Should you buy in a street with multiple homes for sale?

N.B. The follow article has been written by Emma Sorensen and sourced from: http://www.realestate.com.au/blog/should-you-buy-in-a-street-with-multiple-homes-for-sale/?rsf=invest-blog-widget. All About Rentals does not take any recognition in writing this article.

What does it mean when multiple properties in the same street, block or complex come up for sale simultaneously?

Does it suggest something is majorly wrong? Is it just coincidence? 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.

Something else sells nearby

McDonald Real Estate auction at 270 Chandler Rd, Keysborough.

 

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?”, explains Tom Scarpignato from Belle Property, Neutral Bay.

But he says that the explanation is much 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,” Scarpignato says. “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.”

‘Hotspotting’ happens when a good sale encourages other people in the area to sell.

Scarpignato also says that ‘hotspotting’ tends to happen in hot or rising markets, so it’s something that has been particularly common in Sydney and Melbourne in the past couple of years.

The demographics change

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.

“I once sold three townhouses in the same complex at the same time,” Scarpignato says. “And every single one of the owners put their place on the market for the same reason: they had all just had their second child or were about to have it. And all of them were upsizing.”

Young couple

 

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.

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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.

In an economic downturn, the market often becomes flooded with closely-located properties.

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.

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Patawalonga and Glenelg from the air

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 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 again, Scarpignato doesn’t think buyers should necessarily be put off by this.

“I’ve definitely seen cases of several people in the same building wanting to come to market when there’s new special levies coming up. But the owners are actually doing themselves a disservice because people will find out about them and use this information to lowball them when they make an offer,” he explains.

“I always advise people in that situation to hold off until after the levies have been raised and the work has been done, if they can.”

After all, a good solicitor or conveyancer 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.

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And finally…

Open for inspection

 

Scarpignato says that, far from being worried about multiple sales in the same street, building or complex, buyers should see it as a positive because it gives them something that is often been lacking, particularly in the hot property markets of Sydney and Melbourne: choice.

“As a buyer you might go to see one place and find that you like the other one better,” he explains. “You also get the upper hand by being able to compare like-for-like.”

You get the upper hand by being able to compare like-for-like.

Scarpignato also says buyers can take away enormous positives if they’ll be looking to sell some time in the future.

“While tightly-held neighbourhoods are often valued, sometimes it can be a sign that nothing sells when it goes to market.”

“On the other hand, if several places go up for sale at the same time and they all sell, it’s usually a good sign that you’ll have no trouble selling as well,” he concludes.

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