You’ve found your ideal home, and now you’re wondering how to express your interest without sounding as if money’s no object.
There’s an art to negotiation in the property business. For inexperienced buyers, it’s easy to forget there are likely other parties at the table. You can bid low, stay low and bluff but, like poker, you can over-play your hand and lose the pot.
There’s always a risk to playing hardball. While a few succeed, many more have missed out on the home of their dreams for what amounted to a small percentage of the asking price or because they were determined to
The key to negotiation is not to “beat” the vendor and get the property. Instead, you should think strategically about how you’ll convince the owner to accept the offer you believe represents fair value.
Here’s a great process that’ll put you in the best position to negotiate and win that dream property:
1.) Research is the critical first step: Do your homework on your suburb and the style of property you’re interested in. Ignore media stories about the “Australian market” which is too general. You’ll quickly discover if your area is selling fast and rising in value or a little quieter. It’s best to approach local agents to get a reality check. This should temper your approach so you can negotiate from a position of market knowledge.
2.) Psychology of negotiation: Engage with the selling agent of a property you like and get on good terms with them so they understand you are genuine. Find out the motivation or reason for why owner has decided to sell. You’ll discover whether it’s a distressed sale, if the vendor wants a quick sale or if they’re no rush. Don’t be afraid to ask these questions as the answer can influence your strategy.
3.) Attend Open Houses and inspections: It does no harm to see the house multiple times, but you should pay attention to the number of people coming through the property and the comments they make. This will give you a sense of the property’s current desirability.
4.) Get building and pest inspections: These will either give you peace of mind, or highlight issues that might rule out the property or present an opportunity to bargain.
5.) Be respectful : Lowball offers can insult both the agent and the vendor and make them reluctant to deal with you. If you take this approach, don’t be surprised if you don’t get a return call and invitation to counter if another offer comes in.
6.) Bid before the auction: Don’t be afraid to make an offer before the property goes under the hammer. It should be time-limited, otherwise the vendor might sit on it. Even if the agent says it’s on the low side, they are legally obliged to pass it on to the vendor. They agent will view your offer as an opening gambit and, so long as it’s in the ballpark, they will work with you to find a compromise to meet everyone’s expectation. You should avoid starting so low as to rule yourself out but retain financial headroom to negotiate up.
7.) Stick to your budget: If there’s more than one other party expressing an interest in the property, then the price will likely climb. Whatever you do, don’t go beyond what you can afford. There are serious implications down the track if you do as you may not be able to get finance to follow through on the purchase.
8.) Don’t get emotional: Even if your spouse wants the property, take emotion out of the deal. Stay calm and use your research on the market to serve as your guide. Always be prepared to walk away.
9.) Special conditions: Negotiation is not just about price. Sometimes, the vendor will put value on being able to close a quick deal, or even stretch it out so they have time to find their next home. Talk to the agent about what else might motivate the vendor.
10.) Consider a buyer’s agent: Negotiation and even bidding at auction isn’t for everyone. If that’s you, a buyer’s agent can help you secure your ideal property, or represent you at auction. They have vast experience of these situations and can represent significant value. Expect to pay between 1-2% commission for their services.