Negotiation tips

Was just reading an article on property negotiating and I thought the points/strategy/approach was really good. Others might like it too. Article below:

1. Be sure of your position: It’s always wise to negotiate from a position of strength. So before you make an offer or even start talking to the real estate agent or vendor about purchasing a property, do your research to make sure it is not only the right property for your needs and objectives, but to find out what the right purchase price will be, given current market conditions.

To find out this most important fact, research the recent sale prices of comparable properties in the same suburb and work out growth projections for the suburb over the period of time you plan to hold the property. You might even want to go so far as to have the property professionally valued.

In addition to finding out the right price for the property you intend to purchase, make sure that you are financially situated to take advantage of the deal quickly. To do this, talk to us about getting your finance pre-approved and line up your team of professionals before you begin. Be ready for pest and building inspections, do your valuation and make sure you can include the deposit cheque with your offer.

If you do your homework properly, it will give you a solid position from which to make an offer and negotiate the right price. Even if you’re forced to compete in an auction for the property you want, knowing your position and upper limit beforehand will help you bid decisively to come out on top at the end of the auction process – and remember, coming out on top means securing the property at the right price, not at all costs!

2. Assess the seller’s situation: Finding a vendor who is willing to negotiate on price isn’t always easy. They tend to set a price that satisfies their personal objectives instead of allowing the market to set the price. Discovering as much about the vendor as you can will help you decide if attempting to negotiate the price you want to pay for the property is worth your time and effort. If you can find a vendor who really needs to sell, then you will have more bargaining power and may get a better price. A good tip is to try and find out how many other offers have been made.
Here’s some questions to ask that will help you track down vendors that need to sell:

• Why is the vendor selling?
• Have they already purchased another property?
• How long has it been on the market?
• Has the property been passed in at auction previously?

3. Don’t be intimidated: Always have an upper price limit in mind before you begin negotiations. Your objective is to negotiate a price as far below this limit as you can.

If you do your research properly, you should be able to determine the right price and enter into your negotiations with full confidence. If you have your finances in place, there is no reason you should be intimidated by real estate agents and vendors quoting higher prices than you are prepared to pay. Use the evidence you have gathered in your research to persuade them that your offer is likely to be the best they’ll receive, then sweeten the deal by meeting their settlement terms. Show them you are serious and they will react accordingly.

4. Control your emotions:Emotions play a big part in every property transaction. They are also the number one reason why people pay too much for a property. That’s because finding your dream home is never easy. The more desperate you are to secure a property, the higher the price you will pay.

If you only choose one property to pursue, it is more likely that you will fixate on acquiring that property at all costs – and risk paying too much. This is true for all types of property purchases, whether you are buying to become an owner occupier or an investor.

Have another property as a potential back up, so that you can negotiate objectively on the property you prefer. You can use this back-up property to give you more negotiating power – if the real estate agent seems unlikely to field offers before the auction, or the vendor seems set on an unrealistic price, you can simply say to them “I have a more viable option to pursue” – the thought of losing a potential purchaser will make them more open to negotiations.

5. Be prepared to walk away: If you can’t close the deal for the price you want to pay, leave your offer on the table then sit back and wait. There is a good chance the vendor will come back to you to negotiate further, particularly if no other offers meet their expectations.

Time can be a great negotiating tool, so be patient and wait for the agent to chase you. They may chase you to bring you back to the negotiating table, or to get you to attend the auction. Either way, you may get a second chance at securing the property – but make sure you hold firm on your price limit.

From an investor’s point of view, missing out on a property is better than paying too much. If you’re shopping for your dream home, however, it might not be so easy to take this attitude. You’ll need to be realistic about your budget and what you can really afford to pay.



Would love to hear from others tips they have!

