As a home buyer, negotiating for a property is one of the most crucial parts of the property purchase process. So, you need to have a great strategy for negotiating.
The best strategy for negotiating is one that fits your goals and desires but respects those of the seller as well. Just because your home is likely to be one of the most expensive assets that you will ever own, doesn’t mean you can’t get a good deal.
Here are six property negotiation tips that may be helpful when it comes to negotiating the price for the property you want:
1. Get your finances in order
There’s more to knowing when and how to make an offer than being a steely-eyed Stallone. In fact, most of the hard work in negotiating is undertaken before you even speak to the vendor.
First of all, you need to have all your finances in order to know clearly how much you can afford before entering the negotiation. With the help of mortgage brokers, you could get pre-approved for a home loan before you start looking for the property.
You can contact us on 1300 889 743 or enquire online and one of our mortgage brokers will help you get pre-approved.
2. Start looking for the right property.
You can start searching for the right property with the help of various sites. Once you’ve found a handful of potential dream homes, you’ll want to dig a little deeper. There’s a difference between buying something in a store and buying it online.
There are many resources on the web that provide various details such as how long the property has been on the market, how many previous owners/tenants there have been and how much the property has sold for in the past.
You can also compare the sale price of similar properties in the area over the last six months, so by comparing sales, it can help you better value a property. For more tips on how to value a property, check out this page.
Another tip is to ask the agent for the contract of sale and then look at the title search which is included in the contract. If the owners’ mortgage is with a specialist lender, then they may well be in financial trouble. All of a sudden, you’ve got an excellent idea of how desperate the vendor is to sell.
Actually look at the property
It sounds obvious that one should tour a property before buying it, but many people make up their mind about a home before they even step in the door!
Start venturing out to these properties and sit outside during the inspections to see how many people go through. If you see plenty of people, it means you may have a fight on your hands with other potential buyers. You’ll need to act fast!
3. Negotiating with the real estate agent
Whether there’s a good agent or a bad agent, it’s usually worth mentioning that you are considering making an offer on another property. In this way, you’re using their own tactic against them. A good agent will usually follow up with a bunch of questions, so if you’re bluffing, make sure you get your story straight!
You could also ask some specific questions to the agents such as the reason why the property is for sale, how long the property has been for sale, and more.
Once you’ve agreed on a price, a good agent will often pressure you to sign and pay a deposit right away out of fear that you’ll back out of the sale. They may also want to prevent you from doing proper due diligence because there might be something wrong with the property.
Reassure the agent/vendor that you are proceeding with the purchase but that you never exchange contracts until you have formal loan approval and have organised for proper building, Strata and pest inspections.
4. Not becoming emotionally attached to the property
It’s important to have the power to walk away when the price or other conditions aren’t right for the sale to happen.
- Setting yourself a budget and sticking to it: Financially, you need to be able to afford to pay off the loan.
- Keeping your options open by making offers on 3 or 4 other potential properties: This is not only so you can be fully prepared to jump ship just in case the current deal goes stale, but so the vendor knows you are genuinely looking at other properties. If the property has already been on sale for a while, they may be willing to drop the price so they don’t lose you as the buyer.
- Not becoming emotionally attached to the property: this goes hand-in-hand with number two. You have to try to play it cool, even if it is the house you want to spend the rest of your life in.
5. Making the right offer
Once your finances are pre-approved and you’ve carried out various inspections, make sure your solicitor has looked over the terms of the sale.
Let the real estate agent know that you’re serious about buying by putting your offer by writing a cheque for the deposit amount for your proposed price. For example, you can offer them $100,000 upfront as their deposit to buy the property.
Traditionally, the vendor cannot touch this money until settlement. A lot of vendors will value the flexibility you’re providing them in relation to the settlement date and the size of the deposit and will be more likely to accept your offer.
However, if the seller refuses, slightly increase your offer, but keep in mind to never exceed your own limits.
6. Negotiating at an auction
Firstly, you need to research how auctions work.
Go to as many auctions as possible so you can see how they work. More often than not, you’ll find they’re not as daunting as you think: the hyped-up drama of auction reality shows doesn’t help!
Try to be the first one at the auction and see how many people are registering. If there are only 10 to 12 people, the rule of not being the first bidder doesn’t always hold water in these situations. You’re better off bidding first and trying to scare the others off.
There’s a lot of advice out there on how to win at an auction. Ultimately though, it’s whoever bids the most right? So you should see it more as an internal process of knowing your limit and keeping your nerves in check.
You should vary the amounts you are bidding depending on the location of the property. A $1,000,000 plus property in a prime location will require you to get on the front foot early and make a strong bid. You need to come across as more of a player than if you were looking to buy a property that you know you could easily afford.
Occasionally, there’ll be somebody with deep pockets at the auction, throwing huge bids out like nobody’s business. Remember, know your limit and stay cool. If need be, let them win. There are other properties out there. Don’t counter insanity with more insanity.
Some states allow the vendor to place a bid. Guess what? The vendor can’t win their own auction. So if you are winning and everyone else has stopped and then the agent places a vendor bid, don’t outbid it. Let the property ‘pass in’ and then negotiate.
Passing in means the property failed to reach the vendor’s price, which means the highest bidder has first crack at negotiating one on one. If this is you, then you are in a stronger position than you were during the auction. Good for you!
The agent knows that if they don’t sell it that day, there’s a good chance it will not sell at all. Take this opportunity to be a tough negotiator! Keep asking them to drop their price and don’t budge on yours.
Keep saying, “Nobody else out there is willing to pay as much as I am; we’ve seen that today. And that’s because the owner has an unrealistic price. So unless they can come down to meet the market, then I’ll just have to walk away.”
Looking for a home loan?
If you need help with your home purchase process, please fill this free assessment form or call us on 1300 889 743 and one of our mortgage brokers will get in touch with you.