Whether you’re a first-time buyer or an experienced investor, it’s always nice to keep some extra money in your pocket. When faced with the dynamic property landscape in Melbourne, your chances of sealing the best possible deal increase when you arm yourself with knowledge and tactics.
But not everyone is a natural negotiator, and mistakes in property buying can be costly. Your negotiation skills can significantly impact your financial outcome, so adequate preparation is key.
As an experienced buyer’s advocate in Melbourne, I’ve encountered my fair share of negotiations. Although the market is ever-changing, one thing has remained consistent: a successful negation it’s a collaborative effort between the buyer and the advocate. As well as brushing up on your negotiation skills, considering the guidance of a buyer’s advocate can elevate your strategy.
To improve your property negotiation skills, it’s essential to understand the market, utilise online research tools, and familiarise yourself with the neighbourhood. Recognising selling agent tactics and knowing how to respond is another vital skill.
With over a decade at the helm of Property Analytics, I’m happy to share some insider tips and strategies to level up your property negotiation game.
The First Negotiating Principle: Know Who Has the Leverage
Negotiation is about leverage. When purchasing a property, you have the most leverage when:
- The property has been on the market for a long time, and/or
- no competition exists from other buyers.
The first point of leverage (time on market) is easy to determine and simple to understand. Every property will sell for the right price, and properties that languish on the market are either overpriced or poorly marketed. Vendors are more willing to compromise as time goes by.
When searching for development sites, sort suitable properties from ‘Oldest to Newest’. And, before running a feasibility, speak to the selling agent to understand how the campaign has progressed: Have there been any written offers, and if yes, on what terms? What are the vendor’s circumstances? Why no sale yet?
This leads to understanding the second leverage point (how much interest exists from other buyers). Follow these basic principles:
- If the agent isn’t forthcoming with info, and isn’t asking you questions, then assume they’re pretty relaxed, and there are probably other interested parties
- If the agent is asking you questions (What type of property are you looking for? What are your pros and cons for this property? Have you been looking for a while?), then assume they’re eager for an offer, and there’s probably little active interest
- If the agent volunteers a lot of info about the campaign, the vendor, and the property, then assume that he/she is anxious, and you’re quite possibly the only real interested party
How to Use Leverage During Negotiations: A Case Study
I recently purchased a development site for a client where the property had been on the market for over six months. The campaign started in October 2015 (a busy selling season, where lots of properties were available) with a BIR of $1.25m-$1.4m. Given this advertised range, most buyers would consider vendor expectations around $1.5m at auction. The property passed in on a vendor bid.
It turned into private sale with a BIR of $1.20m – $1.32m. Over-pricing is the kiss of death for any Melbourne campaign, and the fact that no clear asking price was provided, meant that buyers would still expect a price north of $1.3m.
I quietly tracked the campaign, and in mid-April contacted the selling agent. He immediately told me about the slope of the block, the difficulties associated with managing three vendors, and the recent challenges that overseas developers face in getting funds out.
“OK, my client doesn’t mess around. What is the absolute minimum the vendor would likely accept?“. He felt $1.1m was the barrier in his clients’ minds.
I quickly ran a feasibility, and the numbers looked good, with total return on capital well in excess of 20%. My client was very interested indeed. Now came the fun part – negotiation!
I primed the selling agent with the problems – high construction costs due to the slope of land, single driveway design (body corporate), maximum dwelling sizes of 24 squares, etc. “I’m telling you all this so that you understand our offer of $1.05m with a 90-day settlement“. This was clearly not what he wanted to hear, but we both understood I had a lot of leverage to play with – the campaign was 6 months in, without any serious interest.
He came back within five minutes. The vendors hoped for $1.1m-$1.15m (then why was he advertising it at $1.2m-$1.32m?). They may consider below $1.1m but not $50,000 below. He said, “maybe $1.08m would get it done…”.
My client was happy with $1.08m (heck, it was a great buy at $1.1m), but I persuaded him to let me negotiate further, because this is the perverse thing – vendors need negotiations to be tough in order to feel like the highest price is achieved. We went back with $1.07m, and a few conversations later, bought it for $1.075m.
Why did we get such a good deal?
