WOULD you part with hundreds of thousands of dollars to purchase something you haven’t even seen?
It sounds crazy, but it’s a new phenomenon among Sydney property investors.
Blind-buyers are throwing their cash at real estate agents to purchase houses they’ve never seen in person, in suburbs they may not have even visited.
Brisbane agents are benefiting from this blind-buying, with investors snatching up property in dodgy suburbs, notorious for crime.
Domain reported investors were attracted to affordable properties just 20 minutes out of the city, in areas like Inala, Woodridge, Eagleby, Forest Lake and Slacks Creek.
Logan real estate agent at White Knights, Kym Whalan, told Domaininvestors made up about half of sales.
“Out of every 10 sales, five will be investors, and two will not have viewed the home, and that is a modest estimate,” he said.
“Often it seems as the investors have no idea about the area’s reputation. Or maybe they are overlooking them because of the good house prices.”
Lesley Waters, officer manager at Professionals Beenleigh said a whopping 70 per cent of Sydney investors were using photographs as their only guide when buying a Queensland property.
Real estate agent Daphne Orley told Domainshe even had to devalue a home by more than $7000 when an investor complained about cracks in the house that did not show up in photographs.
Property investment heavyweight Chris Gray said blind-buying was not a smart decision and investors thought of it as a get-rich-quick scheme.
“They try to just go on the latest trends or fads because they want to make a fortune overnight,” he said.
Mr Gray, chief of Your Empire, said a misleading real estate photograph earlier this week showed the huge risks involved with blind-buying.
The real estate photos showed a quaint home sitting on a grassy lawn with a clear view of the sky, but the pictures didn’t show the water tank that shadows the home.
“You want to trust the real estate agent but if you don’t look at properties and have due diligence then you only have yourself to blame,” Mr Gray said.
“If you buy off the internet you don’t know the suburb and you have to put your trust in people.”
The investment mogul said there was also a risk with buying somewhere affordable and sometimes buying one property for a million dollars could be better than buying three houses for a million dollars.
He said buying a house in a sought after area like Bondi Beach in Sydney could pay off better.
“It’s all about supply and demand,” Mr Gray said.
“If those three big houses you buy aren’t in demand, they might stay at $400,000, but there could be a massive demand for a house in Bondi and the price could double to $2 million in a short period of time.”
Mr Gray believed many investors weren’t playing it smart enough and not spending enough money on property valuations to determine how much a residence is worth.
“It’s disappointing,” he said.
“There’s so much education now but if you give someone 20 steps to investing they do step one and step 20 and miss the other 18.”
He said it was worth paying extra money for property reports and thorough inspections, but believed people would do anything to save money.
“Building reports cost a few hundred dollars but people will try to save those dollars, even though they are investing thousands,” Mr Gray said.
“People used to save money to make money but the new generation very much thinks you need to spend money to make money.”
Blind-buying is a mistake that can lead to catastrophic results, according to Mr Gray.
He believes an investor could end up purchasing a house in an area where nobody wants to live.
“A good situation would be the house doesn’t drop in value,” he said.
“A dire situation, which is found in many mining towns, houses are bought and in six to 12 months the value has cut in half and you can’t physically rent them out and can’t sell them.
“That’s a very costly mistake.”
New Image Real Estate Marsden agent, Christine Carroll, told Domain she refused to sell a property to somebody unless they’ve attended a visual inspection.
“In my view, it is the ethical thing to do, because it puts the ball into the buyer’s court,” she said.
“At the end of the day I want them to know what they are buying and it is in the best interests of the buyers.”
Ray White Balgowlah principal, Andrew White, said he had noticed a huge increase in Sydney investors blind-buying, especially on the Gold Coast.
“Sydney prices are peaking and people pay good money on their investments and there’s now a lot of talk about Queensland growing,” he said.
He said there was always a risk when blind-buying, but said technology allowed it to be possible.
“It’s really good now, you can do so much remotely like get advice and copies of reports,” he said.
“Even Google street view is helpful.”
Mr Gray said anybody interested in investing should just jump in and do it.
“Have some due diligence but don’t wait until it’s absolutely perfect, that won’t ever happen,” he said.
“Valuation is the key thing and valuers know certain areas and will tell you if property prices are too expensive.”
Original Publish: http://www.news.com.au/