Real estate agents have a wealth of knowledge when it comes to understanding the features of a property or what a suburb has to offer.
But what happens when it comes to questions about price and the figure quoted is way above what you want to pay? You’ll need to negotiate or move on and keep looking.
So how do you beat the agent and get the best deal? We look at some classic strategies as well as the dos and don’ts of negotiating when buying a house.
Tip 1. Use property negatives to bring the price down.
Does the property need maintenance? Put an estimated monetary figure on how much a repair will cost to justify a lower offer. The agent will be sure to explain your request to the owner when giving feedback.
In addition, many buyers will be put off by homes that require work.
This strategy kills two birds with the one stone. Firstly, you’re choosing a property where price is more flexible as the owner knows what work is needed. Secondly, you’ll have less competition from other buyers.
Other negatives you can leverage off are noisy nearby building construction or a train line, traffic congestion at peak times, structural defects on the property, a poorly maintained street or a high maintenance garden.
Tip 2. Everyone loves a good story, so use yours.
When property owners are presented with a lower offer it’s only natural for their defences to come up.
With your offer, having a common, everyday, emotional story of your personal situation helps the vendors relate. This brings down the walls and humanizes the buyer.
Some example stories:
Frist homebuyers that want to start a family and love the property but don’t have much money. Second homebuyers that have large families, looking after elderly relatives nearby and need this particular property. A single parent with kids that love everything about the home.
Once upon a time, the current owners bought the property because they loved what it offered and most likely still have an emotional attachment to it. The owners want to know their home will be in good hands and want to help out someone that’s a battler. Australians love an underdog.
Tip 3. Do your homework on the property.
Due diligence helps you work out if the vendors are asking a fair price for the property. It empowers you to know when to make a buying offer or when to walk away.
This involves looking at:
- Prices for similar properties. For this to work effectively, compare sold properties from a 1.5 km radius around the property you’re interested in that feature a similar land size and property specs.
- Are properties in the area selling quickly (via auction) or do they spend a lot of time on the market via private sale (8 weeks or more)? This determines demand in the marketplace. Higher demand = higher price.
- Why is the vendor selling? You can tailor an offer around the vendor’s future property needs. They may need money quickly or may need a place to live for four months till they finish building their next house. This can get your offer ahead of the others.
- Long time-frames and inactivity create pressure on agents and sellers. Has the real estate agent sold many properties recently? Has the property spent a long time on the market? All this can work in your favour when negotiating terms or price.
Tip 4. Make sure you’re ready to buy.
Have you ever walked into a car dealer and asked to test drive a car? They ask direct questions like ‘are you buying today?’. They qualify you as a buyer or just a window shopper to see whether they should spend time with you or another buyer.
Make sure the agent doesn’t judge you as a window shopper, you want to be taken seriously. Make sure you:
- Have your finance pre-approval in place.
- Know when you want to buy and your move-in date.
- Know what you want from a property.
- Tell the agent you’re interested in the property and want to make an offer.
- Your budget is private, so don’t reveal it to a real estate agent as they’ll be asking you for money later down the track. If they don’t know your top price they will be fearful of pushing your price up during negotiations.
- Don’t let your emotions get in the way. If a property is too expensive, walk away. A buyer’s biggest mistake is not having a plan of retreat if things get out of hand.
- Take the asking price with a grain of salt. In a market where properties are not selling well you would be surprised how low a property price can go.
- Never negotiate verbally, always put offers in writing and ask for a written response from the sellers.
- Starting negotiations too high will make it near impossible to backpedal.
As you can see, there is a lot of angles to negotiating property and it’s normal to feel overwhelmed and nervous during this process.
How long does a negotiation take?
If you’re buying at auction it can be over within in a few minutes of the auction opening. If the auction passes in, face-to-face negotiation could take up to a few hours.
Negotiation via a private written offer could last for two or three days depending on how many buyers there are or how a real estate agent chooses to manage the process.
Real estate agents are trained professionals that close deals every week so it’s wise to seek out help.
Buyers agent’s offer negotiating only services if you find a property they’ll do all the due diligence for you, create a bidding plan and face off with the real estate agent to close a deal.
Assistance in negotiating ensures:
- You don’t overpay for a property.
- You save yourself a lot of time and emotional effort, missing out on properties that you could have purchased.
- A reduction in the risk of buying a capital growth lemon.
The primary role of a real estate agent is to look out for the interest of the seller. A buyer’s agent looks out for the interest of the buyer.
Hopefully, these dos and don’ts of negotiating help you get the best house for the right price. For more info take a look at these four tips to get your offer accepted and our guide to negotiating as a first home buyer.