Get the best price – How to negotiate when buying a house
Once you’ve identified a property that suits your purposes as either a home or an investment, the hardest part can be negotiating successfully to buy it.
The thing is negotiation is a skill that needs to be learned and buyers are usually negotiating with real estate sales agents who are probably better than they are at it.
That’s because sales agents negotiate to sell many properties during their career but buyers generally only buy a handful throughout their lifetimes.
But to help swing things in your favour, this article will show you how to negotiate buying a house as well as various real estate negotiation tactics and tips.
Understand the vendor’s motivation for selling
The most common motivation is that they’re simply wanting to move to another location or perhaps to upgrade to a better house in the same suburb.
Sometimes, however, their motivation can mean they’re more likely to want a quick sale, which can help you negotiate for a better contract price.
To discover the seller’s motivation, you could consider the following tactics:
Ask the agent questions about the property to determine how strong the vendor’s motivation is to sell. These may include:
- Is this a deceased estate?
- What settlement terms does the vendor desire?
- Can you describe the ideal outcome for the seller?
- Do they have another property lined up?
- How motivated are they to sell?
- Have there been any reductions in price already?
A motivated seller can also be called a distressed seller because they are looking to offload the property quickly due to less than ideal selling circumstances, such as they’ve lost their job, they’re moving overseas or interstate, or perhaps they’re going through a separation or divorce.
Sometimes the property is being sold because it’s a deceased estate, which often means the beneficiaries are keen to sell it quickly to collect their inheritance.
Discovering how long the property has been on the market can also be used as a negotiation tactic as the vendors may be getting increasingly desperate to sell.
Put a timer on your offer
One of the most important things to realise about investing in property is that there is always another one!
There are literally nearly 10 million properties in Australia and a reasonable proportion of them make good investments.
So, don’t invest with your heart over your head, because there may be another ideal property just around the corner.
If the vendor drags his or her feet on your offer during the negotiation, then call time on the shenanigans!
Often such delaying tactics are really just a smokescreen as the vendor waits for a better offer to show up.
But the best negotiation tactics involve being in charge of the process so if you feel like you’re being mucked around, simply say “enough”.
Instruct the selling agent that your offer has a time limit attached to it, such as the next 24 or 48 hours, and after that you’re walking away.
At worst, it will pressure the vendor into accepting or rejecting your offer and at best it may well secure you the property.
Keep your budget on the downlow
You must never show your hand… or your price limit!
You also need to understand that selling agents are legally required to get the best price for their vendors so they’ll often try to elicit your budget out of you and use that information to their own advantage.
And you can bet your top dollar that they’ll then try to get you to spend every last cent you have on their property!
While you should try to find out as much information about the seller as you can, including price expectations, you should never reveal too much about yourself.
By keeping your budget cards close to your chest, you can then reveal a higher offer, if needed, later on in the negotiations.
Set your emotions aside
As we’ve mentioned above, successful property investment is about using your head and not your heart.
Don’t get too attached to a property because once that happens you’ll end up spending more than you should to buy it.
Of course, that is what the vendor and sales agent wants, but it’s rarely in your best interest as a homebuyer or an investor.
If the negotiation stalls or the vendor wants a price that you know from your own research isn’t its true market value then you must walk away.
There will always be another opportunity – that’s a cold hard fact.
Reduce/eliminate any conditions
In fact the less amount of conditions you have on an offer, the more successful you are likely to be. The most common conditions that people add to a contract are:-
- Subject to finance
- Subject to building inspection
- Subject to solicitors approval
- Subject to sale of another property
- Subject to satisfactory bank valuation
And the list goes on…
These will all present great impediments to a seller and reduce your ability to negotiate strongly.
Intuitive Finance – the smart choice
Negotiation doesn’t come naturally to a lot of people but it’s a necessity to learn if you want to understand how to negotiate buying a house.
Understanding real estate agent negotiation tactics, as well as the seller’s motivation are two of the key elements to help you successfully buy a good property at the right price.
The world of banking and finance can be a pretty daunting one for both novice and sophisticated investors and since our establishment in 2002 we’ve focused on providing outstanding service and business standards.
This approach was vindicated when we were named Victoria’s favourite mortgage broker at the 2015 Investors Choice Awards.
So if you’re considering investing in property, why not contact Intuitive Finance today to ensure you have the right information and expert support on your side no matter what stage of the property ownership journey you are on.
Disclaimer:
The information provided in this article is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs.
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