As Buyers’ Agents, we believe that information is power. Unfortunately in Australia, the buyers are at a significant disadvantage compared to sellers when it comes to access to information. Take the following property as an example.
This property was sold on 29 August 2009 for $1.61 million. The priced advertised by the agent was “over $1.4 million”. We can be sure that in this instance the selling agent was intentionally underquoting. How do we know this? Because the seller called our office two months prior to listing it with the selling agent and we inspected this property silently, well before it ever hit the Internet and newspapers.
At that time, the seller was already telling our agent and client that they wanted over $1.6 million. Because we know the history of this property, we also knew that this was a ‘flip’ (read more about ‘flips’ from our previous blog). The seller bought the property in June 2008 for $1.05 million. They presumably wanted to hold the property as their primary residence for at least 6 months so as to avoid capital gains tax upon selling.
On the several occassions that our alert agent drove past the house, we noticed that the owners were doing a lot of the renovation work themselves. When our agent inspected the house, the ‘flip’ became quite evident with things such as cheap cypress pine floorboards, poor paint job, old light fixtures and switches which were not upgraded along with the new extension of the house etc.
We did not recommend this property to our clients because we were uncomfortable with the quality of the renovation. Usually with ‘flips’, flaws only emerge and things only start to break down after the new owners have moved in. Given that the sellers (who insisted they were not architects, builder or in the renovation business) did most of the renovation themselves, we felt they were trying to maximise their profit and may have cut corners – thereby compromising on the standard of renovation.
Unfortunately, the average buyer with untrained eye would have fallen for the fresh paint and nice presentation of the house that they don’t realise the past sales history and the fact that it is most likely a flip.
About Oliver Stier
Oliver J. Stier is the Director of OH Property Group, a leading Sydney buyers agency. He studied Quantitative Economics and Finance at Cambridge University (UK), University of Toronto (Canada) and Princeton University (USA). In addition to being a licensed real estate agent, Oliver also holds the Chartered Financial Analyst (CFA) designation.