Price negotiation is an art, and like every art, practice makes perfect. However, there are five simple ways you can avoid risking it all when it comes to buying property. We point out the most common mistakes buyers make when negotiating price.
Mistake #1: Revealing your walk-away price
If you reveal your final walk-away price to the seller (or the seller’s agent), they will attempt to get as close as possible to that walk-away price (meaning they will squeeze every last cent out of you). You could end up negotiating prices that are a lot higher than you anticipated or what the property is in fact worth.
TIP: Keep your cards to yourself – if you’re pushed to reveal your budget, advise the seller or agent that you have adequate finance approval but are looking to buy a property at market value. Give a market-price range estimate if necessary, or indicate a price that is lower than what you are capable of spending.
Mistake #2: Being the emotional buyer
You might absolutely love a property, but show desperation and it could be your downfall. Sellers and agents can smell buyer desperation a mile away and will not hold back from playing on your heartstrings. They will use threats of other interested buyers, time running out, or vendor resistance, and they will try to get you to commit to the highest possible price.
TIP: Conceal your emotions and balance the playing field by pointing out factors that might realistically and adversely impact the value of the property, such as work required to be done, structural defects, troublesome easements, covenants and so on. A building inspection or pest report, as well as a copy of the contract, can be wonderfully beneficial in this regard.
Mistake #3: Not knowing the market
While it’s true that the ultimate value of a property is what someone will pay for it, you need to have a fair bit of research and area knowledge in your head to be able to negotiate effectively. Overvaluing or undervaluing a property can make you seem like a gullible or non-serious buyer.
TIP: Take the time to do your research, go to inspections and get a good picture of the property market in your area before making an offer.
Mistake #4: Not being ready, willing and able
When it comes to negotiating property price, it helps to be a ready, willing and able buyer. That means having pre-approved finance in place, a deposit or deposit bond and the legal capacity to buy right away. Without the certainty of these benefits, you could be wasting the seller’s and agent’s time, as well as your own.
TIP: Get all your ducks lined up before you enter property price negotiations, as it will leverage you as a serious buyer and prevent problems securing the property down the track. Also, use your readiness to your advantage. Advise the agent if you can settle within a shorter timeframe, waive the cooling off period or are willing to release the deposit to the vendor before settlement.
Mistake #5: Making a silly offer
Sometimes making a silly low offer can work wonders, but mostly it can be off-putting for a seller and can damage your relationship with the agent, who is your bridge to getting the seller to agree to your purchase price.
If you think the seller will go for a silly offer, there are usually a few indicators, but it takes sussing out their story from the agent, neighbours or locals. Questions you want to ask include: how long has the property been on the market, has it been passed in at an auction, why is the vendor selling (personal or financial reasons) and how desperately does the vendor want to sell.
Circumstances such as marital breakdowns, deceased vendors, foreclosures, business problems, or failed sales attempts are unfortunate, but can benefit you when negotiating purchase price.
TIP: Know the seller’s story and, if at all possible, use it to your best advantage.
There are no hard and fast guarantees when it comes to negotiating, but with these helpful tips you’ll be on your way to a successful price negotiation.