Negotiating is a bit of a science. It’s a balancing act between who has the most knowledge or information on any given topic. As a buyer, you may think the seller has more information and expertise and that may be the case when it comes to the property for sale, but don’t forget, they know nothing about you and this is how you can use that important fact to your advantage.
When it comes to buying property, the negotiation process starts from your very first contact with the managing agent. As a sales agent, their job is to qualify you to determine your likelihood of buying a property, so their goal is to get as much information about you as possible. And that’s a great place to start with my first tip…
Tip 1: Don’t give away too much information about yourself
This is not a job interview. Try to be as vague as possible. That way the agent will have less information to use to their advantage when it comes time to negotiating your offer.
For example: If you’ve recently sold your own property and you tell the agent, they now know you’re going to be more anxious to buy within a short timeframe. If they also manage to find out how much you sold for, they’ll begin to calculate how much you have to play with.
Tip 2: Ask lots of questions
Ask the agent as many questions as possible – remember, information is power.
Here are a few questions you should be asking straight up:
Tip 3: Do your homework
Tip 4: Devise your game plan or offer strategy
Every agent runs a different offer process depending on how much interest there is in the property. They may have around 30 interested parties, 10 of whom are serious. Or perhaps they only have a couple of buyers that they will pit against each other. Ask how the offer process will be run.
This is very crucial to understand to allow you to devise the right strategy when submitting an offer. Transparency of the process is key.
Knowing about the offer process is particularly important so you know where you stand and how the agent can potentially use your offer as leverage with the vendor and other buyers.
Now get ready to negotiate.
Tip 5: Stick to your buying range.
Say your buying range is in the vicinity of $1.2m. That means you should be shopping within the $1m and $1.25m range depending on the method of sale – a private sale is normally priced higher with a view that it will get negotiated down, whereas an auction will be priced conservatively to garner competition and drive the price up.
Don’t forget, this doesn’t include additional costs like legal, insurance and stamp duty so make sure you factor those into your budget.
When you’re comfortable with your buying range, submit your first offer on the contract – this shows your seriousness and the agent has to present it to the vendor.
Start at a price below the asking price not at a level that would insult the vendor or you may not be taken seriously. Starting at 5-10 per cent below the asking price is reasonable depending on the discussions and the information you’ve obtained in the processes above.
And then wait.
An agent always wants to sell as soon as possible for the best price so you can rest assured, as soon as you make an offer, the agent will tell the vendor immediately. Unless otherwise stated, an offer usually lapses after three business days but check regulations in your state.
From there, the vendor can either accept, reject, or make a counter offer. This is usually on the advice of the agent who would be using all the intel they gathered in the early stages (see Tip 1).
Agents know that time kills deals so they will try to wrap it up asap… but not before they’ve had a chance to play the offers off against other offers.
If the vendor doesn’t accept your offer, and you are prepared to offer more, increase the amount in small increments, around 1-2 per cent above your original offer.
Here’s a recent example that we negotiated on behalf of a client. We found an off-market property for a client in Yarraville priced at $1.1million. We discovered that a similar sized property, although at a lower standard, had recently sold in the same street for $975,000. Our first offer was for $980,000 and we slowly increased our offers in increments over the next two weeks until we finally settled on $1.018m which shaved $82,000 off the original asking price.
Tip 6: Know when to hold ‘em…and when to fold ‘em.
Timing is critical. Ask the agent if they have received other offers from interested parties. If they say there is an existing offer on the table, ask more questions. If the offer is real, they’ll answer straight, if not, they’ll be vague.
Think about how many people were at the inspection. Ask the agent how many contracts have been requested and how many offers have been made. This will give you an indication of how many serious buyers you’re competing with.
If you’re not competing with any other buyers, take your time to make any further offers – if there are other buyers, the faster you move the better.
Communication is key. When the offer is sitting with the vendor make sure you’re calling the agent constantly until you get an outcome.
If you’ve reached the top of your buying range, make it clear this is your ‘best and final’ offer and if it’s not accepted you will be walking away only if you are prepared to walk away. Never go above your initial buying range. It has become much harder to obtain finance in this market and you don’t want to be stuck with a mortgage that you’ll struggle to pay.
Tip 7: Get it in writing
Once your offer has been accepted, ensure the sale price and all conditions of sale are documented and signed on the contract. There is no such thing as a verbal deal. A deal is not done until both parties have signed the contract and it has been exchanged between both parties. This shows commitment from both sides and now makes the deal legally binding.
A universal tip that applies not only to purchasing property but to any situation is to try not to become too emotional about the process. If you miss out this time, there will always be another great opportunity for you. You will become more experienced with each attempt you make and keep in mind every set back is actually getting you closer to your goal.