5 Negotiation Strategies You Did Not Know
Most people will only ever buy one or two homes over the course of their lives, which means you don’t always get much practice at the skills of negotiation. When you are buying a home, you will often find yourself dealing with a sales agent who is a professional negotiator.
Here are some ways you can improve your position when the time comes to negotiate.
1. Substantiate your Offer and Use Precise Non-Round Numbers
Most sales agents and valuers will price a property based on the method known as comparable sales. What this means is that they will use similar types of properties that have sold recently as a gauge to value your property or the one you’re interested in buying.
The good thing is that you can do this same research ahead of time to get a clear understanding of what a property is worth, and you can take this evidence to the sales agent when the time comes to make an offer or negotiate. Look at similar properties, in terms of age and land component in the same suburb that have sold in the past six months. This will give you a good understanding of what the property is realistically worth and will help dramatically with your negotiation.
Also, a good tip is to use odd numbers to give the impression that you have mathematically and systematically come up with this figure. Let’s say you want to offer $450,000 on a property listed for $460,000. Instead of throwing a lazy $450,000 round number at the agent, offer $451,285. It may be slightly more but it gives the illusion that you’re not simply throwing low offers around and it has somehow been precisely calculated
2. Create a Win-Win
One of the most important aspects of negotiating on a property is trying to create a win-win for both yourself and the seller (and sometimes even the agent). Don’t just go into this deal trying to get what’s best for you.
Instead of just throwing a higher offer back at the agent after your initial offer was rejected, try to give something back to create the feeling of a win-win. This could simply be offering a shorter settlement time, increasing the deposit amount or removing some of the clauses that may allow you to exit the deal. These are all things that are often not thought about when negotiating and too often than not everyone is fixated on getting the best price both ways.
Many don’t understand that even after the contract is signed on an agreed price the negotiation does not stop there. This leads to my next point.
3. Use your Building and Pest Inspection Report
It’s important to understand that the offer you submit to a vendor is not finalised until the terms are also met. If you make an offer subject to a building and pest inspection and it comes back less than satisfactory, that doesn’t mean you have to walk away. You’re well within your rights to go back and negotiate a lower purchase price, factoring in any repairs that are required and the inconvenience.
4. Understand the Seller's Motivations
Arguably, the most important part of a negotiation is knowing why the vendor is selling. You should do everything you can to find out why they are selling, including questioning the sales agent. The more information you have, the stronger your position will be. If a vendor is unwilling to negotiate on price, perhaps you can get more favourable terms or vice versa. If a seller needs to sell quickly for personal reasons, a low offer with short settlement terms can be very appealing.
5. Have the contract of sale reviewed by a lawyer
This one has personally saved thousands. Having a lawyer who specialises in property contract law can be a great strategy in your negotiations. Some conveyancing firms will have these people available as part of their service for a small fee.
Obviously, the contract is written in favour of the seller. This is your time, prior to signing, where a lawyer can remove any grey areas that may exist or special clauses that remove your right to have certain things repaired or deposits withheld at settlement. Even things such as changing the word "Major" to "Minor" for building reports can open up new negotiating doors.