Purchasing a property is one of the biggest and most stressful financial decisions people have to make. To make sure you are comfortable with the sale or purchase price you may need to do some negotiating. A successful negotiation however, will ensure less stress and help make such a big decision, easier.
A successful negotiation comes down to having good knowledge about the property, it's location and the conditions of the sale.
Listed.co.nz has used the latest technology to come up with an online negotiation platform, providing a revolutionary tool for private property sales, ensuring a simple and transparent negotiation process. Because it is a new way of negotiating your property sale or purchase, we're aware you probably haven't used one like this before, so below we have written a guide to give you the confidence to use and enjoy our new platform.
This guide has been written to give you the information and advice required to negotiate a fair property price and avoid some of the common issues that can come about during the traditional private sale negotiation process.
Before placing an offer on a property, we recommend having your finances sorted so you are in a position to buy quickly if needed. Have your finance pre-approval in place and know exactly how much you have in your budget.
Conditions such as ‘subject to finance’ can make the difference between the seller accepting an offer or choosing another offer of a similar price from someone who has their finances readily available.
If the seller is looking for an urgent sale and you are unable act quickly, then you will miss out. This is a pain felt by many buyers.
Real Estate sales can either happen very quickly, or the process can be dragged out and it may be months before you get your hands on that set of keys!
Knowing the date you would like or need the settlement to be, will allow you to determine if a property will meet your requirements or not; regardless if the price is right. A lengthy settlement may not suit all buyers or sellers, for example, if bridging finance is required, temporary accommodation is needed, or if one party is moving overseas to start a new job.
A buyer who is flexible with the settlement date of a property therefore being able to agree easily to a settlement date suiting the seller, could encourage the seller to be flexible and negotiate further in other areas, for example, the price!
So you’ve viewed the property and like what you see. The easy part is done. Now you need to do your research on the local housing market, the property value (market rate and rateable value) and also to find out if there are any issues with the property likely to affect it's value.
Part of the due diligence process will unveil any defects to the property.
Does the property require a lot repair and maintenance? How much will the repairs cost? These are things you can use to decide on what you think is a fair price for the property, and worth mentioning when it comes to negotiating the price.
Do your research regarding this and be fair and realistic. It does not usually work to suggest outrageous repair costs, thinking the seller will drop the price by $10,000 because of a cracked gutter.
Some buyers may be put off by a property that requires a lot of work, giving you more flexibility to negotiate the price. Less competition means more bargaining power for buyers.
Other things to consider, that may be used to negotiate a lower price include:
Knowing the value of the property is vital to your negotiation strategy.
Are the owners asking for a fair price, or is the asking price well above the market value? Don’t base the value of the property solely on what the asking price is, or the rateable or capital values.
Compare the property to recently sold properties within the general area that have a similar land size and property specifications. From here you can determine what you think the property value is and what you would be willing to pay for the property.
This is just one of the ways that help to find the value of a property.
Refer to our blog ‘how to value your property’ for more information.
Understanding the seller’s motive and reason for selling will allow you to make an offer that is attractive to them, without compromising what you would like.
Ask open-ended questions to find out the sellers situation. Using this information, you can best tailor an offer that will be appealing to their situation whilst containing everything you wish to achieve.
Questions you could ask are:
If you are serious about having your offer accepted, only make realistic offers and avoid 'low-ball' offers that are likely to offend the seller. Show respect for the seller and their situation.
Offers that are $100,000 less than the asking price will more than likely result in the seller being unwilling to continue in the negotiation as they will not see you as a genuine buyer.
That’s not to say you are not able to negotiate the price! Owners are typically more than happy to negotiate depending on the method of sale in place. If the initial offer doesn’t satisfy the seller’s demands they will often submit a counter offer.
A general guide is to offer $10,000-$15,000 less than the maximum amount you are prepared to pay for the property after doing your due diligence. Leave enough room to negotiate with the seller.
Tip: Offer an uneven amount e.g $652,750 instead of $650,000
Making an offer with an unusual amount will often show the seller you have considered every detail of the properties value to determine the price you have offered. This can also show the owner you have put every last cent you have available into the offer.
Be careful not to start your negotiation too high, as it is very unlikely you will be able to negotiate the price down from there. This is why doing your due diligence is so important- know the value of the property!
Note: Don’t let your pride get in the way of the property of your dreams. Not being willing to negotiate because you expect the seller to ‘meet in the middle’ may result in you losing that perfect property.
Ask yourself..."If this property sold to someone else who was willing to pay $5000 more than me, would I be really upset?" If the answer is yes, it may be worth reconsidering your offer. Remember you are buying a property.
The terms of an offer can be just as important as the price. Adding too many conditions can be enough to make a seller decline it, even if the price is right.
By ensuring your finances are in order and by doing your due diligence prior to making an offer, you will be able limit the amount of conditions you need to add.
Remember to tailor your offer to appeal to the seller’s situation.
If the negotiations come to a stand-still over the price, with neither parties willing to budge, look for other ways in which you can accommodate the seller. Compromising on the conditions can satisfy the seller that they are getting something in return for accepting a slightly lower price.
Some of the ways to make your conditional offer more appealing to sellers are:
If the terms of an offer are convenient for the seller, it may give you more room to negotiate the sale price.
Note: Not all sale methods allow room for negotiation. If a property is for sale by tender you must put your best offer forward or risk losing the sale to another buyer who is offering a higher price or fewer conditions.
People want to see a fair price for their property so it’s only natural for a property owners defenses to come up when they are presented with a lower offer. If the owner is able to relate to a buyers situation they may be more flexible on their terms of sale than they would be for the average buyer.
For example, it might be worth sharing if you are a young family buying their first property, have just moved here from overseas ready to start a new life, or if you're a single parent whose kids absolutely love the place.
Note: We are not encouraging you to make up a sob story or lie to win the hearts of sellers. We are simply acknowledging that sellers have at some stage purchased that property because they loved it too and may prefer to see that property go to whom they think it suit best.
Follow these tips to avoid some of the common issues that arise when negotiating a fair property sale or purchase price:
As you can see, there are many things to consider when negotiating the sale of a property. Using some of the tips mentioned and not falling victim to the common mistakes people make will ensure you achieve a fair price.
It is normal for this to be a stressful and overwhelming time. Making sure you are ready to buy and have done your due diligence will make this process a lot more enjoyable and hopefully land you your dream home!