 

Nice post Leo, I was viewing a property about 4-5 weeks ago, I couldn't make the open and had a viewing with the agent later in the day. The property has been on the market for at least 6 weeks, I was non committal at first when the agent asked if I was interested.
The agent then said that she had other offers.
I never made an offer and 4 weeks later the property is still for sale with open homes each weekend.
It would be interesting to know why these multiple offers never went anywhere and if they ever existed in the first place. Maybe they were just very low ball offers.

 

Hi @HUGH72,

If your still interested why don't you make an offer? Its been on the market for awhile so they may be more willing now to negotiate on it. Its possible the multiple offers comment was just a tactic. Do you know how much the current owners paid for the property?

 

Either they were made up offers or the offers were below what the vendor wanted.

 

Yeah I agree. If I was interested in this place I would just make an offer and start the negotiations.

 

The worst they can say is no

 

I made an offer on a property about 2 months ago, it was advertised for 430k so i offered 430k with view to get a building inspection that following Monday.
This was in Newcastle NSW on a Saturday open day.
The woman real estate agent was less than impressed."Offers over 430k "! She snapped back .
I said it says offers over 430k so im offering 430k i said.
She already had my name and number on the form coming in the door.
She then completely ignored me so i left.
I just forgot all about the property and looking at others until last monday she calls me and says "sorry i havent got back to you but your iffer has been accepted"
I told her sorry im not interested as it was on Saturday June 6th and to tell you the truth I have found better and truthfully i had forgotten the property.

 

Y man I agree with the unconditional offers. As you said, if you know finance is not going to be a problem and you really want an advantage, offer unconditional. I have done that in the past but I usually make sure the offer is less and to my liking. But I play up the factor that Im going to buy it for certain.

Tell you another way you can use Band P that you don't often hear about. If what comes back is really small stuff, go unconditional PLUS let them know of all the issues in Band P but you are happy to take the bill yourself! It works

 

2. Doing a building / pest first and THEN negotiate. You have solid evidence to talk down the price. (Obviously this then means you don't buy at auctions)

Do you think this is ok?
An agent could use this against you by knowing you have paid the $500 or so for an inspection so knows you wont go down in price?

 

It could work both ways as I see it.

 

I think relationship with the agent can be as important aswell. At the end of the day, we are all human beings (hopefully all of us ) if this one doesn't go through, the agent would know what you are looking for and keep you in the loop with what comes on etc.

Also the point about knowing where you stand is so important. There is so much info out there about sold properties that eveyone can access and use

 

You'd be surprised what people blurt out when they feel comfortable with you (Especially REA).

Last purchase i spent 10 mins talking to the agent about his car ( not a common car in aus) and later slipped in so what's the best offer at the moment? Surprisingly the agent slipped it out and it was below what I was planning to offer.

Also depending on the market (not Sydney at the moment) but take side on who's market it is.
If its on your side get aggressive (dont worry about the REA - they understand where you come and good ones are usually trained in the same way - you wont offend them)

Same purchase as above the offer place (1k over the next offer) was take to owners who wanted a think once i said it was firm. Called back next morning and adviced i will be shaving $500 off if not accepted by midday. Ended up having the contract signed at 11:50 AM.

I guess same could be used vice versa if sellers market

 

I would have to agree. Sometimes the REAs that are really switched on, they know how to 'let things out' which is really a tactic they use in some cases.

But I definitely agree I have come across too many REAs where at the end of the conversation I find I'm asking myself "just who do these guys work for...?"

 

Ohh don't get me wrong, that's a textbook statement I've made (cant remember if it was uni or sales training where i learn't that). So REAs would also use that against you as well. Just need to evaluate the situation. In my scenario i offered 3-4k under what i planned too.

 

I find that if i offer more than everybody else i tend to be successful in buying. Works every time

 

Very interesting, I will try that one day

 

@OC1 mate do you just accept a slghtly smaller margin then, but as long as its still worthwhile? I guess then if someone is offering a ridiculous price you would just walk away.

 

ive seen times where buyers who offer the most aren't successful in buying because they couldn't match the more vendor suited conditions that a person 5k below them has offered