For the vast majority of homebuyers, the decision to purchase that first property is a big one.
Regardless of your age or income, when the time comes to put an offer in on a property and start negotiating with a sales agent the first time, it can be a daunting process.
However, it’s important to understand that to put in a strong offer and to be able to negotiate is all about the work and research you need to do up from – it’s not about haggling with the sales agent.
Being able to negotiate effectively is all about information. The more information you have the more information you can use to negotiate a deal that you’re happy with.
As a general rule, sales agents like to list properties slightly above what they would like to sell the property for.
For example, if an agent wants to sell a property for $600,000, they might list the property for $625,000, knowing full well, the vendor will accept $600,000.
The best way to understand how much the sales agent should be asking for a property is to do some research. The most effective way is to compare recent sales of similar types of properties in that area and the gauge how much that property should be listed at.
Ideally, you will be looking for houses of similar age, condition and land component, that have sold in the last six months within a few kilometres of the property you’re looking at. The more recent the better and the more similar the better.
That’s not always possible, but it is a good idea to go to a real estate website and put together a list of recent sales and try to do your own analysis. If you’ve been looking in the area for any length of time, you’ll likely have a good grasp on how prices are trending in that area.
When you can show hard data on recent sales to the sales agent, it is a powerful tool for your position.
It doesn’t matter where a property is located or how much it is worth, ultimately your strength at the negotiating table will come down to the vendor’s motivation.
If a vendor is looking to sell fast then you might have a chance of getting a good deal for yourself. Generally speaking, we see vendors that are highly motivated or distressed, if they are selling a property for either financial or family reasons.
That might be something like a divorce, or because they have lost their job and are now unable to service a loan.
On the flip side, if a vendor is not motivated at all and the house has no debt and they are set on their price, then even the best negotiator can’t help.
Trying to find out as much about the vendor’s reason for selling is a great asset to a buyer. Usually, a sales agent will give you some background if you ask, so try and find out as much as you can.
It’s possible to even make some assumptions – for example, if a house has had the same owner for the last 60 years, then you could potentially assume it might be a deceased estate.
When you put an offer in on a property, it is usually conditional, meaning there are conditions attached to it.
From the perspective of the vendor, the fewer conditions the better. They want a sale and don’t want to wait around for other conditions to be met. Some conditions, such as being subject to finance, are generally not avoidable for most people.
However, the more conditions you attach to the offer the weaker it is from a negotiation perspective.
Sometimes a vendor might be open to drop the price if some of the other terms they want are met. That might mean a short or a long settlement.
If a vendor needs cash quickly and you’ve been pre-approved for finance, then you could potentially negotiate a better price with a very quick settlement. Speak to your mortgage broker first though.
Similarly, the vendor might want a long settlement to give them time to move out, or find somewhere else to live. When that happens, they might be open to moving on price for more favourable terms.
Once again, you need to talk to the sales agent to find out as much as you can about the vendor’s situation.
An offer in writing is more effective than a verbal offer. In fact, a sales agent is under no obligation to even present a verbal offer to a vendor.
You could even find yourself negotiating against yourself if the offer is not in writing.
One of the best negotiating tactics is to simply be organised and seen as a serious buyer.
These days there is no reason you shouldn’t have a preapproval in place and ready to go. This is also something you should communicate to the sales agent. They will see you as a serious buyer and be happy to deal with you and negotiate.
It also means there is less risk to both the vendor and the sales agent (who gets paid when the transaction is successful) if your subject to finance clause isn’t an issue.
Remember, a negotiation isn’t meant to be a lose-win situation. You’re looking for an outcome that is fair and where both parties come away happy.
If a win-win outcome can’t be reached then it might be best to not go ahead with the deal.