How to negotiate the best property price
Negotiating the best property price isn’t a matter of swindling a seller. It’s about doing your homework, knowing what you want, knowing the market and making sensible offers.
When you are buying property, getting the best price can mean the difference between being able to afford it and having to settle for second best. And, of course, a purchaser is often negotiating with a seasoned professional, so any time spent brushing up on negotiating skills is well spent.
But we’re getting ahead of ourselves. For a first class property price negotiation, the homework starts well before you even let the real estate agent know you are interested.
The first thing to do, is get a good understanding of your requirements and circumstances. Aside from the location and type of house you are looking for, this understanding involves finance, of course.
One of the first things a real estate agent will want to know is if a prospective purchaser will be borrowing to finance the property, and how much they are looking to borrow. If someone is relying on finance as part of the property purchase process, it is crucial that they have a home loan pre-approval in place, because if they don’t have a pre-approval, it doesn’t put them in a strong negotiating position when compared to the rest of the competition.
Aside from meaning that when you do eventually make an offer it will be taken seriously by the seller or their agent, having finance sorted out means that you can be sure of what your stamp duty and associated costs are go to be, and exactly what price range you can consider.
With the help of a Buyers Agent, you can start to work out what an offer range might be, and then it’s just a matter of ascertaining the market. Ultimately, this means doing lots and lots of research – seeing the prices other similar properties are listed on the market, checking recent sell prices for other properties that fit the criteria. Comparing as much as much as possible, so that you’re not paying too much when the time comes.
A Buyers Agent can initially start looking at online resources such as realestate.com.au, Domain or RP Data reports. The reports can provide a little more insight into properties that have sold, and background on the circumstances and situations leading up to a property coming on the market, how long they’ve been on the market and whether the vendor has switched real estate agents. Above all else, the best thing a prospective buyer can do is get out and look at properties, and speak to the real estate agents to build contacts.
It is common for Buyers Agent to inspect properties and go to auctions just to keep in touch with the area, to see what the market is doing. If a Buyers Agent attends an auction and there was a lot of hype around the property, but then they find that there was really only one person interested in bidding, it tells a different story.
Once you have your finance sorted and you’ve found that special property, get the building and pest inspections done as soon as you can so that if you do make an offer, you are prepared to move quickly on the property. This can give you the edge on your competitors.
If you have your homework done – your due diligence reports and finance – you know exactly the position you’re in and you’re ready to go, and letting the real estate agent and vendor know that is actually a good thing. A real estate agent wants to look for all those signs to see who is the most serious buyer. So being able to make an offer, possibly with no cooling off, will put you ahead of anyone else, because the agent knows that you’re going to start talking about dollars and, once the parties agree, it’s a done deal.
Finally, it’s time to talk dollars, and you are well armed by the time you reach this point. Most real estate agents will make buying guides available at inspections, so you will have a good idea of the vendor’s expectations; you will have a certain budget in mind because your finance is locked in; and you will have a good idea of the value of the property from all the preparation you have done. If you are still unsure at this stage, you can have a professional run a valuation report or engage a Buyers Agent.
So what should you offer? Seasoned professionals tend not to start too low because the agent won’t take you seriously. You have to get that balance right. You might want to start five per cent below a realistic opinion of the value of the property, and go from there. It also depends on your budget. Certainly start below your maximum, and work up to that. Every dollar you get the property under your budget is a bonus for you.
One exception to this is when a property has been on the market for a long time and there is not much interest in it. That might be the case where you can get something at a heavily discounted price because the property is not in high demand. The key to knowing whether this is the case, of course, is all that research you’ve done.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.