commercial loan

10 Tips for getting a Commercial Loan

Beginners look at commercial loans as a means of realising a dream. They long to own their own restaurant, pub or bed-and-breakfast, and look to their friendly local bank manager for help. Cue frustration and disappointment. These days, commercial loans are decided by back-room underwriters, who use cold calculation to decide your credit worthiness. To the seasoned pro, it’s just another day at the office; a handy way of adding to their portfolio. To get the best deal, you need to prepare in advance. Here are a few tips to help you on your way to securing a commercial loan:

  1. Have your business plan, forecasts and projections, financial records and statements, history of the property’s income, and the appraisal when you approach lenders. Make sure these are accurate and up to date. This lets the bank know that you mean business. If you make them think about your application and make their own assumptions, they are more likely to decline the application.
  1. Put your own money down. You’ll need at least a deposit and settlement costs. Lenders want to share the risk, not own it entirely. They will usually not finance more than 75% of the appraised value of the property. Personal guaranties of the principal owners may be necessary for a commercial loan.
  1. Get your own appraisal of the property. This will provide you with an unbiased estimate of what the property is really worth. You’ll then know whether it’s worth the financial risk.
  1. Apply for your commercial loan as soon as you can. Commercial lenders exaggerate their speed. They’ll quote you forty-five days when it’s more likely to be three months!
  1. Never rely on just one commercial lender. Commercial lending is very subjective.
  1. Lenders near the property generally offer better terms. With those farther away, it’s a case of ‘out of sight, out of mind’.
  1. Have a lawyer who specialises in property investment go over everything. You need someone who knows the business and who can be an advocate on your behalf.
  1. Be certain that you can afford to keep your business going and still meet your payments. Properties must show sufficient debt-repayment ability. If the property is to be occupied by a sole tenant, the lender may want to appraise that tenant’s finances.
  1. Check with your local small business administration for any potential grants or low interest commercial loans you might be able to wangle.
  1. Negotiate. You do not have to take the first offer you get. Getting a commercial loan is like buying any other goods. People are sometimes too in awe of banks to haggle. There’s no need to be afraid; they can only say no!

 

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Beginners look at commercial loans as a means of realising a dream. They long to own their own restaurant, pub or bed-and-breakfast, and look to their friendly local bank manager for help. Cue frustration and disappointment. These days, commercial loans are decided by back-room underwriters, who use cold calculation to decide your credit worthiness. To…

Seven Steps to Eliminate Credit Card Debt

Here are Seven common sense guidelines to eliminate credit card debt:

1) DO make a budget listing all your fixed expenses. Rent or mortgage, car insurance, car payments, mobile phones, utilities, day care, fixed loans, etc. Then try to estimate a reasonable budget for discretionary items like food, entertainment, clothes, etc.

2) DO make a second list of all your outstanding balances and sort by balance, minimum payment, and interest charges if you have multiple credit card debts.

You may think the wisest thing to do is paying off the credit card with the highest interest rate. However, there are 2 preferred methods to follow.

First, you should reduce the number of credit cards. Pay off the smallest balance first with larger payments until the number of credit cards you have in debt is down to one. Your ultimate goal is zero, or when you can pay your monthly balance in full every month.

The other strategy is to pay the balance on any card exceeding 50 percent of your credit limit because balances above this level may affect your credit score.

3) DO use cash or a debit card linked to your bank account. You can’t spend what you don’t have.

4) DO look for extra income. Most likely your rent or mortgage is your biggest expense, so consider a roommate if possible. If you like your occasional privacy, consider an International student for shorter periods of time.

5) DO look for the little things that add up in your expenses. Maybe change your phone plan if you are constantly going over the monthly minutes? How about that $3.50 latte or cappuccino every work day? That’s almost $1,000 a year!

6) DON’T sign up with a new credit card with a 0% Interest Rate for the first 6 months.

You probably receive a lot of junk mail enticing you to sign up with a new credit card with a 0% Interest Rate for the first 6 months before it jumps to 18% or even higher. Then 6 months later you would transfer your huge balance to another piece of plastic. Unfortunately, the biggest risk is they are simply giving you more credit to spend, and the number of cards and liability increases.

