The good news is you don’t have to be a gifted negotiator to nab a great deal on your next investment property.
You just need to learn a few tricks from the pros. So how do buyer’s agents negotiate on a deal?
It starts with having a deep understanding of what the vendor actually wants says Cate Bakos, founder of Cate Bakos Property.
“Some vendors are driven only by price, but more often than not, they have other requirements or desires. Tapping into these to frame your offer is always a good idea. This is generally only done via the agent which means you need to establish a good, trusting rapport with them,” says Bakos.
You also need to understand how the vendor wishes to sell. Some vendors prefer an auction, and Bakos points out that in situations like this, pre-auction offers are fruitless and just undermine the negotiator before the big day.
Having a solid market intelligence is also important according to Miriam Sandkuhler, founder of buyer’s agency Property Maven.
“You need to know the area that you’re looking to buy intimately. You should identify at least five recent sales of comparable properties. This eliminates some anomalies such as unusually high selling price because someone got emotional,” says Sandkuhler.
How to: negotiate like a pro
To help you get a leg up on the negotiating process, here are some of the insider tips from the experts.
- Study comparable sales
When you do your homework, it shows you’re serious and are likely to extract more information from the selling agents says Bakos.
“If you go to an agent with comparable sales on hand, a legally reviewed contract and an understanding of demand in the area for this particular type of property, you should be in a position to talk honestly with the agent about which recent past sales are reliable, comparable sales. Agents will generally chat more openly about their honest opinion when the buyer has educated themselves,” she says.
Knowing what other houses in the area have sold for is valuable information.
- Cultivate goodwill with the agent
It’s true that they’re working for the vendor, but don’t underestimate the power of being genuinely nice towards the selling agent. Treating the agent politely might just get you the crucial information about the vendor’s situation and their expectations.
For example, they may tell you what the vendors value in terms of the pace of the transaction, the style of communication, their desired terms and any extra things you can do to enable a smoother transition for them.
“Price should come last in the discussion,” says Bakos.
- Establish the agent’s rules before negotiating
To help strengthen your position, you also need to understand how the agent will handle offers and counter offers.
Find out if they will call the vendor immediately or whether they sign up the offer or facilitate a counter-offer. Will they call other buyers before selling it? And if so, how will they deal with competing buyers?
“Make sure you are satisfied that the negotiation will be fairly handled so that you don’t show your cards and get slapped in the face with rejection, or worse still, gazumped or played off against other buyers,” says Bakos.
- Identify some potential weaknesses
Always have at least two negotiation points up your sleeve says Sandkuhler. You can use it to show the agent that while you’re interested in the property, you know that there are issues within the property that should make the price be discounted as a result
Knowing what the vendor wants and knowing where there’s room to negotiate can be a great strategy.
- Understand the vendor’s position
Find out what the vendor’s motivation is for selling. Are they time-restricted and have to sell, or not?
The more you understand their motivation, the more you understand what to offer says Sandkuhler.
“Sometimes offering a shorter settlement period can chump a few thousand dollars off the deal. Paying a deposit on the day could also close a deal. That’s why you need to extract as much information to know how to present the best offer,” she says.
- Make sure your offer is clear
Sometimes just being succinct and leaving it be is the best option. Following up too soon, asking where the offer is at, and asking what the next steps are a hint to the agent that you have more money up your sleeve says, Bakos.
“Don’t say the offer is your best or last though unless it really is. Agents can’t be held accountable for selling at a higher price to a competing buyer if you have told them it’s your last offer,” says Bakos.
Make sure your agent knows you have other options in mind.
- Tell the agent about your Plan B
By this stage, you should have built up a rapport and a bit of trust, and equally, you know your values, are actively looking to buy and should have a Plan B property you are prepared to pursue if this one doesn’t go your way.
If the agent knows that you aren’t entirely emotional, and also motivated enough to walk to the next one, they will feel compelled to keep things moving for you.
“No agent wants to lose their leading buyer,” says Bakos. “Nothing feels worse than telling a vendor that the buyer who made a reasonable offer is now out of the market.”
- Don’t be too greedy
Ultimately, the deal has to be a win/win for all parties. Without the agent’s support, the deal can topple over.
Without the vendor’s support, even if the sale proceeds, you will have to face a settlement and handover with a person who may feel quite negative towards you.
Cultivate a good relationship with the vendor and agent so everyone wins.
“Don’t push the negotiation so hard that you have a vendor who hates you,” warns Bakos.
“You might need to rely on their goodwill at the time of settlement. From bank delays to missing cheques, settlement dates can be missed, and the difference between a kind vendor and an angry vendor could be thousands of dollars of penalty fees. Not to mention a dirty house and an unkempt garden.”