Secret negotiating tips for homebuyers
Real estate expert John McGrath reveals some insider tactics buyers can use to ‘seduce’ a vendor into selling for a good price.
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Many buyers are uncomfortable with the process of negotiation.
While the vendor has their agent to negotiate for them, buyers are at their own mercy (unless they use a buyer’s agent, though that is not the norm). All buyers need some negotiation skills, so I’ve outlined some basic principles for you below.
MY TOP NEGOTIATING TIPS FOR HOMEBUYERS
Care – but not that much
You have to be a little bit careful that you don’t play it too cool and negotiate yourself out of a purchase. It’s okay to reveal you’re interested in the property and you’d like to buy it, but don’t let on that you’re too attached. If the agent feels you’re interested but also have other options, that’s a very strong negotiating position.
Always be respectful of the vendor
If you can help the vendor get a win, you often get one yourself. Look for some common ground that works for both of you. For example, you can often trade off terms favourable to the vendor for a lower price.
You need to communicate that you’re a serious buyer and you can be trusted. Ways to do this include making your offers in writing and confirming you have finance approved. Don’t make negative comments about the property as this will only offend the vendor. They are influenced by their emotions, too!
Put a deadline on your offers
Use a deadline to encourage a decision. Give the vendor enough time – 5pm the next day is fair – and be aware that the agent will use this time to encourage other buyers to make offers. Simply extend the deadline if the vendor hasn’t reached a decision.
The best way of showing you’re serious is by signing the contract and attaching a cheque for the deposit. This makes your offer a lot more seductive.
Find out the vendor’s motivations
If you can get an understanding of where the seller is at, and what their next move is, you can figure out how you might be able to assist them and get a good deal as well. The terms and conditions of the contract can be powerful bargaining chips. You may be able to stand firm on your price, but give the vendor favourable terms to sweeten the deal.
Some examples:
• If they have bought elsewhere, they might be amenable to a lower price in exchange for a faster settlement.
• You can offer to release the deposit early so they can use it for their next home (get legal advice first).
• You can offer to rent the property to them after settlement if they haven’t secured a new home by then.
Win-win negotiations are best
It’s better to make your first offer somewhere below your walkaway price and move your offers upwards in small increments. If you believe the property is overpriced, it’s okay to open negotiations with a low or ‘cheeky’ offer. To be effective, it needs to be high enough to get the vendor’s attention, but low enough to give you room to negotiate up to your walkaway price.
If you have your heart set on owning the home, it might be better to start closer to the asking price. Justify your offer with factual information, such as recent comparable sales, and don’t catalogue the property’s faults.
Avoid making ultimatums such as, “This is my top-dollar price – take it or leave it”. You leave yourself no room to move. If you then make another higher offer, you’ll look untrustworthy.
Offering odd amounts is a great tactic, especially after making a couple of lower offers. It suggests there’s some logic to your offer and also implies you’re at your limit. Rather than offering $860,000 or $865,000, offer $863,500.
If you can’t get your price, get your conditions
You can make a higher offer contingent on the vendor undertaking certain repairs, or requesting that a piece of furniture be made an inclusion. You can also ask for a longer or shorter settlement to suit your own circumstances.
I hope these tips are helpful to you. Good luck out there this Spring season.
* John McGrath is the founder, Managing Director and Chief Executive Officer of McGrath Estate Agents
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