollar value so you can adjust your pricing of the subject property accordingly.
While comparable sales analysis is vital, it is easy to get bogged down in the detail. This exercise is a blend of art and science because assessing a property can be subjective: The value one buyer places on timber floorboards for example may be very different to another buyer. And to complicate the matter further, each of these buyers have varying degrees of borrowing power and finances available to them even if they subjectively assess the property at the same level. The key is to do your research but be pragmatic about it.
It is important for buyers to understand the state of the market because it helps form a view of price expectations and the level of buyer activity. For example, in 2021, property prices were surging and on average, increased by $1,000 a day (https://www.afr.com/property/residential/sydney-house-prices-grew-1000-a-day-in-2021-20220103-p59lgx). In a hot market such as in 2021, your negotiation strategy should be adapted to reflect the market. This means factoring in rapid price rises and speed of sale. However, buyers must remember that not all properties move in the same trajectory as the general market. If the property is “A” grade, buyers should expect fierce competition in a rising market. For a “B” or “C” grade property, FOMO (fear of missing out) may creep in and the sense of urgency may encourage buyers to pay a premium to secure the property.
In a slowing market such as 2022 in Sydney, FOOP (fear of overpaying) set in and buyers became reluctant to pay premium prices for property. Sydney property buyers should use this market sentiment to their advantage in negotiation by selecting relevant comparable sales and highlighting the declining property prices. Remember however that “A” grade properties may still attract high levels of interest and fetch premium prices even in softer markets.
Likely Level of Demand
When considering pricing a property, you must also factor in the types of buyers the property will appeal to, how rare the property is, and the associated level of demand. Work out the local demographics which means the typical buyer profiles for the area. For example, areas close to the CBD are likely to attract a large number of young professionals whereas young families will be drawn to areas where there is a great choice of local schools and sporting facilities for example. Or perhaps the locals are retirees who wish to live by the seaside with walkability to cafes. Once you have a grip on the main buyer profiles are for the area in question, consider if the features of the property are suited to the local demographics for the area. For example, if you are buying into an area popular with retirees, does the apartment complex have a lift? Or is the house low maintenance? The likely level of demand will be higher for properties that have broad market appeal for the area.
Another factor to consider when reviewing the level of demand, is the number of other properties on the market and how stock levels cater to the levels of demand from each of the demographic groups. If the local area is popular with young families for example, and there is a shortage of supply of 3+ bed houses, the family sized homes will be more fiercely contested than 2-bedroom apartments or townhouses for example.
Also, consider if the property has rare qualities or unique attributes which are in short supply. For example, a property with a view of the Sydney Harbour Bridge is rare and therefore will be in greater demand than the house down the street or the apartment located on a lower level which does not have a view. Period properties with character and well-preserved features will typically attract a higher level of demand because they cannot be replicated and are therefore likely to be more sought after.
Level of Interest in the Property
It is important to ascertain the levels of competition from other buyers and the likely level of negotiating power you have over the vendor.
The first step to is to find out if the property is being marketed for sale by public auction or by private treaty or by other means. Next, ask the selling agent about the selling price guide for the property, whether there have been any offers and the current status of the marketing campaign. Ask the agent how far into the campaign they are. This may reveal insightful information such as “We’ve been on the market for 6 weeks. The property passed in at auction at $2m. There have been no offers.” This type of information is gold. You now have information about both the vendor and the agent. Or the agent may say “This is the first open home. We are waiting for buyer feedback.” This is not necessarily a cue to sit back and wait for feedback. This is your chance to ask more questions such as “What are the vendors’ price expectations and is the owner open to pre-auction offers?” Try to initiate a flowing conversation with the selling agent in order to extract more information. The key is to ask open ended questions. But only do this if you’re interested in the property. Otherwise, focus your energy on finding and assessing the right properties for you. As Sydney buyers’ agents we are well aware that searching for properties is a very time-consuming process so use your time wisely.
If you are interested in the property and are engaging with the selling agent, keep up to date with the agent’s other listings. You can build a picture of how the agent operates by taking note of the price guides of other properties they sell, how those properties compare to the subject property, how the selling agent sold those other properties and the prices achieved.
And finally, ask the agent questions about the process of submitting an offer. This step will reveal information about the vendors’ readiness to sell and how to best work with the agent. If the agent says that the vendors are not accepting offers and will proceed to auction, find out why. If it is a legal matter such as an estate sale or sale subject to court order, then there may be no point in making a pre-auction offer. If you ascertain that the vendors’ preference is to go to auction, but the vendors would consider selling before auction for a price, find out how much that price is. If you are not prepared to pay the amount suggested, at least you know what the vendors’ position is. Bear in mind this will almost certainly change based upon factors such as the likely level of interest in the property and the vendors’ motivation to sell. Always ask the agent to keep you informed of any developments regarding the sale. The more information you know, the more prepared you will be.
Finally, you will need to undertake detailed due diligence on the property you are purchasing. Due diligence includes the building and pest inspection report and the strata report for a strata property. The results of this due diligence may impact upon how much you are prepared to pay. You can use any negative findings as leverage in negotiations. For these reasons it is vital to complete all the necessary checks before purchasing a property. It would be counter productive to negotiate or even purchase a property only to discover subsequently that your budget does not cover the cost of a new roof which you were not aware of!
As you can see, there are many factors which influence the final selling price of a property. This information is to be used as a guide only and is indicative of some of the details we consider as Sydney buyers’ agents when assessing the likely selling price of a property. For further information about how much you should consider paying for a specific property, you should consider speaking to a reputable Sydney buyer’s agent.