With the number of homes for sale 20% below the five-year average, buyers face a tough negotiating environment..
The latest data suggests home prices are now rising by more than 1% every month – in October the mid-tier actually rose 1.4% – so buyers who’ve set their heart on their next property need to be strategic when negotiating to win the deal.
Significantly, auction clearance rates show that almost a third of properties fail to sell under the hammer. When a property passes in, the agent begins to negotiate directly with the highest bidders.
To be successful as a buyer, you must present an offer that’s not only financially compelling but gives the seller certainty and convenience.
The quality of your engagement with the agent is also important. Ensure the agent knows you have your finance approved and you’re ready to strike a deal. This positions you as a serious buyer rather than someone who may waiver and withdraw at a critical time.
A cautious initial bid risks outright rejection. You won’t have weeks or even days to slowly increase your offer because another party is likely to swoop in.
Here are seven tips for successfully negotiating a deal. Nothing is guaranteed in life, but you need to give yourself the best possible chance to buy the home of your dreams.
Set the tone – Tell the seller’s agent you have pre-approved finance, and you are serious about the purchase. You’d be surprised at how many so-called interest parties are not committed. Sellers assume most potential buyers are considering other properties, too.
Offer strategy – Don’t bid in round numbers, which is what most people do. Instead of saying you’ll pay $1m, offer $1.01m. This gets you just ahead of any offer that hits the $1m threshold.
Go hard – In today’s tight market, low-ball offers won’t cut it. One strategy is to put your strongest number on the table. It will give everyone clarity of your position. If the offer is not accepted, you can move on. This approach saves you time and energy.
Escalation tactic – Alternatively, make an offer and tell the agent you’ll increase it incrementally up to a ceiling amount if other parties make higher offers. This is a good way to stay in the game, and it means you don’t necessarily max-out your spending power.
Personalise the deal – Some buyers have had success by writing personal letters to the owner to show their authenticity. The letter will often cite their favourite features of the home and might state, for example, that they intend to raise a family there.
Settlement period – Work with the seller’s agent to find an attractive settlement period. This will often make you a frontrunner if there are competing parties.
The standard timeframe is six weeks, but it’s usually possible to compress the settlement to four weeks or spin it out beyond 12 weeks.
Rent-back period – If the seller wants additional time to find their next home, you can help by offering to rent the property back to them for a set period. This requires additional legal paperwork to protect your rights. You’ll also need to have somewhere to live. Being able to offer this incentive really does depend on your own circumstances.