How to negotiate like a pro
Securing a bargain is as hard a task as any. However, you can increase your chances of achieving an under market value property by learning some fundamental negotiating skills.
Results Mentoring's Simon Buckingham explains that you need to leave emotion at the door when negotiating, and play on the numbers alone. If you cannot do this, consider enlisting a buyer's agent or a savvy family member to do the talking for you.
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Firstly, be aware of the property's worth. Understand what comparable sales have gone for, and find the most attractive options in the area for you as an investor. Take these examples to the real estate agent. “That way you’re in a far better position to say that the property is priced far too high, or I have more room for negotiation based on this,” Mr Buckingham says. “You can buy it then for a discounted price.”
Finally, ask the agent how they determined the price on this property. “How do you come up with that price when the property down the road, which is a very similar property with the same number of bedrooms and bathrooms, sold for $20,000 less just two months ago? How do you justify it?” he asks.
Focus on how to present yourself to the real estate agent. Consider Results Mentoring's following ideas for responding to a real estate agent:
The Flinch: React with surprise and shock when the price is given by the other party, no matter what it is. Always react with “Oh! I thought it would be much cheaper than that!”
Silence: Sit there, arms crossed, and be in no hurry to break the quiet.Technically, it's a stand off, and whoever breaks the silence first loses. The agent may end up revealing some details - humans naturally dislike silence.
Pre-determined fair middle ground: Figure out the price that you'd be willing to pay. Figure out how much under the vendor’s position that price is. Then you come the same distance again under the price you’re happy to pay - that becomes your opening gambit. For instance, if the opening price is $440,000, and you're only happy to pay $420,000, then you'll want to offer $400,000 and work up to your price.
And if negotiations don't go your way? There's always another deal out there.
Top tips for negotiating
Have your advisors at the ready
- Mortgage broker/banker
- Solicitor/conveyancer
- Building/Pest inspector and/or Strata inspector
Get a cheque book
Do your pricing research
- Know the sale price of all recently sold properties that compare with the one you want to buy
Be speedy with your due diligence
- But don’t rush in with an offer until you are ready to sign a contract
Ask the agent whether you can buy with a cooling off period
- This will be unlikely if a property is scheduled for auction or if it is a sellers market
If you can’t get a cooling off period, make sure you get a building and pest inspection BEFORE you make an offer
- You want to be sure that there are no major building issues which will eat into your budget
Find out whether you need a bank valuation before you can sign on the dotted line
Remember that a verbal offer is not necessarily binding to you or the vendor
- Find out what you need to do in your state to avoid being gazumped
Source: Veronica Morgan, principal of Good Deeds Property Buyers, co-host of Location Location Location Australia & Relocation Relocation Australia