Australia in late 2022 is a buyer’s market. As of November 2022, distressed listings across Australia have increased more than 15% since the interest rate rises began in May. Many sellers are under pressure and buyers can afford to be choosy – and negotiate.
In a seller’s market, asking for a considerable discount to an asking price will get you laughed at, but in a buyer’s market, sellers have to be flexible and open to discussions. Don’t hesitate to negotiate to get fair value, as you can use that money elsewhere, like on new furnishings or renovation.
Here are 10 important strategies to apply while negotiating the sale price of a property.
1. Don’t Believe The Sale Price You See
Listed prices can be deceiving. Property prices on listings sometimes offer significant cuts, in hopes of starting a bidding war that leads to high bids. On the other hand, some sellers are quoting a higher price than the market value, as they expect buyers to negotiate on the asking price.
When you are in a buyer’s market, negotiating is key. The thought of negotiating might seem overwhelming, but knowing this tip will make it a bit less daunting.
Get a house you wish to buy inspected. An inspector will tell you if the house has issues you would have to deal with if you purchase the property. The problems might be foundation cracks, heating issues, or cracked and damp walls. After the inspection, you will get a report with problems and repair recommendations. Ask the seller to fix the reported problems or for concessions on the sale price based on how much they would cost. If the report reveals a major issue in the home or you have an inspection contingency on your offer, you can walk out.
2. Closely Monitor Sale Prices In Your Area
Knowing the sale prices for comparable properties in the same area as the home you wish to purchase will give you an upper hand. Compare the current price of your chosen house or apartment with that of previously sold properties with similar features and conditions in the area. It will give you a tentative idea of the possibilities in terms of negotiation. This strategy is better than making an offer 10% less than the asking price. If there is less activity in your desired property market, you will have more room for negotiation.
Remember this, and it will encourage you to bargain on the quoted property price. It is wise to have an appraisal contingency on your offer. If the seller refuses to sell a home for the price it is appraised for, then you can walk out without financial loss. A mortgage broker can get you a property valuation report in most states free of cost.
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3. Strongest Bidder Wins, Not The Highest
To negotiate effectively, buyers should listen to sellers carefully and find out their motivation. Ask the seller why he or she is moving out. The seller might have bought a new home, or might be in a hurry to move. They could be getting a divorce or they may want to move to a location with a better school. Knowing this information will help you negotiate. For example, if they are in a hurry to move, they may have less time to seek the ideal price so you might consider offering less. On the other hand, if they’re moving to find better schools, they may be in a position to be more patient and you would probably need to make an offer closer to their asking price.
It is best to make a detailed offer in writing that includes a solution to the biggest concern for the seller, which might not be the price. It could be the timeline of settlement, flexibility on the closing date or something else.
Your proposal will sound more assertive if you present proof of your capacity to deliver. Sellers are inclined towards those who can project themselves as a reliable option.
4. Get Your Finance In Order
Getting pre-approval for a home loan before submitting an initial offer letter is crucial. An offer with proof of funding will project you as a strong buyer, and you will be less likely to be passed over. You can also negotiate with more confidence knowing how much your lender has agreed to let you borrow, although keep in mind that pre-approvals don’t guarantee final loan approval.
Make sure that you have a very recent pre-approval. When interest rates are rising, even a month-old pre-approval might not be accepted. Keep the money ready to transfer to the sellers without any delays.
5. Look For Properties Taking Longer To Sell
The median time that a property stays on the market increased to 36 days in the three months to October, CoreLogic data shows. It had reached a low of 20 days over the three months to November 2021. When a property stays on the market for more than a month, sellers can become twitchy.
The chances of you landing a good bargain increase the longer a property stays on the market. So while searching for a property, find out how long it has been for sale and plan your strategies accordingly. Finding out why the property hasn’t been sold can give buyers an edge, too. For example, sellers might have quoted an overly high price or poor local infrastructure might be making it less desirable.
6. Upgrading A Property
You can often ask for discounts when buying older properties, as most buyers find properties requiring renovation less attractive. Renovation is challenging because of the cost of building supplies and the difficulty in finding qualified tradies for renovation. But if you are willing to take on these challenges, you can often get a bargain. After purchasing, you can apply for a renovation loan, to cover the costs. Upgrading the property will add value and increase its worth.
7. Add A Personal Touch
Selling a home is an emotional step. Even if you cannot offer more money, you can send a well-written letter while making an offer. It will help your offer stand out among the rest. You could include your reason for buying the property in the letter. If a seller knows your intentions, then he or she might be willing to help you. For example, someone who is selling their family home might be more inclined to sell to a young family looking for their dream home.
8. Walk Away When Necessary
You might encounter a seller that doesn’t want to negotiate on the price of a property. The seller might have many offers or might be too attached to the home to sell it. You might be tempted to throw your budget out the window and increase your bid to stand ahead of other bidders. But be mindful that you would have to take a higher loan to be able to purchase the property. It’s best not to get attached to a specific home too soon and walk away when necessary. This strategy will help you negotiate more effectively and buy a home within your budget.
9. Take Time To Shop Around
In a seller’s market, buyers have to decide quickly on a property, as there are usually many suitors for each property. In a buyer’s market, this is not the case. You can go to the auction, let it pass and then make an offer. If a property slips out of your hand, another suitable property will come onto the market. If property values are expected to keep falling into the next year, you should use the time to search for another property that ticks all the boxes.
10. Pitch Yourself As A Reliable Buyer
When the balance of power swings in favour of buyers, pitch yourself as a serious and reliable buyer because it is attractive to sellers since there can be a lot of uncertainty regarding a buyer’s ability to service a mortgage.
Get Pre-approved And Improve Your Negotiating Position
Having a very recent pre-approval is essential for good negotiating power when you search for your dream house. Don’t worry. Home Loan Experts can help you get pre-approval.
Call us on 1300 889 743 or complete our free assessment form to get in touch with our mortgage brokers now!