Unless you are extremely disciplined, this doesn’t really work as you end up bigger and deeper in the hole! Reducing the number of credit cards is the goal.

7) DO consider refinancing your home (if you have one) and consolidating all your debts into one

Logically, a 4.50-5.50% home loan is a lot less than 18% on a credit card. You can’t spend what you don’t have. You will be asked to have all your cards cut up (except maybe one with a small credit limit) and you have reduced the number of credit cards. You are now paying back that debt at far lower interest rates – often we find that the overall new monthly mortgage payment incorporating the consolidated debts is lower or at least equal to what you were previously paying out across several loans (credit cards included). Plus – the temptation has now been removed as you no longer have the credit cards!

Melanie Burns

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Here are Seven common sense guidelines to eliminate credit card debt: 1) DO make a budget listing all your fixed expenses. Rent or mortgage, car insurance, car payments, mobile phones, utilities, day care, fixed loans, etc. Then try to estimate a reasonable budget for discretionary items like food, entertainment, clothes, etc. 2) DO make a…

Fine Tune Your Commercial Real Estate Crystal Ball

Don’t you wish you had a crystal ball that showed you what is to come in the future? A simple wave over the crystal ball, the mutter of a magic word, and your entire future is there, revealed in front of you. Now that you know what is to come, you can prepare and move accordingly so you can be ready for what the now identified future holds.

Unfortunately, this crystal ball does not literally exist, but in commercial real estate there are many tools that you can use that act like a crystal ball. They can show you the future in an indirect way so you, too, may pla
n and move accordingly in order to take advantage of the market place.

Fining tuning your commercial real estate crystal ball is really a matter of paying attention, doing some basic research, and being on top and aware of all elements in your comfort zone, or concentrated area of focus and influence. It does take vision and an element of creativity to really fine tune your crystal ball, and, for some, it is the best aspect of commercial real estate! Being able to predict, envision, and then create something that at one time did not even exist, not even in an idea, and then search out the resources to create and put the plan in motion is a commercial real estate insider’s dream.  When done effectively, it can be very satisfying and lucrative!

You should already be doing many things that assist you in predicting and planning for the future, which is extremely important in commercial real estate. If you can see an opportunity coming before it actually presents itself, then you are able to prepare for that opportunity before anyone else, and reap the benefits. These things may include driving the streets of your community to see what land and buildings are for sale, what centres are vacant for leasing, attending planning and zoning meetings, reading the local newspaper for economic and real estate changes or trends, as well as researching other cities and how their market may affect yours in any way, shape or form.

As a real estate insider, it is pertinent that you are up to par, and even an expert in your comfort zone. These things listed above are how you are constantly informed and a step ahead of other real estate people, as well as your own market.

Besides doing these things religiously, and always analysing the data that you collect, there are a few other specific tools that will allow you to see into your commercial real estate future and identify opportunities that others will miss.

The first is a city’s or town’s future land use plan or map that shows the future zoning and use for all the land within a city or town’s limits. Some cities may not have one if they are too small and not looking for growth. However, most cities do have master use plans that are used to dictate the entire future of a city’s economic make-up.  The reports that go along with these offer a wealth of demographic information as well which provides great insight into the future development of an area.  For example, here is the link to the Melbourne Growth Plan documents http://www.planmelbourne.vic.gov.au/Plan-Melbourne . In addition, check out the actual planning websites for your specific state, city or region. Here is Victoria’s http://planningschemes.dpcd.vic.gov.au .

These maps and report are used to plan for growth so that all elements of a city or town are controlled. Zoning and use may change for operating properties; others may remain the same. There is the possibility of raw land to be annexed into the city, having a specific use, offering huge opportunities to the commercial real estate investor. There may be a need to tear down or renovate old properties, and develop them for a different use.

The possibilities of what a future land use map holds is gold in the eyes of an investor, and extremely important to all those working in commercial real estate. Refer to this map, and actually visit the locations of where there is change to identify opportunities. As every area is different, you will be amazed as to what opportunities will unveil themselves when you bring to it a little vision, creativity, and insider information regarding the zoning and use of a property.

