5 negotiation tactics to grab crazy property deals in a slowing market
Rising interest rates have started to put the handbrakes on Australia’s runaway property market, and that’s good news for homebuyers who are now in a far stronger position to negotiate on a property than they have been over the last few years.
One of the most apparent advantages for buyers in the current market is the reduced levels of competition. Fewer buyers mean that prices aren’t being driven higher, and if you’re a good negotiator, it’s possible to swoop in and find yourself a bargain.
If you’re new to negotiating for property or unsure where to start, here are five tactics that will help you achieve a strong result at the negotiating table.
- Know the market
You can’t succeed in a negotiation if you don’t know the value of the asset that you’re trying to buy in the first place. That’s why any good negotiator will always start by doing their research. You need to know the market better than your competition and don’t get caught up in any hype or opinions from a sales agent.
Start by finding what comparable properties are selling for in the market. Look for the last three months of sales around your property. The sales should be of similar property types, sizes, ages, and land components. Another good way to get an idea of the price is to speak with local agents in the area. When you have a fair market value, you then know your “walk away price,” and you won’t find yourself getting emotional and overbidding.
- Understand the vendor’s motivations
In any negotiation, there is a saying that whoever needs the deal least will likely be the one that comes out on top. When looking at potential properties to buy, you can be the world’s best negotiator, but if the vendor doesn’t need to sell, they will likely either wait for their price or walk away.
Whenever you start looking at a property, try to ascertain as much information about the vendor as possible. That will give you an understanding of how motivated they are to sell, which will then impact how much you initially want to offer.
- Be the strong bidder, not the highest
In a property transaction, price is just one piece of the puzzle. When a vendor weighs up an offer on their property, they are interested in the price, but the terms can also play a big part.
For example, if you’re a cash buyer who can settle quickly, that might be far more appealing to a vendor than a higher offer that needs three months to settle. Similarly, a larger deposit could give a vendor more certainty that the transaction will occur.
As a buyer, getting your finances in place ahead of time and then tailoring your terms to suit the vendor might give you an edge in a negotiation even if you’re not the highest bidder. Ultimately, the vendor wants their problem solved, and your job is to find out what it is and then make a strong offer that addresses those immediate needs.
If you are ever tempted to make an unconditional offer, be sure you’ve done extensive due diligence and can secure finance, as there could be significant costs if you have to back out of the deal.
- Unique offers
A great way to make your offer seem stronger than it might actually be is to come in with an odd-numbered amount. An offer price of $596,200 instead of $590,000 or $600,000 reflects that you’ve taken the time to do your due diligence, making your offer stand out.
Another approach is to make a written offer with a deadline. That way, you can speed up the negotiation process, and it might prevent the sales agent from pitting your bid against another buyer to drive up the price.
- Know the property
It’s critical to clearly understand what you’re buying before entering any negotiation. While you might have done your comparable sales analysis and have an excellent overall picture of what similar properties are selling for, you still need to investigate this particular property.
Several things can impact the property’s value, which can help you negotiate. For example, if an awkward tenant occupies the property, it will be less appealing to many homebuyers, which you can use to your advantage. There may also be issues with the property, such as problematic zoning, service locations, or even large trees that can alter its value.
The most obvious factor to consider is the state of the property and whether it needs renovation or repairs. In the current market, homebuyers are less interested in buying a property that needs work due to the cost of materials and difficulty finding tradespeople. That will give you a strong starting point to negotiate around the price.
While getting a great deal is essential, it’s crucial not to compromise on the property’s quality. Quality is more important than a bargain, and a property’s performance will ultimately determine its value.
A slowing real estate market presents an opportunity for buyers to negotiate and secure a great property deal. By understanding the local market, paying attention to the vendor’s motivations, and putting forward intelligent offers, you can potentially grab an excellent property deal in a slowing market.
Rasti Vaibhav is the author of The Property Wealth Blueprint (RRP $39.95) and Founder of Get RARE Properties, a bespoke independent buyers' agency that has been helping hundreds of clients across Australia secure their financial freedom through property.
For more information, visit https://getrare.com.au
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