On Personal Growth and Business Development

7 Effective Negotiation Tactics When Buying a Property

7 Little Known Negotiation Tactics When Buying a PropertyIt makes sense that before you attempt to buy any property, you must do your homework. Those who are relatively new to real estate tend to struggle with negotiations–mostly because they aren’t even aware of common strategies.

However, if you have been doing it for years, you will find some good tips too. Here is the list of 7 powerful methods that can help you beat the competition.

1) Don’t Burn Bridges

A homeowner put his property on the market in April, and negotiations were underway with a number of potential buyers. Then the vendor had some health problems, and found the process was too stressful – he stepped away from the sale entirely without accepting any offers. Technically, though, the property was still listed with the real estate agent.

One buyer kept in contact with the agent and in July the owner again wanted to sell the property, so this buyer’s offer was finally accepted. Time can play in your favour and sometimes the vendor just needs to adjust to reality when it comes to the price.

A property that has been on the market for two months will just sit there, and everybody else forgets about it. So don’t burn bridges and don’t get into arguments; just be patient.

2) Make an Unconditional Offer

Cash is more than just king, it’s an all-trumping ace when it comes to offers. Vendors love unconditional offers and will often choose a lower ‘cash’ offer over a higher conditional offer.

This is particularly true where a vendor is keen to make a quick sale, or a deceased estate where the money will be split among several people. An unconditional offer tells the vendor you are serious about buying, you have the money ready and, if accepted, the deal is almost guaranteed to go through.

3) Why Offer Flexible Settlement Date or Bigger Deposit?

An elderly couple listed their property through an agency, but were determined to sell before they put a contract on another property. A buyer secured a contract by offering the same amount of money as another interested party, but making the settlement open-ended. The couple could remain in their property until they found another one, giving just 15 working days’ notice before settlement. It took them five months to buy a new property, but that wasn’t a problem for the buyer.

Don’t make the mistake of thinking that negotiating is just about money. It’s about the whole package, and you can make your offer more appealing by throwing in sweeteners for the vendor. Most commonly this is about the settlement date. Vendors who have already purchased may want a simultaneous settlement date, or they may want a long settlement so they can go house-hunting.

It could also be the size of the deposit. Sometimes vendors need a certain amount of cash to pay off a loan, for instance, and you can make your offer more appealing by raising the deposit to that amount. Don’t try going the other way in a sellers’ market though; vendors don’t take kindly towards a buyer who tries to negotiate them down on the deposit and the price at the same time.

4) Build Your Network

Property professionals will tell you that many of their best deals come from leads generated by their networks of real estate agents, property buyers and fellow investors. In order to build your network, go to open homes in your area, talk to the agents and tell them what you want. If you miss out on one property, good agents will call you when something similar comes up.

Real estate agents who know you well may also tip you off when they are about to get a listing, allowing you to see the property the moment the listing is secured and before the advertising goes online.

Not all vendors follow the traditional route of listing with an agent and advertising prolifically. Some prefer to fly under the radar. Private sales are one example – these can be a great way to negotiate a good deal as the vendor is already saving thousands of dollars on agents’ fees.

5) Be Patient and Follow Up

In a buyers’ market, one negotiating tactic is to put an expiry date and time on your offer, which puts pressure on the vendor to make a decision. But in a sellers’ market, you’re more likely to succeed by leaving your offer on the table until the deal is settled.

This can work in many scenarios; for instance, when another offer falls through some time after it has been accepted and the vendor doesn’t want to go through the trouble of remarketing the property. The vendor may decide to take the easy option and accept your offer.

6) Make a Reasonable Offer

Many buyers think it’s a smart idea to start with a “lowball” or “cheeky” offer, well below what the property is really worth, and hope to bargain the vendor down. That might work if you were the only buyer interested in the property. But if you’re one of many putting in offers, a low-ball offer will often irritate vendors and they may write you off as someone with whom they don’t want to negotiate.

Assuming you’ve done your homework, you should know what the property is worth, and how much you can afford to pay for it to make it a good investment. You should go in with a strong offer – below what you want to pay, to leave you room to move, but not insultingly low.

7) Give and Take

You want to be easy to deal with, but definitely not a pushover. When you accept an amendment in the sale and purchase agreement, you should ask for something else in return. If you raise the value of your offer, add in a clause that allows you early access for renovations, for example.

If you return an agreement with an offer that is still not what the vendor wants, you could try increasing the deposit or making the settlement flexible. This shows you are always trying to make the deal work, even when you’ve reached your price limit.

Question: What tactics do you use to get the best deal?  Share your experience in the comments box below.

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