Well you've found your block, and it is time to put in an offer. What do you do?
Like almost all land for sale in the country it is through a real estate agent. The asking price was $AUD99,500 (2002). But what does that mean, really?
Sifting through papers we'd gathered during the block hunt phase we found various lots for sale nearby. We noticed a few things we had going in our favour: one or two other lots had previously been at a higher price and then reduced; two lots had been on the market for at least 2 years; there was plenty of houses available in the area due to the recent downturn in the timber industry - the reason why Pemberton was settled in the first place.
What ensued was nearly 6 months of too-ing and fro-ing between the owner, the real estate rep and us. Mostly because the owner lived overseas and, well, I'm not someone to "rush into things". We first pitched $AUD85,000 and eventually settled, many iterations later, on $AUD90,000 (2002). Hindsight shows that if we held our ground a bit more we could have knocked the owner down somewhat further but I'm not that experienced a negotiator. $AUD90,000 at the time neither represented a bargain nor a rip-off.
Rather fortunately, we bought the block just before the area went into a price hike; the value of the block doubled in 3-4 years! It didn't take long until I looked back and thought "bargain." ;)
Now let me give you the offer tips I discovered:
- Make sure settlement is stated for at least 60 days if not 90 days. You won't believe how long settlement takes. I naively signed the "standard 30 days" and it took around 90. I could have made it in 60 but I didn't move quickly in the first few weeks. You can be fined a penalty, at 11%, if you do not meet the target date. Fortunately both sides were guilty of mucking around so in the end there were no tears.
- Buying and selling property is jam packed with fees. Let me rattle off just a few you will find: Contract Stamp Duty (the biggy), Registration of transfer, Title search fee, Dept of housing fee, Land search fee, Settlement agent fee, Monies held for rates(okay, not really a fee). On the the mortgage side - unless you are paying cash - Mortgage stamp duty, Mortgage establishment fee, Registration of Mortgage...ah there are more but it just makes me sad thinking about it. Suffice to say count on around 6% additional to the agreed price in fees. Perhaps there are ways around things, I don't know; I just opened my wallet and hoped everyone was being honest...
- Suss out the scene. In my case the area at the time was a buyers market with plenty of property available around. If a lot of blocks have been on the market for a long time you may have the upper hand. But then again, the previous owner of our block lives overseas and didn't seem to stressed as to whether it sold or not. Either way, *never* pay the price they are asking.
Other investigations revealed that when this block was first realeased it was sold for $AUD55,000 in around 1995. That represents approximately 5% growth for. Not a big money spinner for the owner, but better than your average fixed term cash. It's nice to feel comfortable that what you are buying might be an expensive toy - but at least it is not a depreciating one.