Articles

When multiple properties are for sale on the same street or block, would you still be willing to purchase?

Does it mean that there is something wrong? Is it just a normal thing? Or could it even be a good sign?

Here are the main reasons properties usually go up for sale and what buyers should do about it.

There are others that sell within the vicinity

More often than not the reason a number of properties situated near each other go onto the market simultaneously is because something nearby sells first.

When a number of properties that are close to each other come up for sale buyers do get quite suspicious and a bit cynical. Some think ‘what’s wrong? Is there something coming up? Is there an easement? Are there bad neighbours?’

But the explanation is often more benign than that: It’s usually a case of what real estate agents call ‘hotspotting’.

‘Hotspotting’ happens when a good sale encourages other people in the area to sell. If a property goes for a lot of money it often gives the neighbours the confidence they need to come to market, especially if they’ve been thinking about it for a while.

A Domino effect

It’s a simple fact that people who live in neighbouring properties often tend to be at similar stages of life. Think about your own neighbours: how many of them have similar circumstances to your own? So, when people enter a new phase in their life at the same time, it follows they will often want to sell and move on at the same time.

The same is often true in reverse: neighbours who have brought up their families side-by-side will decide to downsize at the same time, so multiple family homes on the same street will often go on the market simultaneously.

They’re distressed sales

In an economic downturn, the market often becomes flooded with closely-located properties – particularly in holiday areas where they’re being used as a second home.

When this happens you’re likely to see three or four houses right next to each other on the main roads of Australia’s coastal towns – almost entirely the result of people liquidating their second homes to free up cash or reduce their mortgage repayments.

But far from being a bad thing for buyers, this can be a positive. After all, having so much choice in comparable properties gives a purchaser enormous bargaining power.

Something bad is about to happen

Then again sometimes, it’s only right that buyers should be suspicious: neighbouring properties sometimes do go up for sale when a development has recently been approved that will adversely affect another property, or a new busy road being built nearby or an easement is about to be created. Similarly, several apartments or townhouses in the same complex may go up for sale just after a new special level has been announced.

But buyers shouldn’t necessarily be put off by this, even though many buyers will be. It is often a great buying opportunity.

The owners are actually doing themselves a disservice because buyers will find out about the special levies and use this information to make very low offers. The vendors would have been better off simply waiting until the special levy has been paid, and sell their properties then.

After all, an experienced property buyer, (or their Buyers Agent) will almost always find out when something adverse is likely to affect the value of the property or a purchaser’s hip pocket and, as a buyer, this can be used as leverage when negotiating a deal.