Seven Ways To Jeopardise A Deal
So one of the things that you should always consider when you are buying a property is that it really comes down to four parts when you are doing a deal. You got to Clarify what you are after; you got to go and Find the properties whether they are off-market or on-market; you got to Assess the property that you found against the criteria that you clarify at the beginning and then the last part is, you got to Negotiate a deal. So I thought it would be a fun way today to talk about seven ways that you can ruin or jeopardise the deal.
The first one for me is assuming that the agent actually works for the buyer. That’s the No.1 way that you can jeopardise the deal because ultimately, the real estate agent number one job is to try to get a premium outcome for their client which is the seller. But if you’re the buyer and you think that the agent is working for your best interest, you will fall prey to underquoting where they put a very low bait-price to get you involved. But ultimately you are going to spend your time, your emotional energy, you might get a building and pest inspection done, you might get a solicitor to review the contract. But if you think that the agent is working for you, you might be duped into thinking that you are actually in the running when you’re not. And you might waste all those resources. An agent will often say, “Hey, you know, there’s actually no other people who are interested in this property”. When in fact, that’s just a technique that they are trying to do to get everyone think that no one is interested and then, maybe they turn up on the day in a competing scenario and find out that there are more than one person which will ultimately serve the agent’s goal to get the premium price for the seller. So No.1 way to jeopardise the deal is to think that the agent is your friend and he/she is working in your best interest.
The other way that you can break a deal is to play down your interest in the property. By that I mean you generally don’t want to overplay your cards, but it’s actually possible to underplay it. For example, you talk to the agent, not giving them very much indication that you are interested. When they actually get another buyer or a scenario when there’s an offer in place that the vendor is willing to accept, they will have to work the phone pretty quickly and pretty swiftly to try and talk to the other interested buyer to see if they are interested in putting in an offer. But if you’ve given them no indication of interest and whatsoever, they probably won’t call you and then you won’t find out until it’s too late down the track that the property had been sold and you’ve missed out on the deal.
Another way to jeopardise the deal is to get the vendor offside, and typical way to do this is to put in an excruciatingly low offer that is no way near value in the marketplace. The agent is compelled to tell the vendor about it but they are not going to take it seriously, and in fact, they are not going to take you seriously which is not in your best interest. The other thing that you can do is in a seller’s market, you can date stamp an offer. My offer is good until 6 pm tonight for example but unfortunately when the seller has multiple buyers and you said, “If I don’t get the deal done by 6 pm tonight, I am not interested.” They might sell it tomorrow or the next day and literally, take you at your word that you are not interested where in fact, that’s actually a negotiating tactic for you. So it’s important that you don’t overplay that and you don’t get the vendor offside too early in the process.
Another way you can jeopardise the deal is to think that price is the only thing that matters. I’ve missed properties where I’ve been the highest price but the conditions weren’t suitable, and they took the lower price. So for example, if someone offers an unconditional deal because yours has got conditions that may be more appealing to you. Or maybe someone is committed to another property, and they needed an early release of the deposit, or they need a short settlement or a long settlement or they may need to when they settle, they want to rent the property back. These are all the types of things that you can create a win-win situation and deflect the attention away from price.
But if you think that price is the only thing in negotiation that can undoubtedly jeopardise a deal.
Another way is to be really ignorant of the seller’s situation. You don’t do any due diligence, you don’t find out what the vendor’s motivation is, you don’t work out if there is any groups that have had a look through or any other offers that have been made. You haven’t asked the agent if there is any skeleton in the closet here in this property and is there anything you should know about. You’ve just gone in blind, and unfortunately, that could jeopardise it for the wrong reason. You might buy a property that has got all sort of things wrong with it, or you might miss some crucial form of information that would help you get the deal over the line. So being ignorant of the seller’s situation is definitely a way to jeopardise the deal.
Another way is to wear your heart on your sleeve. This can happen on the positive and the negative. If you fall in love with the property and there’s no escaping the fact that you just want this property, you’ve just lost your negotiation posture. The agent is going to see that and they are going to use that to their advantage. But also, you may find on the negative, you get frustrated with the process, and you become flustered, and make decisions at an emotional state which might not serve you. Or you might agree on a deal which in hindsight, isn’t that much of a great deal at all. So it’s important to make sure that you keep your emotions in check and also, as a part of that, to not suggest that you are absolutely in a hurry to get the deal done. Again, as the agent sniffs that and knows that that is what motivating you, all of your negotiation postures will get out of the window at that point in time. It’s crucial that you don’t wear your heart on your sleeve.
And the final way to jeopardise a deal is to celebrate way too early. I’ve seen so many people who think they’ve got a deal done, usually based on a verbal feedback from an agent only to realise later that they were gazumped or another offer came along that was better, and they were caught flat-footed. So my view is, verbal means nothing. It is something that you can get excited about, but it’s not enough to cause you to get a mental high five and start celebrating early because until you see it in writing, the deal is not done. The good news is, is when the deal is actually done, that’s when you can start to celebrate so don’t celebrate too early.
So there are a few ways when you can jeopardise a deal and it’s important to understand that negotiation is a bit like riding a bike. When you’re learning, early on, chances are you will fall off a few times while you are trying to get that experience but with real estate, getting that experience can be very costly because not only can you overpay for a property, but for a lot of people they’ve got a mortgage for 25 – 40 years so you’re actually paying interest on that overpaying as well. So in my view, to make sure that you don’t jeopardise a deal, it’s always good to get someone involved who has experience with negotiating. Whether that is a friend or a relative who you can rely on or perhaps, get some professional advice to make sure that you get the very best deal when you are negotiating your next property purchase.