Top Seven Negotiation Tactics for Spring
With spring “Selling Season” just around the corner, I thought it’d be a good time to revisit some negotiating tactics we need to employ when we’re looking to buy a property in this upcoming season.
The first one is: it’s not all about price. We need to find out what the vendor really wants.
It takes a bit of digging, and it takes asking the right questions, to find out exactly what it is they want because—people are often surprised to learn—that it’s not always just about price.
If there’s a divorce involved, it could be a real motivation to have a short settlement. Or, someone may have a real preference to have the security of an unconditional contract rather than anything that has conditions. In some cases, an unconditional contract with a lower price can beat a higher price with some conditions. Equally, the vendor might be interested in an early release of deposit so they can use the money to afford their next move.
Stephen Covey says it best when he says, “First seek to understand then be understood.”
When it comes to negotiating, you want to do exactly the same thing. Find out what it is that they want so you can create a win/win, and maybe distract them on price in the process.
My second tactic is cash is still king.
If you’ve got your finance pre-approved, you’ve got your deposit lined up ready to go — going into a contract and saying, “No Finance Clause, this is cash, unconditional” — is an unbelievable bargaining chip. Even if you’re buying a private sale, if you buy it under auction conditions, this is very, very enticing. Because what you’re doing is giving the vendor certainty and security, which is something they will value enormously.
So remember: cash is still King.
The other thing to think about, tactic number three, is consider giving a knockout offer.
If you know what the value of property is — not the price, because the price is often the guide the agent gives you —if you know what this value is, based on properties that have sold recently around the area, and you’re going to put an offering, consider putting in a knock out price. Keep the competition at bay —but also: get the vendor’s attention.
I’ve seen, so many times, when people are afraid to do that knock out bid. They wait for the competition to build and, ultimately, they end up paying more than the price they would have done had they done the knock out bid. So know the value and be prepared to make that knock out offer. Again, this might put you in front of the competition.
Now, tactic four, there’s this term: “Smart is dumb and dumb is smart”.
Nobody really ever wants to help a smart alec. Think about it. When someone, say you’ve spoken to recently, “knows everything”… you have very little motivation to help them. Whereas, the person who comes humble authentic and with a curious mind; you just want to jump out of your seat to help them and give them more information.
When it comes to negotiating, it actually is a really bad mistake to come across as smart. You actually want to come across as dumb because then the agent who’s dealing with you, feels more inclined to give you more information. If you’re smart about hearing what they have to say, you might get some key Intel, which will help you craft your offer. You might not have got this, had you gone in with that “superior ego”. For me — smart is dumb and dumb is smart.
The way to remember this is you’ve got two ears and one mouth and you should use them in that proportion when you’re negotiating.
The fifth tactic, for me, is negotiating starts at hello.
As soon as you start talking to an agent, the negotiation has begun. They are sizing you up, they’re asking you qualifying questions, because all they have is to sell their time. They want to work out if you’re a serious buyer first; but then they want to find out as much information as they can to craft the negotiation when it comes to that time.
I know agents who ask people, “Walk through, have a look at the property!” but then they end, stopping and chatting to the kids. Because the kids don’t know what’s going on here. And so he asks them lots of leading questions — are you thinking of moving, and moving schools — and the kids are quite willing to give all the information, and the agent is banking all this for the later negotiating stage.
So remember: as soon as you say hello to the agent, the negotiation has begun.
Experienced people know this — and they know what to reveal and what to conceal.
Now, tactic six, the next thing to think about is: know the metrics of the area.
Work out what the average Days on Market and the average Vendor Discount is in that particular market. If properties have been on the market for a long time, you know you’ve got good leverage in the negotiation. If you can see the market is moving quickly — the Days on Market are short — you understand it’s a seller’s market and so the negotiating position isn’t with you, the buyer.
A confirming indicator is around Vendor Discount. If you can see that they’re taking large Vendor Discounts — the power is in the buyer. Again, if there’s little vendor discount, or if it’s in a strong auction market, it’s going to be zero discounts. In fact, it might even sell for more than the advertised price.
By doing this, you are able to see the strong and healthy markets, and it gives you an idea of exactly what sort of market you’re negotiating in.
My final, seventh, tactic is: have a suitable and viable plan B.
The real estate agent is always wanting to throw at you, “Hey look, just letting you know there’s another buyer in the mix” — that’s negotiating 101 for the agents.
But you often don’t know if that’s true. So if you counter that by saying, “That’s great. I’m still interested in the property; but I also have another property I’m interested in” — you still show that you’re keen, but also that you’re not desperate for the property. See what flushes out.
Equally, depending on the market you’re in, you can say to the agent, “Hey, here’s my offer. Just letting you know, I’ve put two offers in at the moment on two other properties I really like. So whoever gets back to me first is going to be the one that we take.” Again, this gives you a position of strength, provided the market dictates that you can actually do that.
So, as I said, it’s the spring season coming up — and it’s important we are armed with as many negotiating tactics as we can. But it’s also important to understand the real estate agent you’re up against negotiates all day, every day for a living. So if you don’t come prepared, chances are you are going to be outmatched during the negotiation phase.
If you take in mind a couple of these tactics I’ve suggested today, and learn the secrets of a negotiator … they’ll put you in good stead as you come up to this spring “Selling Season”.