Another tool to see into the future is the economic forecast for your area. By looking at both the past and future per capita income, population growth rates, housing costs and other such data that can be found via the Bureau of Statistics, you can see the overall economic environment of your city or town and how it is performing.

Perhaps a continuing decrease in population means people are moving out of the area, telling you not to invest in new home or unit development in that area. Or, the growth has been so extreme that the area is in desperate need of commercial property in order to support the influx of people. You can definitely plan on how you are going to move in the market with this information by your side.

The final tool I urge you to utilise when predicting your commercial real estate future is already approved infrastructural changes within your city. This will require you to attend city and town meetings regarding zoning, planning, development, etc. There could be discussion of a new development a year or more before it actually occurs, and once you hear about it, you can start putting your own ideas into place.

As I am sure you already know, large, influential, infrastructural changes can greatly increase the land values of properties that surround them. For example, a large shopping centre being developed will increase the value of all the land surrounding it, as well as possibly call for a greater demand of residential units, and an increase in the rental prices that can be charged according to the new market.

Let’s say that you hear two years in advance about a shopping centre that will begin development after it is approved. You are then going to get a jump on all competition, look at the site, the land surrounding it, and the opportunities it may offer. Can you purchase the now extremely cheap land adjacent to this site, or perhaps the poor performing units nearby in anticipation of this new development so that you may benefit from the price increase this major infrastructural change is going to cause?

Absolutely!

These things happen all the time, and I urge you to be a visionary and look to the future. After all, this is where a majority of commercial real estate profits are made- by creating something that either wasn’t there, or improving upon what is there.

As you can see, you may not have a crystal ball that does all the work for you, but I promise that if you use these tools and follow these guidelines, you will be preparing yourself for great opportunities that others, quite simply, will overlook. It will take some effort and constant dedication. However, the results that you yield will be worth it. Actually, it is much easier to be the first mover, rather than suffering the increased land prices and changes after a development is already in place or even underway.

Realise your power to predict the future and plan your goals accordingly! You will be successful with these tools, so implement them today.

Author: Melanie Burns

To discuss this article or anything else 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.

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Don’t you wish you had a crystal ball that showed you what is to come in the future? A simple wave over the crystal ball, the mutter of a magic word, and your entire future is there, revealed in front of you. Now that you know what is to come, you can prepare and move…

Selling Your Home – Don’t Be A Victim

Selling your home can be a complex process. If you make mistakes, you may be unable to sell your home or have seller’s remorse. There’s no need for this if you keep in mind the following.

Overpricing Your Home

It’s important to be realistic about the value of your home. Sellers should insist their real estate agents present them with objective criteria for pricing. Comparative information is the most critical in getting a house priced properly. If you ask for too much, it’s hard to ask for less later on in the process.

Not Displaying  Curb-side Appeal (I know – an American term – but it works!)

You don’t have to invest thousands of dollars into redecorating your home. But there some basic steps you must take to present your house in the most positive light.

Overdoing Home Improvements

Don’t go overboard staging your home. It should feel warm and inviting. Lawns should be freshly cut, plant some flowers, organise the home’s interior, rid the home of foul smells and apply new coats of paint to all walls and doors.

Not Understanding The Buyer’s Offer

Carefully reviewing and understanding the offer or purchase contract is imperative. Here are a few things to look for:

1. Has the buyer agreed to pay down a significant deposit?

2. Is the offer contingent upon the owner selling his or her present home? If so, how is the selling process transpiring?

Home Inspection/Open Houses

Have general inspections done in advance. Even though buyers will often have the house inspected again, it’s best to prepare for any potential problems.

Withholding Information

While it is tempting to hide or fail to mention the snafus of a home for example, it’s a hotel for cockroaches or termites, located in an area that’s prone to floods or fires, it is best to give buyers full disclosure. This kind of information can greatly affect the value or desirability of the property.

Be Objective:

While you may think your pink walls or roman columns are fabulous, it is best to keep that opinion to yourself.