It’s about leverage. After a botched six-month campaign that began with price expectations of $1.3m+, the vendor became desperate, and the selling agent even more so. Just over two working days following my initial enquiry, we had signed contracts at $1.075m with a 90-day settlement. Ah, the joys of real estate!
If you want to collaborate with a buyers agent in Melbourne to build your own success story, get in touch with Property Analytics.
Mastering The Art of Property Negotiation: 5 Tested Tips for Success
To avoid common mistakes and secure a fair deal, it’s important to approach negotiations with a clear, level-headed mindset.
- Keep Emotions in Check. Emotions can cloud judgment and lead to overvaluing a property or exceeding your budget. Approach negotiations with a level-headed mindset, reminding yourself that there are always other opportunities. Don’t be afraid to stand your ground.
- Do Your Homework. Research the local market to determine the fair value of a property. Use online tools, and historical sales data, and consult with experts to gather knowledge and negotiate from an informed position.
- Understand Seller Tactics. Sellers and their agents have their own tactics, which may not always be transparent. Being aware of these tactics can help you navigate negotiations effectively. We’ll explore seller mindset and agent tactics in later sections.
- Be Financially Prepared. Obtaining pre-approval from a lender strengthens your negotiation position and shows sellers you are a serious buyer. It provides a clear understanding of your budget and increases the likelihood of your offer being taken seriously.
- Know When to Walk Away. If the price isn’t right, don’t be afraid to walk away. There’s always another property out there.
Remember, negotiation is a skill and like any skill, it takes practice. So, don’t be disheartened if you don’t become a master overnight. It’s a learning curve, but with these tips, you’re well on your way to becoming an adept property negotiator.
Navigating Property Negotiation Without a Set Price
Ever wondered why some properties don’t have a fixed price? When browsing real estate listings, you might encounter terms like ‘offers,’ ‘expressions of interest,’ ‘contact agent,’ or ‘express sale’ instead of specific prices. Selling agents use these tactics to gauge interest in a changing market.
In recent years, the trend of properties without set prices, known as ‘price on application’ or POA, has been on the rise. This can cause confusion and frustration. Let’s walk through a step-by-step process for handling a property that doesn’t have a set price.
- Firstly, don’t hesitate to ask the agent for a price range. They may not reveal the exact price, but they usually provide a rough estimate. This helps you determine if the property fits your budget, avoiding unpleasant surprises later on.
- Secondly, do your research. Understand the local property market by utilising online resources to research similar properties in the area and their selling prices.
- Next, limit your information. It’s wise not to disclose your maximum budget to the selling agent. Remember, they represent the seller, not you. Keeping your budget confidential prevents artificially inflated prices.
- Lastly, be prepared to walk away if negotiations become intense. Buying a property should be a rational decision, not an emotional one. If the price doesn’t align with your needs, there will always be other properties (hopefully with price tags!).
Utilising Online Research Tools
In property negotiations, information is power. Online research tools, for example, are a game-changer in the property market, helping us understand the heartbeat of an area and stay on top of market trends.
Real estate websites offer more than just property listings. They provide market data, suburb profiles, and price trends.
To use these tools effectively, go beyond the listing and dig deeper. Explore past sales records, time on the market, demographic data, and school zones. These insights can help you assess the property’s value and negotiation potential.
Remember, digital tools complement traditional research methods. Attending home openings gives you a tangible feel of the property and its surroundings. Be aware that online tools have limitations. They may not always be up-to-date or have comprehensive data for all suburbs. However, when used wisely, they can form a solid foundation for your negotiation strategy.
Find Out as Much as You Can About the Property
Gathering as much information as possible about the property will greatly support your negotiation efforts. Consider these key questions:
- How long has the property been on the market?
- What is the turnout like at open house inspections?
- What is the reason for selling?
- Is there any urgency on the seller’s side? Have they purchased another property?
- What is the age and overall condition of the home?
- Are there any noticeable structural issues?
- Are there any drawbacks or negative aspects to the house?
- How spacious is the yard?
While the selling agent may provide some answers, it’s important to remember they represent the vendor’s interests. You can conduct your own research and make observations to uncover additional information.
Understanding the Suburb
Understanding the suburb you’re interested in is important for property negotiations. To do this, attend home opens like personal guided tours. It’s an opportunity to inspect properties and get a feel for the community.
