How to negotiate a great property deal out there?

Buying a property in a buyer’s market is a lot easier than buying in a seller’s market. With abundant properties, slow-moving sales, and low prices, you can snag a good deal even with rusty negotiation skills. Unfortunately, the Australian property market is not currently a buyer’s paradise. Across the country, prices have been steadily rising and so are the competition, making finding the perfect property at the right price a much bigger challenge. In a seller’s market, like the one Australia is currently experiencing, you’ll need top-notch negotiating skills to secure a good property. Here are eight property negotiation tips that will have you negotiating like a pro, increasing your chances of closing the deal.

 

Do Your Homework

No good property is going to land on your lap,Property Negotiation tips – How to negotiate a great property deal out there – Buyers Advocate Melbourne services finding and winning a good property requires doing your homework. First, know what you’re looking for. Are you looking for a single, detached family home in a good neighbourhood, or are you searching for an investment property in an up-and-coming area? What are your must-haves versus your nice-to-haves? Consider whether you’re willing to take on a property that needs renovations or if you’re looking for a move-in ready home. Doing a detailed inventory of what you’re looking for before you even start your search will help you zero in on properties that best suit your needs and helps you save more time.

Once you know the perimeters for your search, it’s time to canvass the market. Look for sales history and investigate selling prices for similar properties in the area over the past six months. It’s important to look beyond asking price to also include purchase price because the asking price represents a rough estimate on what the seller is looking for whereas the purchase price represents what the market actually warrants in price. This way you will have an understanding on what’s happening in the market and whether your budget fits the property you are looking for. Searching the listings for comparables can be time-consuming, but all that research will pay off. Alternatively, if you don’t have the time or inclination to do it yourself, you can purchase property data research from research firms or consider hiring a professional buyers agent who can access more detailed sales information, which isn’t available to the general public.

When searching for the right property, do not stay away from properties that are going for auctions.

Many make the mistakes of missing out on a good property purely because they are afraid of going through the auction process. Keep in mind that properties that have an auction campaign can also be purchase prior to the auction. But if you are one that actually likes the adrenaline rush that an auction brings, then remember that auction and private negotiation will require different tactics. At an auction, it’s key that you understand the selling terms as well as have a firm price point in mind. Unlike traditional offers, an auction involves crowd control strategy, possible intimidation tactics and depending on the situation, it could be an auction where you make repeated offers without the fear of offending the seller. Private sales are the opposite. You can’t keep throwing offers to the agent but there is a cooling off period as opposed to an auction, where as soon as the hammer comes down, you are unconditional.

* Suggested: Tips for Buying at Auction (Part 1 – 4)

 

Avoid Becoming Emotional

Once you’ve identified potential properties and done your homework, it’s time to begin negotiating the sale. One of the most important qualities of a strong negotiator is the ability to set aside emotions during negotiation. Does that house remind you of a childhood home? Have you already started imagining yourself living at the property, surrounding by family and friends? Emotions are what spur buyers to make offers outside their comfort zone and above the market value. Try to avoid becoming emotionally invested in a property before you’ve actually purchased it. Most real estate agents are experienced enough to pick on these and if they know that you are already imagining what you can do with the property, they are going to be tough on the price. By reigning in emotions and relying instead on strategy, you can increase your chances of landing a property at a price you can live with.

Having said that, being unemotional about your desired property, especially if it is going to be a family home can be difficult. So, one tip for you is to know your limit before you walk into a property negotiation. What is the maximum price you are willing to offer? Write it down and the underline it. Don’t let yourself get so caught up in offers and counteroffers that you go beyond this price. Set it in stone so that you’re not tempted to one-up it during negotiations. If things get heated up (and it can happen quite often), take a step back and look at your limit. If you are competitive by nature, it is easier to get caught up in a bidding war but always remember your end goal. Do you want to buy it at a premium or do you want to buy it at a fair value? Both emotions and a competitive streak can color your judgment during negotiations if you let them.

 

Evaluate the Seller’s Motivation

While it’s true that emotion can be a buyer’s downfall, buyers aren’t the only ones who bring emotion to the table. Understanding what is motivating the seller can help you strategise your offer.

First, see if you can determine why the seller is selling. Although the real estate agent seem to be your enemy at times, do not forget that they are the conduit between you and the seller and they hold a wealth of information on the seller. Be nice to the agents and in return, they might tell you something that would help you in your offer. Ask questions such as: Does the seller have another property purchased? If so, is it local or far away? For sellers who are paying for two properties, particularly when they are far away from one another, the motivation to sell quickly can be high. Is it a home or an investment? Owner occupiers are more likely to be attached to the sentimental value of their properties, whereas investors are more business-minded. Uncovering as much as you can about what is motivating the seller can arm you with the negotiating tools needed to close the deal.