Poor Real Estate Agent Communication

Sellers should take a pro-active approach to the selling process and not rely completely on the agent. Sellers should insist upon regular updates about the house and never assume the agent has taken care of everything. It is the seller’s responsibility to ensure everything is running smoothly.

Investigate Buyers

Once you have an offer on the table, it is imperative to secure confirmation of loan approval from the buyers (or their conveyancer/lawyer). Many do not ask about this – you are well within your rights to do so – and generally the buyer will have a finance clause in the contract that they must adhere to (unless you sell at auction and that is another article entirely!).

If you follow these steps, you will go a long way towards avoiding being a victim in the home selling process.

Author: Melanie Burns

To discuss this article or anything else 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.

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Commercial Real Estate Misconceptions: You Mean Location, Location, Location Was a Lie?

Commercial real estate is a wonderful, exciting business that can offer a wealth of opportunity for those who look for it! Many people are often hesitant to enter the market of commercial real estate for many different reasons. In fact, there are some major misconceptions about commercial real estate which I am going to address here.Many people who hear about commercial real estate, but aren’t necessarily in the business, often use the expression “location, location, location!” Many people associate this expression as the truth, that the three most important attributes about a property are “location, location, location!”

I am here to tell you – this is absolutely not the case! Now, I am not going to say location is not important, but what if you have a beautiful location for a Bushland retreat, complete with hills, a perfect location for a hotel, and beautiful mountain views? What you want to do to the property is improve it as a weekend getaway for romantic couples with a beautiful hotel, resort, luxury type housing, and perhaps some individual cottages overlooking the bushland. Sounds great, right?

The perfect location- you can’t beat it! But, you learn that the zoning for this property is residential. The use is only one single family residence per acre, and no commercial property allowed. What happened to your “location, location, location?” It flew out the window!

The most important aspect of a property is the use. What is it intended for by designation of the council? It does not matter where the property is, if you cannot get the zoning that is in the realm of your intended use.

It is possible to get properties rezoned, especially as cities and towns change and grow. Be sure to consult with the council to determine if these changes are even possible, because you do not want to buy a property that you cannot rezone, and be left with an unprofitable property on your hands.

Most people believe that commercial real estate is complicated and you need a special education or know how to succeed in the business. Many think that commercial real estate is filled with international finance, heavy and complicated math, complicated tax rules, and forms and applications that are just too complicated to understand correctly.

I am happy to tell you this misconception is the worst, because it puts a road block in front of many people’s aspirations to become a commercial real estate insider. Let me put this misconception to rest. There is math involved, and most of it is not at all complicated: simple ratios, adding, subtracting and multiplying. What is even better is you don’t have to do the math. There are others who can do that for you. The same is true with property management, inspecting the property, and doing the end of year taxes. In fact, commercial real estate is less complicated than residential real estate because you can focus your energies on a single deal that will be worth perhaps 10, 20, even 50 residential deals!

Let me put it into perspective for you. If you owned a business (many of you may), would you create strategies, keep the books, manage the many locations, sell on the front floor, and take out the trash after the day was over? I think not! Commercial real estate is made up of many people whom are there to help you with whatever you need. You must position yourself as a real estate insider, which is a leader in the business.

Another misconception is commercial real estate is management intensive, that you must manage every property you own. Let me tell you when you end up owning 10 or more properties, this is almost impossible to do! You do not have to actually manage your properties yourself, so you can concentrate on creating more deals. Hire a company or agent or set a team in place to take care of this “day-to-day” business.

As you can see, what is passed around in dialogue about commercial real estate is not always true. Before you take everything to heart, be sure to get your facts straight. In fact, many people in this profession speak about commercial real estate as a business in which only the savvy and sophisticated can succeed. They often act this way because they want to keep people out of the market by differentiating themselves. If you were in this position, you would too!

Author: Melanie Burns

To discuss this article or anything else 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.

