Want to know some of the secrets that buyer’s agents use to negotiate thousands from vendors’ asking prices? Your Investment Property speaks to a couple of pros to find out the tricks of the trade.
1. Time on the market
It’s often the case that a vendor who has just listed their property won’t have realistic expectations as to what it can sell for. We Find Houses founder and CEO Paul Wilson suggests that, provided you have a motivated vendor, they’ll be more likely to sell at a realistic price if their property’s been sat on the market for a while.
“They’ll be more conditioned to the market than someone who has just come onto the market. If it’s a new listing, unless it’s extremely brilliant, you might not want to go near it unless you’re willing to put some time and energy into conditioning them,” he said.
2. Find out the seller’s motivation
If you can find out what exactly is motivating the seller, then this information can be an extremely useful bargaining tool.
“It’s interesting to find out why they’re selling and what they’re trying to achieve by selling. Are they on a timeframe? So they need to raise a certain amount of money? Do they need to sell before the bank takes it?” said Wilson.
He adds that a good real estate agent isn’t simply going to spell this out for you, so it’s going to take some digging to find out what’s motivating the vendor. Learning how to handle the agent and ask the right questions is a key skill here.
3. Know your price
Rich Harvey, CEO of buyer’s agency propertybuyer, points out that it’s crucial to do your research and arm yourself with the knowledge of what a fair market value for your chosen property is.
“You’ve got to look at comparable sales. Ideally you want to look in the same suburb or adjacent suburbs,” he said. “And ideally within the last 90 days, as that’s what most valuers take as an acceptable timeframe for valuation.”
4. Build a relationship
Harvey adds that building a good relationship with the estate agent will work wonders on the negotiating front. After all, you rarely get to speak to the vendor in person, so being able to work well with the middle man is vital.
“Negotiating starts from the moment you meet the agent. A lot of people think it starts when you make the first offer, but negotiating is an art, it’s about relationship building. It’s not about smashing the other person over the head. It’s about getting inside the agent’s head, because you generally don’t get a chance to speak to the vendor,” he said.
With these thoughts in mind, he added that you can be doing yourself a disservice by trying to act too cool and disinterested.
“When we go to a property, we’re straight up and down with the agent. We say that we think the property’s going to suit our client and that we’re going to put in an offer. Do you think that the agent’s going to ring that person, or the one that says ‘I don’t know, I don’t really care’? They’re going to call me because I’ve made a good impression,” said Harvey.
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5. Have a plan B
A good negotiator has the ability to look at each property impartially an unemotionally. Having a several properties on your hit list, rather than pinning all your hopes on one deal, will allow you to judge each case on its merits and lead with your head rather than your heart.
“Some people put so much hope in one negotiation, hoping it’s going to work. But have option B, C and D up your sleeve,” says Harvey, who adds that it’s also important to be patient and accept the fact that the negotiation process takes time.
6. Gauge the interest of other buyers
Other buyers may be competing with you for the property, but they can also help you out in the negotiating stakes. Listen out for their property critiques and use them to your advantage.
“Hang around at the open inspection and listen for feedback,” said Harvey. “Ask the agent for feedback and ask them what offers they’ve had.”
7. Be flexible
Price isn’t the only point of negotiation, and by being flexible on other elements of the deal you can put yourself in the driver’s seat. If you discover from the agent that the vendor needs to sell, but would rather not have to settle within six weeks, for example, then you may be able to offer an extended settlement period in return for a price cut.
“Be flexible on settlement terms. Identify whether it’s price or terms that matters to the vendor. What’s going to work for them, and what’s going to work for you as a buyer?” said Harvey.
8. Be realistic
Don’t let bargain fever go to your head. It’s important to be able to impassively judge what represents a good value for money deal, and what represents a cheap proposition that won’t make you any money in the long run.
Do your due diligence on the property so that you can safely walk away in the knowledge that, even if it’s being sold at a bargain basement price, your research suggests that it’s not going to do your portfolio any favours.
“You don’t want to look a gift horse in the mouth when you’ve got the right deal on the table,” said Harvey. “People are hanging out for the bargain at the end of the day, but a bargain is not always all it’s made out to be.”
How do you go about purchasing an investment property? Join the debate on our property investment forum.
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