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Empower Wealth Blog post by Empower Wealth

Making Your Offer Irresistible

Real estate negotiation requires creative thinking in any private sale, pre-auction or post-auction negotiation. Buyers make the mistake of assuming that the vendor solely cares about price. Every vendor cares about price, but most vendors care about a combination of price and terms. In a selling situation where the vendor is relaxed about timing, relaxed about deposit size, relaxed about conditions and relaxed about granting early access – you will generally find that they are relaxed about selling. In other words – they aren’t going to be strongly motivated to sell. We used to deal with the occasional vendor who fit this description – they would hand us the signed authority and the keys to their property but instinctively we knew that they weren’t really selling. They were going to ‘float’ the property on the market and see if we could find a silly buyer who could pay a ridiculous price. That was not the kind of vendor that we really wanted, nor was it the kind of vendor we would like to do business with today as a buyer’s agent. We actually want to find vendors who are genuinely to motivated to sell – whether it be for a fair price or a discounted price.

What we’re really trying to say is that most motivated vendors actually have some kind of restriction associated with the terms which are acceptable to them; whether it be a date of settlement that needs to be met, a certain deposit size that allows them to move forward with their subsequent purchase, or a date by which they know they will have an unconditional contract.

So as a Buyer’s Agent, we are acutely aware of the power of a creative mind when it comes to sealing a deal at a price tag lower than the vendor’s expectation.

A recent negotiation comes to mind…. Our buyer loved the house and the vendors were asking for a long settlement, however the price tag was some $20,000 over our limit. The vendor’s reason for requesting the long settlement was that they hadn’t found their next property and were hoping to have five months to find and buy their subsequent dream house. We sourced an independent rental evaluation of $650pw and then suggested that we offer a 30 day settlement with the offer of renting back to the vendors at a bargain rental price of $500pw for four months in order to give them less grievance with their move, a guaranteed roof over their head, a chunky deposit to use, and a substantial rental discount. Overall, the four months of discounted rental returns only represented $2600, yet the $20K discount meant that the property could become a reality to our buyers. A win-win.

In other instances, we will sometimes offer two offers. One at $x based on a 120 day settlement, and one at $x minus ~3% for a 30 day settlement. It’s a powerful approach for a vendor who is sticking steadfastly to their asking price. If you can offer them their asking price (but perhaps on less attractive terms), but offer them the option to decide, it makes the difference between an obstinate and offended vendor, and one who genuinely has to go away and think. Money does talk – but getting it earlier can talk even louder…. sometimes it means that our buyers get what they want on the terms that they were happy to accommodate – but agents and vendors don’t always know that. This is one reason why it’s important to ask questions first and tell your story last. If you find out what the vendor wants, you can then engineer an irresistible offer to them.

Another recent negotiation we recall was actually reliant on goodwill and emotion. Ordinarily we will tell agents that our buyers are unemotional. We may even tell them that we have another property up our sleeve to offer the client if this one doesn’t go to plan. On this particular occasion though, we were out of bluffs and we had a lovely, emotional buyer who just wanted to secure his new home for he and his daughter. It was Saturday night, 10pm and the listing agent was calling us every fifteen minutes with a negotiation update. The calls were going backwards and forwards and we managed to bridge a gap of more than $50,000…. But we were still some way away. Our final position was $496,000 and the vendor’s ‘final’ position was $510,000. We knew we had no room to move and we also knew that we may have to make a sad phone call to our buyer. In the end, we decided to try to appeal to some sense of emotional concern and we asked the selling agent to tell the vendors that our buyer had fallen in love with their home completely. We detailed all of the aspects he loved, talked about their interior style holding so much appeal to him, mentioned that his daughter couldn’t wait to move in…. and then we left them to have one last think about it. They called back to say that they’d love their home – the home that they had cherished over the years, to go to someone who would love it like they had. Maybe not necessarily a commercial win-win, but an emotional win for them and an exciting break for our buyer. That 10.35pm phone call we made was one of the nicest we’ve had the pleasure of making, and our buyer was very emotional about the outcome.

The last and probably most vital point we’ll make about compelling offers is that of being prepared. For the buyer who has their deposit funds in place, their loan approved and ready to go, their rental manager already determined and their builder sorted to inspect quickly, they are the buyers who can steal the deal with the second highest offer. In many negotiations, we win properties for our buyers just by having the best terms and the least conditions. There are negotiable terms in the contract of sale for example a subject to finance condition can make a difference of anything up to $20,000 – particularly for a vendor who has been burnt by prospective buyer’s purchases not eventuating due to finance hassles. We often get to make the happy call to our buyers to tell them that we were number two but secured it anyway. Don’t let unpreparedness get in the way of a great deal. Sort out your finance now and if you don’t know where to start, talk to a team of professionals who can help you.

On that note, may you and your loved ones enjoy a safe and happy Christmas, and enjoy all that the new year brings. Here is to what is shaping up to be a dynamic and exciting 2013!

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