Observe neighbourhood dynamics, demographics, and local amenities. Does it have ample green spaces? How close are the schools, hospitals, or local grocery stores? Do people in the neighbourhood seem friendly? These are all critical factors that can influence your property negotiation.
It’s also important to know the market trends. Are properties selling quickly or staying on the market? This knowledge helps you gauge your bargaining power. In busy suburbs, sellers have an advantage, while quieter areas may offer more negotiation room.
Remember, understanding your suburb is about getting a better deal on your dream property, not just falling in love with the location.
They’re an open invitation to not only inspect a property but to understand the community’s vibe and way of life. Here, you get to observe the neighbourhood dynamics, the demographics, and even the local amenities firsthand.
Getting Pre-Approved and Ready to Act
Financial preparedness strengthens your position as a buyer and instils confidence in sellers. Securing pre-approval from a lender will help you to gain a clear understanding of your budget and demonstrate your ability to follow through on offers.
- Determine your budget: Figure out how much you can comfortably afford before diving into negotiations. Consider your income, expenses, and any existing debts. This will give you a clear idea of your financial limits.
- Get pre-approval: Talk to your bank or mortgage broker and get pre-approved for a loan. This shows sellers that you’re serious and financially capable. Plus, it gives you a stronger position when negotiating.
Having your finances in order not only boosts your confidence but also demonstrates your readiness to make a solid offer. So, take the time to sort out your budget and get that pre-approval before you step into the negotiation arena.
The Value of a Buyer’s Agent in Property Negotiation
A buyer’s agent is a professional negotiator who understands the property market and can provide valuable guidance. They can save you time, stress, and money, serving as a buffer against the tactics of selling agents.
Equipped with in-depth knowledge of the local property market, a buyer’s agent can provide an accurate estimate of a property’s worth. We have access to data most of us don’t, like past sale prices and property histories.
Besides determining the market value, a buyer’s agent also assists in strategising your negotiation. Plus, they can save you from the hair-pulling frustration that often comes with property negotiations.
Make sure you and your agent are on the same page to make sure the process is smooth and stress-free. Look for someone with a proven track record, positive testimonials, and a professional approach. This decision is significant, as property buying is one of the most important financial decisions you’ll make.
If you need a buyer’s agent in Melbourne, turn to Property Analytics. Our proven process has been designed to help you negotiate your way into your dream property.
Crafting a Winning Negotiation Strategy
With the foundational knowledge in place, it’s time to craft your own negotiation strategy.
- Setting Clear Objectives. Define your goals and priorities before entering negotiations. This clarity helps you stay focused and make strategic decisions.
- Effective Communication. Master the art of effective communication to build rapport and establish a productive dialogue with the seller or their agent.
Flexibility and Creativity. Be open to alternative solutions and flexible in your approach. Creative solutions can lead to win-win outcomes for both parties.
- Take Emotions out of Property Purchase. By keeping a level-headed approach during negotiations and maintaining a sense of detachment, you’ll have a better chance of staying in control.
- Get a Professional Opinion. By teaming up with a buyer’s agent in Melbourne or enlisting a Buyer’s agent to negotiate on your behalf, you can confidently secure the best deal possible.
If you choose Property Analytics as your property buyers agent in Melbourne I will:
- Determine an overall strategy: Including what, where, and when you should buy. I will also explain why you should acquire each asset and how much you should aim to pay.
- Step-by-step tactics and tasks: Including property market analysis, shortlisting, property appraisals, feasibility reports, auction attendance and bidding at auction on your behalf, negotiating private sales, having contracts looked over, and full property handover services.
Beating the Competition and Becoming a Master Negotiator in Property Buying
Congratulations on discovering ‘the perfect one’ – the property that ticks off every one of your prerequisites. You can already picture yourself popping a bottle of champagne upon settlement. Unfortunately, so can a few other homebuyers. To be one step ahead of them, it always pays off to be prepared.
Successfully negotiating property prices requires a combination of knowledge, preparation, and strategic thinking. By avoiding common mistakes, understanding the seller’s mindset, utilising a buyer’s agent, and conducting thorough research, you can become a master negotiator in the world of property buying.
For the opportunity to collaborate with experienced negotiators and buyer’s agents in Melbourne, reach out to Property Analytics. They can provide valuable assistance and guidance in your property search and negotiation process.