9 tips to help you negotiate when buying a new property
Negotiation is a fundamental aspect of buying a property, whether it be your dream home or a savvy investment.
But negotiation is so much more than simply haggling to get a few thousand dollars knocked off a purchase price.
We’ve come up with 9 key tips to help you understand what successful negotiation entails and arm you with the skills you need to successfully hammer out an agreement that satisfies both parties and gets you into your property sooner.
1. Understand the general and local market
Knowledge is your number one ally when it comes to negotiating a property deal. It’s essential to research the local market and check recent comparable sales to get a realistic idea of what a property is worth.
It’s also important to be aware of the market cycle. If you are buying in a seller’s market, you will probably have to adjust your offer upwards to be competitive, but in a buyer’s market, you are likely to have a little more room for negotiating downwards, though never so much so that your offer is upsetting to the vendor!
2. Understand the vendor
Every vendor has their own story. Learning as much as you can about the property and why the vendor is selling can be crucial to a successful negotiation. Understanding the vendor’s needs will help you tailor an offer to suit them while also providing you with some leverage to press for the things you want.
Perhaps they need a long settlement or are keen to have the new owners keep the beautiful old jacaranda that they planted in the backyard 40 years ago. Selling can be an emotional experience, and it’s the little things that can sometimes clench a deal.
3. Understand the property
Do your due diligence and learn as much as you can about the property – buildings and land. Any small defects can be used as bargaining chips in your negotiations, and you will also get a far better idea of the property’s value and potential.
Having the property independently valued is a great idea. If you don’t manage to get it done before you put in an offer, think about including a “subject to valuation” clause in your offer. If, when you do have it valued, the valuation is lower than the asking price, you can use this as a valid rationale for reducing the purchase price.
If the valuation is higher than the asking price or your offer, then you can just keep it to yourself.
4. Know and stick to your limits
Be clear-headed about money and stick to your limits. Have your finance in place, and never get carried away into offering more than you can afford.
Have a clear idea of your own non-negotiables, too, so that they don’t get lost in the heat of the moment. Consider settlement time, how much of a deposit you can pay upfront, what the situation is with existing tenants, and whatever fixtures or inclusions you can’t do without (or absolutely don’t want).
5. Make a sensible offer
Negotiations won’t get very far if your opening offer is insultingly low or ridiculously high. In the first case, you may offend the vendor and find them hostile to any further discussions. In the second, you will almost certainly bag the property, but will probably be paying far more than it is worth.
Your research into similar sales and the local market will help you formulate a reasonable first offer that strikes a good balance between a bargain price for you and an acceptable price for the vendor.
6. Always substantiate your offer
Be prepared to explain why you are offering less than the listed price. Use the information from your research into comparable sales, the changing market and the property itself to justify your offer.
Providing this information objectively will lend credibility to your offer and strengthen your suit.
7. Wait for a counter-offer before increasing your own
Patience is paramount in a negotiation. People need time to process information and rarely respond well to being pressed. Also, if you make an offer and then increase it without having heard back from the vendor, you will be weakening your own position. The vendor will assume that you are going to offer more without them having to make any effort or concessions.
When you do receive a counter-offer, resist the temptation to increase your offer by a large amount to meet their demands. Small, decreasing increments are the secret.
For example, if your first offer of $650,000 is met with a counter-offer of $725,000, try $665,000 rather than jumping up to $700,000. If that’s not accepted, increase to $675,000, then $680,000
By increasing your offers in this way, you will let the vendor know that you are exhausting your possibilities and that it would be best to accept your offer before you give up and walk away.
8. Include negotiable conditions in your offer
Sometimes including conditions that you are happy to compromise on in your offer will work in your favour through the negotiation.
Include several conditions that you don’t mind having negotiated out of the deal, such as a long settlement, a very small deposit, and several “subject to” clauses for inspections and so on. Then let the vendor negotiate you out of them in exchange for a reduced purchase price.
The vendor will feel that they have won, and so will you!
9. Use your words
Language matters when it comes to negotiation.
One sure-fire way to get a vendor’s hackles raised is to criticise the property in an effort to drive down the asking price. Telling them that the property is a dump won’t help your cause. It’s far better to use phrases like “has a lot of potential but clearly needs some work”. Showing how much that work is likely to cost will provide credible justification for you to adjust your offer accordingly.
It’s also important not to back yourself into a corner by using phrases like “this is my final offer” when it isn’t. If the vendor doesn’t accept the offer, any higher offer from you won’t appear credible and will probably be rejected, too.
Trust is an important element in negotiation, and throwaway comments can sometimes undermine the trust you’ve built up and scupper your negotiations.
9. A final word
Being a good negotiator doesn’t mean digging your heels in and refusing to budge from a set position until the other party gives in or walks away.
It’s a question of understanding and respecting the needs of both parties and offering sensible concessions to reach the best outcome for everybody.
Remember that careful research, a clear head, and a good dose of patience will stand you in the best stead when it comes to negotiating for your next property.
Other buying, selling and investing articles and resources
Guide to property investment success in NSW
Selling a house or apartment in NSW eBook
Buying a house or apartment in NSW eBook