 

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Commercial real estate is a wonderful, exciting business that can offer a wealth of opportunity for those who look for it! Many people are often hesitant to enter the market of commercial real estate for many different reasons. In fact, there are some major misconceptions about commercial real estate which I am going to address here.Many…

Sherlock Holmes Lending Solutions

Budget for Settlement Costs – Loan Origination Fees, LMI (Lenders Mortgage Insurance) & Stamp Duty

Once you reach an agreement on the purchase of a home, things start moving quickly. In the chaos, it is important to remember to budget for settlement costs.

Settlement costs are fees associated with miscellaneous events associated with a home purchase, things such as property inspections, stamp duty, conveyancing fees etc. Even if you are purchasing a home for the first time, you are probably aware there are closing costs that have to be paid. Rarely, however, are you aware of just how much and how fast the can accumulate. If you have not budgeted for them, they can put a kink in the settlement or even cause you to lose the home.

A couple of closing costs to keep in mind are origination fees for home loans and lenders mortgage insurance. The mortgage related costs are only a small part of the overall closing costs you can face, but deserve a closer look.

Origination fees for home loans can be a shock to first time buyers. Few realise they are going to have to pay such things. Origination fees are costs charged by a lender for services used to determine if the lender should give you a loan in the first place. For example, a lender will often charge you fees for having a valuation done on the property. Infuriatingly, the lender will also charge you fees for processing the loan and preparing the loan documents. On a $400,000 loan, the origination fees can quickly add up to thousands of dollars.

Lenders mortgage insurance, often called LMI, can also be a nasty little surprise. The magic number when considering LMI is 20 %. If you pay a deposit on the home that is less than this amount, you are almost certainly going to have to pay LMI. LMI is simply insurance that protects the lender should you default on the loan. The cost can add up to hundreds and into the thousands of dollars, so make sure you know what is expected of you.

Stamp Duty is the one, in my experience, that is consistently overlooked.  As a general rule I always tell clients to allow approx. 4% of the purchase price to cover these costs.  It is usually a little less, and varies from state to state – however I find it always better to lean towards the conservative side. Settlement costs are aggravating – budget for them up front, and you will feel less aggravation.

Author: Melanie Burns

To discuss this article or anything else 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.

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Once you reach an agreement on the purchase of a home, things start moving quickly. In the chaos, it is important to remember to budget for settlement costs. Settlement costs are fees associated with miscellaneous events associated with a home purchase, things such as property inspections, stamp duty, conveyancing fees etc. Even if you are…

Demystifying mortgages – 12 myths about lending every first home buyer should know.

Myth #1
You need at least 20% deposit to get a mortgage         
In today’s market that is not necessarily true.  While it is correct that having a deposit is the ideal situation, if you are currently renting and just cannot save enough for a deposit there are many lenders that offer low deposit home loans.  Borrowers can often borrow up to 95% of the purchase price which is a tempting offer for any first time home buyer wishing to get into the property market. A low deposit home loan may often attract higher interest rates or more stringent policy restrictions but if you are confident you can afford the repayments then you can achieve the dream of owning your first home with a minimal deposit.

Myth #2
Fixing your rate is safer than a variable rate
When interest rates are high, many are tempted to fix their rate to protect against further hikes.  All is well with the world and as a borrower, you feel incredibly happy that you are not affected by the next huge rate increase.  The problem here is that if rates fall, you end up paying a higher interest rate compared to the variable rate.  Fixed rate home loans do offer some security in an uncertain market, and also allow borrowers to know exactly what their mortgage repayments will be for the next one, three or seven years. Everyone is different and has varying financial requirements so talking through your options with a mortgage broker is recommended.

Myth #3
A bad credit history means you won’t get a home loan
Let’s get one thing clear.  A bad credit history is not good.  Any missed or default payments on credit cards or mobile phones are recorded.  Even if the amount was small or years ago, it affects your credit rating.  However, not all is lost.  Lenders will consult your credit history and feed this into their own credit scoring system.  If it turns out there are issues, the lender may take a closer look and may still approve a home loan if you meet the requirements.  Similarly, non-conforming lenders provide an alternative option for borrowers who have been refused finance by traditional lenders.  Non conforming lenders are an ever expanding avenue and offer in many cases quite competitive products providing opportunities which were once deemed impossible.

