Understanding the level of vendor discounting in an area is important as it can help you determine the level of demand for property in the area.
Real Estate Investar provides data on this statistic to help property investors understand whether sellers need to use discounting as a strategy to attract potential buyers.
What is a "Vendor Discount"?
The vendor discount is the difference from the original asking price of a property and the final sale price.
This figure is expressed as a percentage, for example a property is asking $500,000 but eventually sells for $450,000 which means the vendor has had to discount the property by $50,000 which equals a 10% discount ($50,000 divided by $500,000).
When investors review a suburb, an average vendor discounting percentage can be calculated by reviewing all properties that have sold and will help you get an indication of the overall state of the market within that suburb.
What does a low or high level of vendor discounting percentage mean?
A low level of vendor discounting indicates that sellers generally don't need to provide much of a discount because there are a number of buyers interested.
Sometimes, there is no discounting at all and properties may even sell higher than the original asking price because there are enough buyers and they drive prices up.
A high level of vendor discounting indicates that sellers are struggling to find a buyer or have listed a price that is too high and need to reduce the price to attract interest.
By lowering the price, this may then lead to a sale and generally these properties will have also been on the market for some time.
By understand the level of discounting that may or may not be occurring in an area allows property investors to understand the level of demand and supply.
In turn, this allows investors to determine the likely market value of a property and whether there is any opportunity to purchase a property at a discount.
How do I obtain this information?
Once a property has sold, this report will provide the following data:
- First Advertised Price
- Last Advertised Price
- Actual Sale Price
- Percentage Change from First Price to Last Ad Price
- Percentage Change from Last Price to Actual Sale Price
- Percentage Total Change
How Does the Property Cycle Impact Vendor Discounting?
Watch this quick video to learn more.