When it comes to real estate, you can negotiate practically everything. From the price you pay, to the length of time you need to settle, to having access to the property prior to settlement, all the way to the size of your deposit – everything is negotiable. However, negotiating isn’t just a matter of asking for a discount. It’s both an art and a science according to Cate Bakos
, founder of Cate Bakos Property. "Negotiating well is a science as it relates to the research and due diligence that you must do before you make an offer. As a well-organised negotiator, you should be able to defend your position with fact," says Bakos.
"The art, however, is where many people are challenged. Knowing when to offer, when to stay quiet, when to stand firm and when to agree to terms is critical."- Cate Bakos, founder, Cate Bakos Property
If you think this feels like a lot of work, you’re right. But mastering a few negotiation tricks would go a long way in successfully building a solid portfolio. The good news is, you don’t have to be a Harvey Specter (Suits
) to walk away with a sweet deal. Our experts generously shared their secret sauce so you too can nab a good deal on your next purchase.
Insider’s secret sauce for negotiating a sweet deal
Understand the vendor’s motivation
Knowing what the vendor wants and expects is the key to negotiating powerfully. Realise that vendors are driven by things other than the price. For example, some may need to sell in a hurry because they’ve bought somewhere else. They may need to move to an aged care facility or simply want to cash out and they have no time pressure.
"Not all vendors are driven by price. More often than not, they have other requirements or desires.”- Cate Bakos, founder, Cate Bakos Property
Therefore, knowing what these desires and constraints are would help you tailor your offer and stand a better chance of getting the deal to move in your favour.
Treat the selling agent well
You need the selling agent on your side for many reasons. You need them to give you information about the vendor’s motivation and expectations. You can only negotiate through the agent, assuming that the vendor uses one. Therefore, you need to build a good, trusting rapport with the agent to get the information and support you need.
Understand how the vendor prefers to sell
In a hot market, most vendors prefer to sell via auction. But some still prefer to sell via private treaty. Don’t waste your time making pre-auction offers if the vendor has decided to sell via auction as this would undermine your position.
Be realistic about pricing
It’s easy to get so focused on driving a hard bargain that you lose sight on how much the property is really worth. Miriam Sandkuhler
, director with Property Mavens, says that being realistic about your offer is a better strategy than trying to squeeze every last cent from the deal. “Buying the property at the fair market value that will outperform the average rather than driving a hard bargain is a better outcome than to miss out altogether because you tried too hard to bargain,” says Sandkuhler.
Sharpen your best negotiation weapon by researching hard
Doing extensive research before you make an offer ensures that you’re armed with the information you need. This also enables you to make a sound decision quickly and confidently. “Doing your due diligence in a property before making an offer is the best way to ensure you’re paying a fair price,” says Sandkuhler. “It may also give you further negotiating power when you make an offer after the property has been passed in at auction.” To get the market intel that you need, you have to attend lots of auctions, go to as many open houses as you can and speak to a number of selling agents. You should also keep an eye on the auction results to see how much properties are going for and which ones have been passed in. “This helps you gauge if the asking price is realistic and helps you make a decision based on facts rather than emotion,” says Sandkuhler.
Make sure the contract is reviewed by your legal expert before starting a negotiation
No matter how many times you’ve bought a property before, you still need to get the contract reviewed by your lawyer or conveyancer. This is particularly important if you’re buying interstate as there are different clauses and rules that need to be adhered to.
Always include finance and building and pest inspection clauses in the contract
Even if you’ve already gotten a pre-approval from your lender, don’t assume that you will get the loan in the end. Therefore, it’s a good strategy to always include a finance clause in the contract to protect you in case your lender decides not to approve your home loan application in the end. What this means is that you can pull out of the deal if you don’t get the finance from your bank. You may lose part of the deposit you paid during the negotiation, but it’s a small price to pay compared to the headache and stress of trying to get finance within a very short period of time. Equally important to include is the pest and building inspection. Even if you’re a seasoned buyer, you cannot and should not underestimate the value of having a trained inspector go over the property for you to ensure you’re not spending the money you save via negotiation fixing the problems you missed because you didn’t engage a professional.
Always have a backup plan and let the agent know it
You can’t always win a negotiation so it’s important to have a Plan B in case the outcome doesn’t go in your favour. Don’t start a negotiation without a backup plan. Having alternatives just in case allows you to negotiate more confidently as you know you have other opportunities to pursue elsewhere. Letting the agent know that you have options will also create a sense of urgency and pressure for them to move the negotiation forward. “No agent would want to risk losing a serious buyer,” says Bakos.
Leave something on the table
Yes, you want to buy low. It’s tempting to take advantage of the vendor’s unfortunate situation, especially if they need to sell in a hurry due to financial strife. But it’s always important to treat people humanely and make them feel they’ve also won something during the negotiation. “Negotiating needs to represent a win/win,” says Bakos. “Sometimes a vendor may be in an unfortunate situation where they have
to sell under difficult circumstances. They may not achieve the price they had hoped for, but it’s a less painful transaction for them if other ‘wins’ are achieved." These other wins can be a shorter settlement, a lease-back arrangement post-settlement (if they need time to search for or build the next home), or if the offer is completely unconditional and gives them certainty of a sale. Different elements motivate and entice different sellers.
Always be respectful towards the vendor and selling agent
Above all, always aim to balance a respectful negotiation without offending the vendor or the agent advises Bakos. “Without the agent’s support, the deal can topple over. Without the vendor’s support, you will have to face a settlement and handover with a person who hates you. An unhappy vendor can make things painful for you during settlement. For example, documents and cheques could go ‘missing’ that could delay settlement. Or you could end up with a dirty property.”
What to do next?
There’s no question that navigating the property market is daunting if you’re starting out. But just like with everything, it gets easier the more you do it.
Getting educated is the first step.
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