Article by Mozo
Whether you’re a novice home buyer or seasoned pro, investing in property can be a perplexing time and sometimes confusing. When is the best time to buy anyway? There’s a buying trend we need to follow, right?
But if you’re hankering to close a deal and get that deed in your name and pocket (or locked in a safe) then you’re probably prepared to pull out the handy negotiation tools to invest when you want to, not when the market says to.
Umm...Someone said it was a buyer’s market. Wait, what?! Are you sure about that? Because if you take a closer look around, it’s more like a seller’s market. What does that mean to you, the buyer? It means that haggling the price may not be an option, or at least, you’ll probably have little room to work with. Why? Because there are a trillion buyers who are willing to pay what you can afford, and more.
So in the end, it’s all about timing. Timing that you inspect the property first - before the family with $200k more. Get to it! Bargain as much as you think you should, maintaining a realistic expectation on how low the seller will go. Haggle too much and watch your phone enquiries go unanswered. Remember, the agent wants a good deal too. Commission pays for their fancy cars, dontcha know.
Obviously the concept of bargaining down a property’s price is when it’s for sale, not auction. You can however make an offer before auction date. Not every agent or seller is into that, especially if the market is hot and both parties think they’ll get more dollars from the outcome.
But for properties that are listed for sale, the timing of your offer means everything to the vendor. Things you need to consider while researching the property you’re interested in:
By knowing the answers to these questions will better guide you on the position of the seller and how desperate they are in selling it. Sure this is all an assumption, but it’s a guided assumption as opposed to making an offer straight out cold without any background knowledge.
Well that’s good. Pat on the back. Not easy finding the time, is it? But when you're investing a big chunk of your money into something, you ought to make the time. Speaking of which, this isn't the only property you’ve enquired about, right?
You’re going to need to compare at least 30-50 different properties (of similar types if you can) to understand the kind of prices and comparisons you’re up against. Well not against, but having all the information in your hands in the direct area you want to invest in means that you're potentially well-versed and know exactly what to expect when it comes to prices and how much sellers are willing to accept.
And it’s not just the immediate area. It’s neighbouring suburbs too. The more you research, the more you pick up on trends and understand exactly what you’re getting yourself into. Also the more prepared you seem when you make your enquiry.
Remember the old saying: that agents lie through their teeth, just to get a sale? Well, sure, you may not be able to see through all their dialogue, but by combing through the sale and auctions statistics in the immediate and surrounding areas means that you at least appear to be articulate in what you’re looking for. With sound knowledge, no one can pull the wool over your eyes. Not even a crafty real estate agent! (No offence agent buddies.)
Since you’ve asked politely, we’ll let you in on a secret - although you've done a thorough comb-through the immediate and surrounding areas, and have compared recent successful sales and auction prices, you need to understand this: not every property is the same.
What are the benefits to surrounding properties being similar, but just not the same? You can make fair comparisons that may influence the direction of the price. Here are some factors that can push the price of the property up or down, depending on your mojo and your finer observation skills:
Positive language. ALWAYS. Using a negative tone will make you seem like an annoying handful who wants something for nothing. You have to understand that buying and selling is a relationship between two parties. And it needs to be a win-win. A win for you and a win for the seller. Remember: The agent representing the property is the intermediate party. Be nice to them, because they may have a larger influence over the lucky one who gets in.
Here’s an example of what not to say:
"This place is a wreck. It’s just not worth the asking price. I’m going to offer $XX"
Instead, you could say:
"I’m really interested in this property. I can see it’s in good condition but needs a little work here and there. Is the owner prepared to come down a little in price?'
Can you see the difference between the two sentences? You’re virtually saying the same sort of thing just posed in a different way. The latter is certainly more polite and shows that you're a serious contender, not some jovial has-been who's walking around with a chip on their shoulder.
There’s no real right or wrong answer here, but you don’t expect to be taken seriously if your offer is way too low. What’s too low? Mozo advises that you don’t go below 30% of the asking price. In some cases, even that’s considered too low.
After your first offer, if half decent, the vendor will likely come back to you with a counter offer. Unless you’re on the money. Otherwise expect to play a little tug-o-war for a bit until a price is agreed on.
However, don’t expect to be the winning party, just because you’ve made an offer! There could well and truly be a few other interested parties making offers at the same time, so be prepared to raise the bar where it’s needed. If you can.
Hang on to your wallet! Are you making an offer with your heart or your head? If you’ve been playing hard to get with the vendor, or vice versa, the agent may push you over your limits. You really want that house, don’t you? Well just because you really, really want it, doesn't mean you necessarily can have it. Check before you leap.
Note: The agent or vendor does not need to know your exact buying power. After all, you may decide to put the balance on a renovation or a separate apartment altogether for investment. Choice is yours.
Note: This usually makes vendors a little desperate themselves and super eager to close the deal. By remaining calm and realistic with your offerings, you’re likely to secure the deal with the next offer you make. Cross fingers some other party doesn't outbid you!