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We define buying below market value as purchasing a given property for less than the property would fetch on the open market, given a reasonable amount of time on the market and a large number of prospective buyers.

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1. Know The Market

It’s difficult to know what represents “value” unless you have a good understanding of comparative sales of the same property type in the same suburb.One way to know the market is to put boots on the ground and visit open homes and inspections over an extended period of time.

Another way is to analyse the data on a suburb to get a reading on how a certain valuation stacks up against the “norm” in that location.Once you can analyse a market well, you’re in a position to pounce when value presents itself.

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2. Know Your Agent

Similarly, many home buyers and investors experienced good results by getting to know one or more local agents.If an agent knows exactly what you’re looking for, when they find it, they’ll tend to think of you first.

Some buyer spent over a year traipsing from property to property with a local agent. They were looking to buy acreage, but couldn’t find a block that matched their needs. One day the agent called and said there was a new property on the market – part of a deceased estate that was looking for a quick and hassle-free sale.They inspected the property and put in an offer the very next week, which turned out to be successful.

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3. Obtain A Reliable Valuation

If you want to buy “under market value”, then you need to know what market value actually is. If you know the market well and you back your judgement, then you can estimate for yourself. Obtaining a valuation can be useful, but it’s important where the valuation comes from. You can be skeptical about any valuation that comes from the vendor.

One form of valuation that tends to be reliable is a sworn bank or lender valuation. Banks have vested interest in protecting their downside. And they tend to be conservative in their valuations – typically valuing a property at 95% to 100% of a realistic market value price.

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4. Pre-Settlement Opportunities

Sometimes, a property buyer will sign a contract on a property purchase, but for whatever reason, are unable to settle.This usually means that the property vendor (often a builder or developer), has a property they were expecting to sell that needs a new buyer.

In cases like this, it’s not unusual for the original purchaser to forfeit their deposit. This may creates a “price buffer” that the developer can be persuaded to pass on to a new buyer in the form of a discount off the bank valuation.

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5. Distressed or “Highly Motivated” Developers or Builders

When a vendor needs to sell quickly, the buyer naturally has more leverage on price.

Property that doesn’t sell as planned tends to start burning a hole in the developer’s pocket. Sometimes there are opportunities to pick up a relative bargain. This helps to get the developer out of a tight space, and also provides some instant equity to the purchaser.

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6. Mortgagee Sales or Deceased Estates

A vendor with plenty of time on their hands, and a direct stake in the outcome of the sale, will usually hold out for the best price they are able to obtain within a reasonable time frame.

There are some cases, such as mortgagee sales or deceased estates, where the aim of the vendor is simply to dispose of the asset for an OK price.In these situations, the seller does have a legal obligation to achieve “market value” for the property. However, in practice, there is often less time, effort and due diligence put into making sure this occurs.

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7. Divorced Estates

Similarly, with divorcing couples, there may be a variety of emotional and practical reasons why the vendor is unwilling or unable to maximise the sale price.

They may need the proceeds of the sale quickly
They may have bad memories of the marital home, and just want to “get rid of it”
They may feel bitter that the other party will get most of the proceeds

If you understand the motivations behind the sale, that will often give you the upper hand in negotiations.

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8. Negotiate Effectively

There’s nothing like good old fashioned negotiation for getting a deal done. Often this starts with understanding exactly why the vendor wishes to sell.  There may be variables other than contract price that they are interested in maximising.

They may want a quick sale.  Or perhaps they are looking for a long settlement to enable a relocation somewhere else.Strong negotiation skills, plus the ability to walk away with a straight face, can often tip the balance in favour of a sale at a very attractive price.

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9. Consider Engaging A Property Advisor or Buyer’s Agent

There are several reasons why engaging an advisor or buyer’s agent to act as your intermediary can help obtain a better price. 
An intermediary typically knows the market very well.  They can use their market knowledge to understand genuine value when they see it.
An intermediary will cut emotion out of the equation.  A cold, hard, logical approach is usually how you negotiate the best buying opportunities.
Intermediaries can be effective negotiators because they can say to the vendor, “I have a buyer here with money to spend.  They’re serious, but they need a very good deal.”

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10. Be Ready To Transact

There’s a common thread here: if all vendors were in no hurry to sell, and were able to speak with a large number of potential buyers, then all properties would sell at “market price”.However, that’s not the case.  Sometimes vendors need or want to sell quickly.And when they do, they’re willing to drop their expectations around price.  That’s where you can swoop in, providing you’re in a position to move quickly.  That means:

Having the deposit funds available (typically 20% of the purchase price, plus costs = 25% of the purchase price).

Being in a position to service any lending against the property.