Negotiating with a real estate agent can be pretty intimidating, especially if you’ve never done it before. When it comes down to it, you want to purchase a property for the lowest possible price while the seller and their agent are working towards the opposite.
But rather than thinking of it as locking horns with someone, it’s better to see it as working together to strike a deal that benefits everyone involved. Below, we’ve compiled just a few tips to help you put your best foot forward.
1. Do your homework
It’s a good idea to spend some time studying the market, but you’ll also want to hone in on the property itself and the immediate area. Find out how long the house or apartment has been on the market, why the vendor is selling, and how they arrived at the asking price.
If you’re trying to gauge how much a home is worth, try to track down comparable properties in the area that have sold in the last 6 to 12 months.
Mozo’s property expert, Steve Jovcevski also suggests running a few checks to make sure the property passes muster.
“If it’s a unit, look at the strata reports and the meetings to see if any issues have been discussed. If it’s a house, make sure a pest and building inspection has been done. Sometimes the agents do this themselves and charge a fee of around $50 to access the report, which is obviously much cheaper than paying, say, $500 to organise a check yourself,” he said.
2. Make sure you have pre-approval
Before you reach the stage where you’re making an offer, it’s important you manage to secure pre-approval from your bank or lender.
Not only will it give you an idea of how much you’ll be able to borrow - letting you narrow down your search to properties you can afford - it will also give you an edge over other buyers when it comes to negotiating.
Why’s that? Well, it’s not uncommon for real estate agents and vendors to favour whoever is able to buy the property the fastest. If you have formal pre-approval, it signals to agents that you’re serious about buying, and could see you bumped up a couple of spots in their eyes.
3. Know your bargaining strength
There’s more to negotiating than just offering the highest price, which is why it pays to be aware of all the possible bargaining chips you might have that could give you an advantage over other buyers.
How quickly you’ll be able to purchase the property, how large your deposit is — these are the kinds of things that might be weighted fairly highly by real estate agents looking to close a deal.
Jovcevski suggests talking to the agent and trying to get as much information about the vendor as possible. Understanding their situation - for example, do they want to settle quickly, or over a longer period? - could give you some clues about the best way to proceed.
“For example, it might be the case that the vendor is still looking for another property and wants to rent it from the buyer until settlement. They might be willing to sell to you at a lower price if they can get that benefit, because it could save them a lot of money in bridging finance.”
4. Know your limit
When it comes time to exchange offers, it’s a good idea to have a maximum price in mind. If things cross that line and it’s clear that you won’t be able to negotiate a better deal, you should be prepared to walk away.
That might be a difficult decision to make, but it’s generally best to avoid paying more than market value. Plus, there will always be other properties.
5. Don’t appear too keen
If you’ve made it clear to the agent that your heart is set on a particular property and you haven’t considered any other options, you’ll find yourself in a much weaker bargaining position than if you told them it was one of several you’re interested in. So make sure you signal a readiness to turn your attention elsewhere if you can’t come to an agreement that suits you.
“Don’t be overly excited about the property. You want them to think that it’s just another option, because if they think that you really want the property, then they’re going to be negotiating a lot harder,” said Jovcevski.
“I’d advise against making an offer at purchase price too, because then all of a sudden they’re thinking it’s perhaps too cheap, and maybe someone will pay a bit more. What they’ll try to do is leverage your offer to get a better offer from other buyers.”
6. Consider one final negotiation
Even after your offer has been accepted and the papers have been drawn up, that doesn’t necessarily mean the negotiation stage has wrapped up completely. Issues revealed by building and pest inspections might wind up tilting things in your favour, teeing you up to make a second, discounted offer.