Buyer beware – Don’t Overpay for Property

By Janet Spencer

Buyer beware- Don’t Overpay for Property

At Buyer Solutions we are sending a message to investors and home buyers loudly “buyer beware don’t overpay for property”.

Just because interest rates are low and you want to buy a property, don’t just jump in and buy without doing proper research.  The bank manager might say you can borrow a million dollars but that doesn’t mean a property might be worth a million dollars.  It may be only worth $850,000 and you don’t want to overpay.

Let us explain the consequences of overpaying.  A years interest bill on $850,000 at 4.5% interest rate is $38,250.  On $1,000,000, it increases to $45,000.  That is an extra $6750 per annum that you may have to pay.  Not just for one year, as you may be paying that loan over the next 25 years you own the property.  Total extra interest cost is then $168,750 over that period.

So over 25 years the cost of this extra purchase margin is $168,750 and that is if interest rates stay the same over this time.  If interest rates go up the cost will be alot more.

As a property buyer, its not difficult to work out that overpaying is costly not just now, but into the future.  Every weekend at auctions around Melbourne we see buyers paying in our opinion too much for properties.  They outbid us at auction.  Sometimes we even hear them telliing their family that they have gone over budget and gotten carried away.

A good Buyers Agent will do a thorough pre-purchase due diligence and prevent their client from overpaying for a property.

It may cost you a few thousand dollars for the professional advice of a good Buyers Agent but if you do the maths, the upfront cost may be well justified.  Frequently at Buyer Solutions we stop buyers from buying bad property, property with problems they were unaware of and from overpaying for their property.

For up to date information on what’s happening in real estate in Melbourne, contact Janet at jspencer@buyersolutions.com.au or 0418 101 146.

By Janet Spencer

Buying property, First home buyers, Home buying, Investment, Investment property, Overseas Buyers, Real Estate News & Opinion, Selection a Buyers Agent

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