Think carefully about your offer
It is vital to understand the value of a property and what you can afford to pay before making an offer, says Belinda Moffat.
Question
I’m a first-time buyer. I’ve put offers in on three properties, only to miss out because someone else has offered significantly more than me. House prices are rising quickly and I’m tired of spending money on building reports only to findmy offer wasn’t even close to winning. How do I get a better idea of what a house is worth and what I should offer to pay?
Answer
I’m sorry to hear you’re having a frustrating time navigating the market. It is extremely competitive, so understanding the value of a property and what you can afford to pay before making your offer is critical.
Purchasers should think carefully about what they are willing to pay rather than rushing to make offers that might not be sustainable in the long term.
It is important to research the property and carefully consider your financial situation before you make an offer. If you are borrowing, you need to be satisfied that you can cover the costs, even if your personal financial position or the economic environment changes. You may want to seek advice on what these changes could mean for your ability to cover costs.
Generally, a property is worth whatever a buyer is willing to pay for it. However, there are ways to gauge the value of a property. A starting point could be the rateable value or RV, which is prepared by the local council to help work out what rates a household should pay.
Recent sales are also a good indication. Research this before you start actively looking to buy. Attend open homes for the sorts of properties you are interested in and keep an eye on what these sell for. Attending auctions can also be good research.
This will help you get an idea of how far your finances will go in the current market. Be realistic about the market price you are willing to offer, based on the condition of the property, and what you can afford.
You need to anticipate what other costs might arise in maintaining the property. A building report will help you make that assessment. You can use REA’s free report generator at settled.govt.nz/propertychecker to identify the potential issues you should research further about a particular property.
Platforms like homes.co.nz, Trade Me Property, One Roof, and realestate.co.nz can also be used to find a guesstimate of a property’s worth.
While these insights are useful, consider the numbers with some caution. Online tools can’t know the condition of the property. Ask the agent about improvements that have been made that might add to its value and check the council LIM (Land Information Memorandum) to find the consents granted for work done on the property.
You can also pay a registered valuer to provide you with an independent valuation. This service comes at a cost, but it will be more comprehensive and consequently more accurate.
The New Zealand Institute of Valuers explains that there are often many factors to take into account when assessing a property’s value that can’t be robustly considered by an algorithm or a computer programme.
Once you’ve gathered all the information you need you will be in amore informed and confident position to determine your ‘‘walk away’’ price and submit your offer.
Belinda Moffat is the chief executive of the Real Estate Authority (REA), the independent government agency that regulates the New Zealand real estate industry. For independent information about buying or selling property, check out REA’s website for buyers and sellers settled.govt.nz. For information about working with a real estate agent, visit rea.govt.nz.