What is a “Vendor Discount”?
The vendor discount is different from the original asking price of a property and the final sale price. This figure is expressed as a percentage; for example, the 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 checking all properties that have sold and will help you indicate 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 several buyers are interested.
Sometimes, there is no discounting, 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 too high price and need to reduce the cost to attract interest.
Lowering the price may lead to a sale, and generally, these properties will have also been on the market for some time.
Understanding 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 potential market value of a property and whether there is an opportunity to purchase a property at a discount.
How do I obtain this information?
Through a Real Estate Investar membership, you’ll have access to CoreLogic RP Data and can run a Market Compare Report.
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.