Part III: Mastering the Art of Negotiation.
When we’re talking about buying property, we’re talking about negotiating probably the largest asset a person will ever buy in their lifetime; a small mistake could cost you 100s of 1000s of dollars it’s vital to plan ahead and make the right decisions from the outset.
The ideal way to approach negotiations is beginning at the end. Knowing where and how you want the process to finish will help you plot a path of least resistance.
When it comes to deriving the necessary information, such as the vendor’s reasons for selling, if you have that trust with the agent he or she will be more open to sharing those reasons with you. Whether there’s a divorce or the vendor is committed elsewhere and prefers a quick sale, the best course of action is to ask outright “what is the situation of the vendor?” and then stay quiet and let the agent talk. Bear in mind, that you may find a more willing ally in the sub-agent on the property. Sales agents usually handle their business in pairs or more, and while you will likely be greeted exclusively with those standard automated sales responses from the lead agent, the sub-agent who is privy to much of the same information, may not be as refined in the way they deliver those responses. Learn to differentiate between those automated responses and genuine responses to gain clarity.
You want to know what is on the agency agreement, what the interest levels from other parties are like and ultimately what the sales agent believes the property will sell for. Don’t let them wheedle out what you think it is worth as you will potentially set yourself up for failure by revealing your limits.
Utilise the knowledge you glean from the agent at the right moments because ultimately you’ve got to look out for your own best interests because the sales agent’s focus is on getting the best price for the vendor. Knowledge is undoubtedly powerful but timing is everything. When it comes to the property, always do your research upfront before submitting any offer. Understand what the value of the property is based on comparable sales, what the value is based on the summation of the land and physical building. Is there any obvious opportunity which might affect the price i.e. zoning changes, flexibility to develop? Remember, it’s not a case of whether you can afford it; it is about where you see the value of the property and if this aligns to your goals.
Establish your buying range and work backwards so you are clear on your starting offer as a good purchase price all the way through to your walk-away price. This key step in negotiations allows you to anticipate their responses, thus plotting the path of least resistance for you. Your first offer should be an anchor offer, designed to be rejected but setting a bottom limit that subsequently opens the dialogue for further negotiation. Good buyer’s agents will have already assessed the vendor, the agent and the circumstances, determined fair value, and importantly developed an acquisition strategy that best positions their client to meet their goals.
If the opportunity arises when negotiations are in the balance try and arrange a face to face meeting. It is much harder for someone to say no when face to face. Equally importantly, make sure to set a deadline for every offer. If you give an agent and vendor too much time to contemplate your offer that also gives them time to leverage other interested parties. It’s in your best interests to expedite things.
Once the deal has been signed, although the majority of the negotiation is over there is still room for a pre-settlement inspection to ensure that no last minute alterations have been made by the vendor, for example, that beautiful art deco door that once stood between the kitchen and garden has now been replaced with a cheap slab of wood. The negotiation is not over until the title of the property has been officially transferred and settlement has taken place. Use those last moments pre-settlement, wisely. If in doubt and you’d like an expert on your side, we’re always here to help.