Can you really buy below market value?

Mar 15, 2023

Some cynical investors believe that there is no such thing as buying below market value. They say things like “if it was such a bargain why was nobody else willing to buy it for that much”.

The Australian Property Institute defines Market Value as “The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.”

Based on this definition it is clear to see why often a property transacts at a price different to the market value:

  1. Market is not informationally efficient
  2. The property has not been marketed sufficiently
  3. The parties do not act rationally

The Eastern Suburbs is a thinly traded lumpy market so these situations crop up more frequently than you’d think.

If you want to buy below market value you need some of these stars to align:

  1. Committed Seller (they don’t need to be “desperate” just committed)
  2. Seller’s level of risk and greed are such that they value a “bird in the hand”
  3. No other buyers ready to transact at the moment in time when you buy it OR other buyers not valuing the property correctly