Deciding how much to offer on a property is one of those decisions that can feel genuinely stressful — you don’t want to overpay, but you also don’t want to miss out on a property you really want or make a decision you’ll later regret.
The right offer depends on a number of things: local market conditions, recent comparable sales, the condition of the property, and how motivated the seller appears to be. Each of these can influence what a fair and reasonable offer might look like.
Whether you’re buying your first home, upgrading, or adding to an investment portfolio, getting a clearer sense of how to assess a property’s value can make that final decision feel a lot more grounded and a lot less like a guess.
To determine the “right” price to offer, incorporate the following tasks. This can help avoid bidding wars and multiple offer situations, which drive prices up.
It is essential to conduct extensive market research and analysis to understand the local real estate market conditions and trends. This includes analysing local factors such as growth, rental demand, and other economic factors. For instance, if you are looking at a property in Auckland, it is important to understand the Auckland Property Market.
This technique involves identifying properties that have recently been sold. These properties should have similar qualities and features to the property you want to buy.
The income method is often used to evaluate rental homes that are bought as investments. Calculate the net operating income of a property. Estimate the potential rental income. Subtract associated costs, such as property taxes, insurance, maintenance, and management fees.
Similar to the income approach, however the focus here is more on the desired yield
A common calculation/guideline on the offer price is: Potential Rent divided by yield percentage = Offer Price.
The potential rental income is $900 per week, thus $46,800 per annum. Assuming a desired yield percentage is 8%. We can use the following formula to determine the offer price:
$46,800 divided by 8% = $585,000 offer price.
Of course, this is only one aspect of the many factors that you need to take into consideration and always remember, each situation is unique.
For investers, it is important to make sure the numbers still work comfortably after factoring in costs and potential vacancies.
An appraiser assesses the condition and location of a property. They also take into account recent sales of similar properties. This helps them estimate the property’s fair value.
Getting an independent property valuation can also help you understand whether a property’s asking price is realistic. It can help confirm your analysis, ensuring you make an informed decision.
Although the objective for an owner-occupied property may differ, there are some similarities.
Similar to Investment Property, it is important to do some homework to get to the “right price” and avoid pushing the price up.
Unlike rental properties, how much it costs to buy has a bigger impact. The value of the property can be affected by factors such as its construction quality, age, and necessary repairs or upgrades.
Many homes built between the mid 1990s and early 2000s did not meet the standards of the New Zealand Building Code. This resulted in the leaky homes crisis.
Examples of this is monolithic cladding, untreated wood framing, flat roofs without eaves, and decks over other living areas. Note that not all monolithic cladded properties are created equal. Cavity systems and treated framing became the standard after the year 2004.
The location of a home has a big impact on how much it’s worth. Price is affected by proximity to schools, public transport, shopping centres, and desirability of the neighbourhood.
For example, a property in a preferred area like Forrest Hill on Auckland’s North Shore, is often worth more. This is because of Westlake’s good school reputation, low crime rate, and convenient bus terminals. A property in a less desired area is not as valuable. It usually has fewer services and a higher crime rate.
Bear in mind that your dream home or location, will not necessarily be another persons dream home or preferable location – So:
Your Mortgage Broker can arrange pre-approval for you. This way, you know exactly what your budget is and whether it is within your capabilities. You can then focus on homes that are within your price range. Understanding your borrowing position early can make it much easier to search within a realistic price range.
In summary, when conducting due diligence, it is important that the analysis undertaken is comparable. There is no point comparing data and trends between properties that are not “pretty much the same” or similar. This includes sales data, sale prices, key features, and potential rental income. Moreover, these properties should be located within the same areas.
There are multiple pricing strategies and techniques to consider. The more aspects or techniques brought into consideration, the better. Your preferred pricing model may be as simple as an excel spreadsheet. There is no one defined formula to determine what the right price is, since it depends on multiple factors.
Purchasing a property, regardless of the objective, is a large investment. Ensuring your purchase is aligned with your personal financial goals is important.
We have more than 17 years in the mortgage industry, and this is our niche.
Purchasing a property is a major financial decision, and having the right guidance can make the process feel far more manageable. If you’d like help understanding your borrowing position, discussing finance options, or preparing for a purchase, get in touch — we’re always happy to help.
Angela is an accredited Financial Adviser, licensed under FSP742251 and has been in the Financial Industry since 2006. Our 5-star Google reviews reflect the excellent customer experience we promise — making your home loan journey positive, stress-free, and rewarding. At Platinum Mortgages, our clients are the reason we exist — so you can be confident every step is guided by genuine care and expertise.
