Negotiating for property is serious business, but your chances of getting the best possible deal increase significantly when you arm yourself with sound knowledge and tactics.
So you've found 'the one'. That property that ticks every box. You can picture yourself now, making that first cup of coffee in the kitchen.
Unfortunately, so can a few other homebuyers. It's always important to polish your negotiation skills if you want to get an advantage – whether you're buying through private treaty or at auction.
So, here are six tips that will help you beat the competition.
1. Be ready
The most important thing you can do to be a confident negotiator is to have all your finances in order. Be clear about how much you can afford before entering the negotiation, and speak with your bank or mortgage broker to get pre-approval – you should do this before you even start looking, never mind negotiating.
2. Do your research into the property market, and the property you like
A confident negotiation comes from knowledge. You need to understand the true value of the property, and what motivates the other parties also involved in the negotiation.
Start by building a positive relationship with the real estate agent, and ask them about the seller's requirements. Why are they selling? Have they already bought elsewhere? Are they looking for a quick settlement? Is there a particular type of buyer they would prefer to see in their home?
Try to get a gauge of what their price expectations are, but be aware underquoting does happen, especially in markets that move quickly. You could use Domain's home price guide to get an independent perspective of the property's value and potential rental yield, while your mortgage broker will be able to give you the lowdown on the local area.
Make sure this transparency only goes one way though. Don't let the seller or their agent know your true maximum price – otherwise you might find you get pushed beyond your comfort zone.
3. Make the vendors a compelling offer
Auctions are all about the vendor trying to get the best price. As the buyer, you ideally want to purchase without going to auction, so use your insights into the seller's motivation to gain an advantage. Some sellers may be anxious that their property won't attract the right bidders on the day. Others may be keen to sell quickly because they've already committed to their next home. Others may want to sell to someone who’s going to keep the home, rather than knock it down.
First, make sure your finances are pre-approved, you've carried out your building and pest inspections, and your solicitor has checked the conditions of the sale.
Call the real estate agent, or walk into their office with a cheque made out for the deposit amount for your proposed price. The agent will have to call the seller: it's a serious offer.
If the seller refuses your initial offer, make gradual increases, but never go beyond your limit.
If the property is due to go to auction, put an offer on the table that expires at 11pm the night before. You might offer to forego the cooling off period to make the offer even more attractive. It’s a difficult time for real estate agents to attract counter offers, and if it’s a decent offer the vendor may well accept, rather than risk it at auction.
4. Be confident at the property's auction
If you've been unable to secure the property before auction, but it’s the one you’re serious about, then it’s off to auction. First of all, don’t let this be your first auction. Attend four or five auctions beforehand to get a sense of what to expect on the day. Make sure you have your finances, legal advice and inspections in order too.
This is not a time for your heart to rule your head, though. You know your limit. Stick to it. If you don’t trust yourself, get a friend or family member to bid for you.
5. Be prepared to waive certain things when negotiating your property purchase
Negotiation is all about give and take. And there are a few things you may find it easy to give – in order to get the price you want. For example, you can negotiate how long settlement will take, how much of a deposit you will pay, conditions for existing tenants or vacant possession, and any fixtures or inclusions you do or don't want. All of these things may be up for discussion – use them to your advantage if you can.
If you're buying at auction, you need to confirm these details upfront. If you are buying by private treaty, the cooling off period is also up for negotiation. And as long as you're confident with the purchase, reducing or waiving that period can be a powerful motivator for sellers to see things your way.
6. Take emotions out of property purchase
When purchasing a property, it’s vital you take your emotional attachment to the house out of the equation. You need to be able to walk away from a sale if the price is beyond your limit – whether it's at auction or private treaty. Sometimes sellers have a set figure in mind and just won't budge, and that's OK – if it's not meant to be, there will be another home that will suit you better.
If you can stay reasonably detached during negotiations, and act like the sale doesn't mean that much to you, you're also more likely to stay in control.
And if you’re buying with your partner, and you disagree on the property decision, stop. This is one of the biggest decisions you will make together, and you both need to own the final result of your negotiation. It can be a stressful time, so seek advice from a trusted friend or buyer's agent if you need to.
If your bid is accepted you will need to pay a holding deposit immediately – this is typically 10% of the purchase price. You'll then sign a Contract Note and begin the conveyancing process.
And then you can celebrate a successful negotiation and start planning life in your new home.
- Before your start looking at property, get your finance pre-approved.
- Find out why the vendor is selling. What’s their motivation?
- Get a gauge on the price they’d accept.
- Never reveal your hand to the real estate agent.
- If the property is set for auction, put a good offer in the day before.
- Know your price limit at auction – but make a decent offer first.
- Know what you want fixtures and fittings wise, and what you can offer in return.
- Remain emotionally detached – there are plenty of other properties.
- Be prepared to walk away.
Before you start negotiating, you need your home loan pre-approved. Call us on 13 62 27 to discuss the best home loan to suit your needs.