Buying a property for first-timers can be nerve-racking. Besides taking on the biggest financial commitment in your life, there's the actual mechanics of buying the property.
Most of the time in life, if we want to buy something, we just buy it, don't we? We don't really need to negotiate on price (well, except in places like Bali) or be the highest or most attractive offer. Instead, if we want to buy those jeans or that new car, we hand over our cash and simply walk or drive away.
But when it comes to property, that's not the case, of course. And the biggest perceived hurdle is understanding how to get your offer accepted by the seller.
So, to help you be the property winner and not the second-place getter, here are four handy tips to get your offer accepted.
1. The right price.
Let me be clear: there is an art to negotiation that most people must learn – sometimes the hard way!
One of the first rules of negotiation is to have undertaken the right amount of research. Do you know what the ‘market price’ is for that property? Do you know what other similar properties in the same location are selling for?
A common mistake for new players is to try to offer a low-ball price, thinking that will set a floor under the price and show they're serious negotiators. The thing is that tactic rarely works.
In fact, what's likely to happen is you'll offend the seller so much that they may refuse to negotiate with you – and no one wants that, do they?
‘A grade’ homes or ‘investment grade’ properties rarely sell for a ‘bargain’ price, but that doesn't mean you shouldn't negotiate.
Instead of offering 20 per cent under listed price, perhaps consider what price is a reasonable reflection of the market. Then offer a sum below that figure – that way, you'll be in the ball-park from the beginning.
2. What's their motivation?
Another strategy to help you get your offer accepted it to understand what the seller's motivation is. How do you find that out? The key is to be friendly with the sales agent and ask them plenty of questions. Ask ‘Why is the vendor selling?’, ‘Have they bought elsewhere already?’ and ‘Are they interested in a short or long settlement period?’. By knowing the answers to these questions you can tailor your offer to suit the seller.
Consider a seller who has bought another home and wants everything wrapped up quickly. In that scenario, you may consider a fair but unconditional offer that gives them certainty matched with a settlement date that suits their time frames.
3. Prepare to negotiate.
It should come as no surprise that the vast majority of private treaty sales require some level of negotiation. The seller may want $500,000 for their property but you have offered $475,000. Of course, unless the seller or the buyer is prepared to negotiate you'll be stuck in a stalemate.
A professional agent – both for sellers and buyers – can help remedy this impasse so that both parties can meet somewhere in the middle.
If you're not prepared to negotiate because you have a number in your head that you won't budge from, then don't expect the seller to come down to your level.
Of course, if your research shows that the property is only worth $475,000 then you should stand your ground. If the seller doesn't budge, then you walk away. It's never wise to pay over the odds for a property.
4. Do you need to cool off?
Here's the thing: ‘clean’ offers are the most attractive to sellers. What do I mean by a clean offer? I mean an offer that doesn't include too many (or any) special conditions – unless they're agreeable to the seller's situation.
Another strategy to getting your offer accepted is to consider removing some of the standard conditions such as the cooling-off period. If you're confident in your desire to buy the property and you’ve got a loan preapproval, then why would you need the mandatory cooling off period?
By removing it, the seller will know that you're serious about moving forward with the transaction, which might just result in your offer being the winner – even if there is another offer on the table with the same price as yours.
The main point to all of this is that your offer should be reasonable. Offending the seller will usually do you no favours whatsoever.
You must also be prepared to negotiate on price as well as conditions to give yourself the very best shot at succeeding.
The reality is, once you've got the first few successful property purchases under your belt, your confidence will grow.
You'll then find buying and negotiating on a property a process to look forward to rather than one that turns you into a nervous wreck.
As opposed to buying a home where emotions play a role, investing in property is all about making sound, strategic decisions and knowing which cards to show and which cards to hold. And, of course, knowing when to walk away when the numbers no longer add up.
Michael Yardney is a director of Metropole Property Strategists, who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia's leading experts in wealth creation through property and writes the Property Update blog.
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