November 18, 2015
How is your poker face? Whether you are buying your first home or you’ve purchased several properties in the past, negotiating with real estate agents is always a stressful period. When you are on the hunt for a home, be prepared to stand your ground during negations and always keep your budget front of mind.
Before deciding to make an offer, ask yourself the following questions:
- Does this property match my criteria?
- Can I realistically afford to purchase it?
- If I do stretch my budget for this property, will I still think it is worth the financial stress when the emotions settle?
- Have I let the real estate agent talk me into a property I didn’t set out to buy?
If you have sound, rational answers to each of these questions, then it is probably time to think about making an offer. Here are some tricks to keep up your sleeve when negotiating with real estate agents.
Know the market
Understanding the current market conditions should be part of your property research process. When you know what a reasonable asking price is for the area and current market, you put yourself in a position to negotiate a fair price.
Tip: In situations where there is high demand for a property, your best bet may be to place a realistic offer rather than a low one. This saves dragging out the negotiation process and reduces your risk of losing the property to a buyer with a better offer.
Ask the right questions
Don’t be afraid to ask the real estate agent lots of questions, as the answers you get may help you better understand the seller’s motivations, which can be useful when negotiating. For example, if the sellers are happy to accept a short settlement period or need to sell in a hurry, you will find yourself in a better position to negotiate a lower price.
Organise a pest and building inspection
The results of a pest and building inspection will help you to negotiate with confidence (or avoid purchasing a property with several defects). According to industry statistics, as many as one in three homes have faults such as illegal building, poor roofing, dampness and wiring and plumbing issues. If you can afford to repair any issues, you can use them to negotiate a lower price.
Keep your emotions in check
No matter how emotionally invested you have become in a property, it is important to keep this to yourself. Agents are very good at reading buyers and showing you are emotionally involved is a sign to them that you’ll be more willing to do whatever it takes to secure the property. Play it cool in all of your dealings with the agent to give yourself the best chance of negotiating a lower price.
Set the terms of your offer
Part of finalising your offer is deciding if you want to make it subject to any specific terms. Have the contract of sale checked by a solicitor prior to making your offer, so you know it is fair or whether you need to request any amendments.
Terms you may wish to consider include:
- I want to make an offer of $__ for the property.
- My preference for settlement is __ days.
- I will require a finance approval clause. Although I’ve already seen my broker, I need to get formal approval for finance of $__ from ‘__ Lender’ and this may take up to ten business days.
- My offer is subject to a satisfactory building report to be arranged by me and completed within 48 hours of my offer.
- I don’t have 10% cash available for a deposit, so I can offer __%.
- My offer is also subject to removal of the rubbish pile in the backyard prior to settlement.
Always remember your budget
No matter how good a deal is, be very wary of exceeding your budget. This is the golden rule of negotiating and, in the long run, you’ll be glad you stuck to your guns.