Second, take stock of the situation. How long has the property been on the market? Was it passed in at auction before? If it’s a recent listing, the seller may remain firm on the price for a while. Conversely, if a property has been on the market for a while, they may be looking (quite desperately) for a reasonable offer. Unfortunately, asset grade properties across major cities like Melbourne, Sydney and now Brisbane are moving quickly right now so finding one that hasn’t been snapped up may take some digging.

 

Know Your Competition

Sizing up the competition helps you determine what kind of offer to start with. Determine how many offers have already been received and how much are the offers can add significant value to your property negotiation strategy. Once again, this can only be done if you have a healthy relationship with the selling agent. One of our Buyers Agent once said that, the reason he won the property for our client was because their offer was a mere $500 more and this was thanks to a text that he received prior to the dateline. If you don’t have a professional buyer’s agent, you might have to do some snooping to find out and ask the right questions. Ask the agent for the number of contract requests they have had or how well did the open inspections performed. Alternately, you can ask whether there have been previous pest and building inspections done, which will tell you how many serious offers there have been before yours.

 

Find the Sweet Spot

When making that all-important first offer, it’s important to find the sweet spot. If you go in too high, you risk committing more money than was necessary to land the property. If your offer is much too low, you risk offending the seller.

The key is to make an offer that is under the market value but not by so much that it’s insulting.

Here’s where that homework and all the communication comes in handy.With a firm grasp on what are competitive prices for similar properties coupled with an understanding on your competitors, you’ll be able to come up with a good starting number for your first offer.

 

Negotiate Counteroffers

In a seller’s market, counteroffers are almost inevitable. Few sellers jump at the first offer on the table, so be prepared for a counteroffer. When you get the counteroffer back, take some time to evaluate the offer instead of firing back an immediate counter.

To extend a second and subsequent offers, you need to up the ante. Usually that means upping your offering price. One of our Buyers Agent says that his commonly used negotiation trick is to not end with a rounded number. Always end with a unique number, for example; $543,200, to give an impression to the agent that you are pushing your limits. However, as you counter, consider other details that you can concede as well. Is the owner looking for a quick sale? Being open to a short settlement can be attractive for such sellers. By comparison, a seller who is still living in the property may appreciate a more distant closing date. A big part of negotiation is creating a win-win feeling for the buyer and the seller. Potentially, with a few concessions, the seller can become comfortable with the sale.

 

Consider a Third Party

If you’re one who easily caught up in emotion and don’t think you would be able to bid at the auction objectively, perhaps you should ask a stoic family member or friend to help you. Give them a maximum bid and make sure you stand away from them to avoid any chances that you would interfere halfway through the auction. If you don’t know anyone who can do that or you would much prefer someone with an established record in the art of negotiation, why not engage a professional buyer’s agent? There’s no shame in calling in the experts and very often this option would yield you a much better result due to their years of experience and the extensive due diligence conducted. Make sure you engage an independent buyer’s agent and always ask how they are getting paid. A good buyer’s agent is paid on a flat fee and they do not receive any commissions from any third parties such as, development companies. This will ensure that they are working with your best interest at heart.

Furthermore good buyers agent often get “off market” opportunities that the general public don’t get to see – meaning some seller don’t want to take the ‘public’ option of selling and instead, they sell discreetly via the selling agent who gets in contact with potential buyers and buyers agents who they think might be interested in the property.

 

Be Prepared to Walk Away

In any negotiation, you need to be prepared to walk away. If you get too caught up in winning the deal, you’re likely to pay more than is actually necessary. Always keep in mind that there are other properties available. Having backup properties already in mind can be a great strategy. Not only does it lessen the sting of a lost deal, it also gives you confidence that there are other potentials waiting in the wings should this deal fall through.

Negotiating a property deal can be nerve wracking. However, with the proper preparation and the right attitude, anyone can be a successful negotiator. So, to summaries, inventory your needs as well as the market before you make an offer. Once your offer is on the table, keep your emotions in check and approach the deal impartially. If you don’t have success on your first property, look at it as a lesson in learning the market value and an opportunity to land an even better property down the road. With each offer, you can hone your negotiating skills and increase your chances of finding that perfect property at the right price. Lastly, if you don’t have the confidence to do it yourself then engage a professional buyers agent.

You can also book a free one hour appointment with us. It’s a no-obligation appointment and we are more than happy to be able to assist you in your property journey. Simply fill in the form at the top right corner to get started. Alternatively, you can also join our Free Property Webinar to learn about investing in property and more!