Myth #4
I can still get a home loan even though no income, because I have several assets
Yes, you may have a collection of stamps from the 1920’s to be proud of, but it’s not going to convince a bank to lend you $400,000.  Assets aren’t the same as income, and it’s your regular income that lenders get excited about.  Lenders will only lend as much as people can afford to repay, and a first time home loan is a big commitment. The amount of income earning capacity you have will ultimately determine how much you are able to borrow.

Myth #5
Get the lowest rate possible
Be cautious with low interest rates.  A cheap rate is attractive, especially to first home buyers, but take note because these low rates often come with less features on the home loan, reduced flexibility and higher fees. They may only be an introductory rate and once that honeymoon period is over you could find yourself paying a much higher rate.  Often a loan with a slightly higher rate but more features will save you money over the life of the loan.

Myth #6
Credit cards are okay if I pay them off.
When it comes to credit cards it’s not all about the balance on your card, or cards, it’s the total available credit that counts. Having a large range of credit does not necessarily equate to a good credit history.  Often it’s the credit card limit, not the balance that counts.  So even if you pay off all your credit card debts, if you still have a high limit this can affect your servicing and chances of approval.

Myth #7
I can roll my personal debts into my mortgage
So you have a car loan and credit card debts, and you want to roll all of these into your home loan?  Makes sense, as the interest rate on your mortgage will be lower than your current rate.  But, first home buyers are not usually able to just throw all their debts together like this.  Usually you have to build up equity in the property and then use this equity to service the additional debt.

Myth #8
A low-deposit home loan means you don’t need any savings.
This one is most certainly not true.  First home buyers get excited and tend to think that a 95% per cent loan means that they do not have to pay much money upfront.  But, a 95 per cent home loan only covers most of the cost of the property, and not all the purchase costs such as stamp duty, legal fees, property inspection fees and lenders mortgage insurance (LMI).  You will still need some savings to cover these costs as well as the 5% deposit.

Myth #9
Start by paying just the minimum amount
Many first home owners pay only the minimum monthly repayment, as they adjust to the new financial commitment.  However, at the start of the loan you are really only paying interest so by paying more than the minimum, you quickly reduce the amount of interest and principle on the loan.  As interest is calculated daily, repaying twice a month instead of once per month can also save you thousands in interest.

Myth #10
Mortgage insurance protects the borrower
Lenders Mortgage Insurance (LMI) protects the lender, not the borrower.  Borrowers who can put down a 20% deposit should not need to pay LMI but borrowers with any less than this will pay LMI to the lender.  The less deposit you have, the higher the premium.

Myth #11
Offset accounts save you money
Home loan offset accounts are a great idea, but only for those borrowers who are responsible with their money and have a regular income. If you have a shoe addiction or tend to buy all your mates extra rounds at the pub, you may want to think twice about offset accounts.  Your income goes straight into your home loan account, pays your mortgage repayment and then you can use the extra funds for other expenses.  However, if you have bad spending habits you could end up spending more.  Be careful not to end up in negative equity because you didn’t monitor your spending.

Myth #12
Refinancing saves you money
Perhaps you have just bought your first home, and you are enjoying all the benefits of your own home.  Your first time mortgage is going well, but perhaps you fixed your rate six months ago and now rates are coming down, or maybe you want to switch to a different lender.  Refinancing sometimes costs money. In the way of exit fees for existing home loans, and settlement fees for the new loan.  However, the market is quite competitive currently and some lenders are giving all the power to the home owner.  Shopping around and refinancing your home loan can save you thousands over the life of you loan, but can also end up costing you more, so talk your possible choices through with a mortgage broker before making your decision.

Author: Melanie Burns

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.

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Myth #1 You need at least 20% deposit to get a mortgage          In today’s market that is not necessarily true.  While it is correct that having a deposit is the ideal situation, if you are currently renting and just cannot save enough for a deposit there are many lenders that offer low deposit home loans. …

5 ways to knock $20k off the asking price

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.

Be prepared

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.

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