Buying a property can be one of those situations where it truly is you against the world. The vendor is after the best price possible and expects the real estate agent to go joyfully into bat for them and do whatever it takes to get you to pay more. The real estate agent wants commission, so the higher the sale price the better.
But that’s not even all of it. The vendor and agent will often be in a position where they can play numerous bidders off against each other in order to push the sale price into bad investment territory. This can sometimes rule you out of the running, especially if other bidders are emotionally attached to the property and likely to end up paying more than it’s worth.
Arming yourself with a thorough preparation and an understanding of what is a good value deal and what falls short is integral before entering into a negotiation situation with an agent who is trained and well-practised in the discussion field.
It is your responsibility to set your limits, stick by them and never let emotion enter the frame. Once the bidding exceeds your limits, walk away and move onto the next one.
You want to be able to let an agent know not to bother trying to pull the wool over your eyes, so it is best to learn as much as possible about the area that you are looking to buy in.
It is important not to enter an unfamiliar market without doing your due diligence first. Other real estate agents can play a part in this process if approached correctly.
It’s important to ring around a few other real estate agents, see what else is in the marketplace and get their thoughts on suitable prices. If you can make them think there is something in it for them, they will be helpful. So, you might say I’m thinking about buying, then renovating and re-selling or renting. This will get their attention because they will want to get the listing to resell it or rent it out.
In addition to local agent knowledge, sales history, suburb reviews and other listed properties in the area can be found on realestate.com.au. Discovering that similar properties have sold in the area for less will give you an advantage that you wouldn’t otherwise have.
You can go in there with the information and say ‘I really want to buy the property, but why should I pay that much for it when the house two doors down sold last year for $80,000 less?’ Then it becomes obvious that you know your stuff.
Agents come in different shapes and sizes and with different personal goals. Some may want to get the best price for the vendor, while others may just be interested in getting a sale happening. You can turn the odds in your favour by being mindful of a number of different factors.
1. Help the agent help you
Let the agent know that you are the best option for a hassle free sale.
If you can play on that emotion and say ‘I’m the best option for you, I’ll make it happen straight away’, they’ll know that perhaps apart from the price, you are ideal.
The sale itself is more important to an agent than minor increases in price.
Remember that an extra $10,000 in sale price to a real estate agent equals $200 or $300 going to the office, based on a 2% or 3% commission. By the time that filters to the individual agent, he or she gets $20 or $30 extra, which isn’t even worth the petrol driving out to the property. It’s important to remember that.
2. Leave your ego at the door
A negotiation situation is a microcosm of real life; agents will not respond well to someone who is arrogant and inflexible. If you are humble and open-minded, you will find it easier to cultivate a friendly environment.
3. Give a little in return
You might see a property listed for $520,000, but also know that a similar one sold in the area for $440,000 the year before. If you want to shoot significantly lower, it is good to sweeten the deal for the agent.
4. Don’t look a gift listing in the mouth
Some people claim you should always take a certain percentage off the asking price when making an offer. Birch says that as a loose rule of thumb, you might be able to get $20-30,000 off a $200,000 property, but if the numbers work well, you don’t need to push for further discounts.
5. Ask good questions
Agents are often trained not to offer up any information that may lessen the value of the house, but you can get around this by asking insightful questions.
First up, ask who set the price on the property. If the vendor set the price, there is a chance the agent believes it is worth less and will push your lower offer harder. Asking the agent how much they expect the property to sell for will also give you an idea of their opinion. If your numbers tell you the asking price is too high, yet the agent says it will sell for higher, you probably can’t count on the agent as a price ally.
Next, remind the agent that you don’t really care whether or not you buy the property. Asking what else they have in the same market for a similar price lets them know that you are not emotionally attached. If you appear desperate to purchase a certain property, you can kiss any bargaining power goodbye.
Finally, it is hard to gauge why the vendor is really selling. An agent will never tell you if the reason will make the vendor appear desperate to sell. If you are bold enough, ask the vendor’s neighbour why they are selling. The other option is to ask how long the property has been on the market, or ascertain the information from its online listing. If a house has spent a long time on the market, you may be up against a vendor that is willing to hold out, rather than budge on price. It may also reflect a problem with the property.
If you suspect the latter, ask the agent if there are problems that you should know about. If you say that any issues emerging in a building inspection will prompt you to withdraw from the deal, they might be upfront and save you the hassle. This may also give you some negotiating leverage.
To discuss this article or anything to do with your finances, please call our office today on 0434 087 735 or email us and we will be happy to assist you.