How To Negotiate On Property Price

Negotiating On Property PriceDoesn’t negotiating on property price simply involve a combination of low-ball offers, being firm and even acting partially dis-interested in the hope of gaining a low price? This may be correct if you’re purchasing in a buyer’s market, where properties are not selling, but when you look at a complete property cycle this type of market condition may only happens every 20 years and usually only lasts for two years. Therefore it’s important to understand the art of negotiating for the purpose gaining a cheaper price or favorable settlement terms, according to current market conditions.

Industry expert, Wise Real Estate Advice Buyers Agency Director Mark Ribarsky, shares his top tips for closing the deal including a real-life example of how his advice worked!

 


1. Understand what market you’re in.
Are prices going up (Sellers market), down (buyers market) or sideways? This determines the balance of negotiating power on either the buyer or seller. Take for instance the 2017 property market in Melbourne, this was clearly a sellers market, properties were selling above market value, some suburbs experienced over 20% growth. If you where a buyer in this market, submitting low ball offers would get you nowhere. Successful buyers recognized it was a buyer’s market and were prepared to bid above the range to close the deal. Buyers that can determine the market they are shopping in will create an opportunity to sit in the negotiator’s seat when submitting an offer.

 

 


 

  1. Know You Price Rangeinfo-graph: Negotiating mistakes
    Knowing how much you can spend and shopping within this figure will lower your time on market and make sure you’re creating opportunity to purchase. This tip will increase your chances of becoming a buyer rather than a browser. Speak to a mortgage broker to work out your buying capacity.


     

  1. Know the properties’ current market value
    Buyers tell me, selling agents quote low during the marketing campaign, then come auction day buyers are gob smacked at the high closing price. I call this the ‘forgetful real estate agent’ The agent quoted a high selling range to the vendors, trying to win the business, yet somehow forgot the price when speaking to buyers just weeks later. To avoid getting effected by the ‘forgetful selling agent’ syndrome it’s important to know what a comparable property has sold for. For instance, how much has a property with comparable specs (house and land) sold for in the last 3 months within a few kilometers of the listing? Once a buyer understands price they no longer need to rely on an agents guidance on this issue.


     

  2. Understand the vendor’s motivation for selling.
    This is useful when negotiating terms of settlement or getting a deal across the line. Consider the vendor looking at two offers of the same price, yet one offer has a 6-month settlement term and the other has a regular 60 day settlement. The long settlement allows the vendor time to finish building his new house, access much needed deposit funds or organize bridging finance. In this case the seller could even accept a lower price if his unique terms are meet. Every sale is unique and it’s vital to understand why the seller is moving out of the property to tailor an attractive offer.


     

  1. Timing of offers.
    A vendor is always more willing to negotiate on price when selling time on the market is longer than normal. You can spot these types of sales by watching the market and not following the buyer crowd. Usually this type of property has had a few failed auctions, has changed selling agents or has had an average marketing campaign.


     

  2. Respect the vendors and offer your story.
    Selling property is an emotional process that most vendors do not enjoy, it pushes people out of their normal comfort zone. Hence trying to bring a price down incorrectly. This can often bring vendor’s walls up. To defuse this situation it’s wise to offer a story with your price. If you were in the vendor’s shoes which story would you relate to?

    • a young couple that is getting married, buying there first home who love the seller’s property, they have dreams of making the property a home and can only afford a certain price.
    • an investor that’s buying his third property that’s considering putting tenants in for the life of the property, monetary gain at the vendors expense being the only driver of the offer.


       

  3. Show interest in the property so the agent knows.
    Most buyers assume showing a disinterest in a property protects them from the Jedi powers of the real estate agent. Agents are a bank of knowledge when it comes to understanding why the property is on the market. If the seller has a need of an urgent sale it’s important you’re the buyer that’s front of mind when the agent picks up the phone. So tell the agent you have you loan approval and deposit ready, mention your feelings about the property and to call you if any offers are on the table. More importantly if there is a need for an urgent sale. You will be surprised at the opportunity this can create when the agent tells a vendor about you.

Negotiating Mistakes:

If an agent asks the questions, reply ‘ I don’t want to reveal that information at this point.’ Reveling your budget will disadvantage you at the negotiating table and pay more than you should for a property.

Stepping out of line during a negotiation will only create opportunity for other buyers to win your property. Don’t let you emotions distract your from doing what needs to be done.

Verbal offers are a real estate agents conditioning tool against buyers and sellers. This is also a source of distrust amongst competing buyers as verbal offers can set a high starting point for negotiations. Hence a written offer is a tangible binding contract of your intention and if accepted can achieve your goal of property purchase.

A popular saying among real estate agents is ‘quote it low and watch it go.’ When it comes to price, you should do your own research by understand recent comparable sales in the same area. You should be able to work out market value without the agent’s feed back.

Negotiating Mistakes

Always start below your preset budget for the property. You don’t want your offer to run out of steam during a negotiation. If an agent offers vendor bids at auction don’t be afraid to make a bid lower then the agents vendor bid to win the auction and a seat at the negotiating table

The advice in practice, 80 Westgarth St, Northcote.

I was hired to bid on a property that was quoting $2.20M via an auction campaign; my budget prior to auction was $2.152M. I closed the sale at $2.010M after the property passed in saving my clients $190,000, so this is how I did it.

 

I believed few buyers could afford this property at auction; the agent had chosen the wrong selling method for the price range. I also recognized that the market had slowed down in the area, hence the stage was set for a slow auction and potential negotiation.

The agent opened the auction at $2M on a vendors bid, I was the only bidder and won the auction with my bid at $1.9M, the property was passed in and I had won the rights to negotiate. I also didn’t want to offend the seller with a low-ball offer, potentially closing the opportunity to negotiate altogether.

Once I was invited in the house to begin the arm wrestle, the agent told me the reserve was $2.175M. Taking my time we went back and forth several times over thirty to forty minutes. My buyers were wondering why the auction had failed but I had assured them prior to auction that this would happen and told them to believe in the comparable sales research I completed. During the negotiation, I gave my client’s story twice to the agent, I increased my bid each time respectively till both parties came to an agreement.

Successful Negotiation 80 West Garth Street Northcote

In Closing

Negotiating is a complex process and like everything in life it’s best done with practice. Following this guide can help you sharpen any deal by saving you money or achieve and favorable settlement terms.

If you’re concerned about negotiating Buyers Agents are professional negotiators that offer their services for a fee. They can mange the whole process and usually save you their fees though their negotiating skills.

At Wise Real Estate Advice, we ensure all boxes are ticked and that sincere care is taken when providing a buyer with the wise advice and action required throughout the buying process. To speak to one of our friendly buyer’s agents click here to fill out an enquiry form or just simply call us on 1300 00 WISE. 


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