An essential guide for private treaties and auctions
So you've found 'the one' - the property that ticks every box. You can picture yourself now, making that first cup of tea in the kitchen.
Unfortunately, so can a few other homebuyers. In a competitive market, it's never been more important to polish your negotiation skills if you want to get an advantage – whether you're buying through private treaty or at auction.
Here are six tips that will help you beat the competition.
1. Do your research
A confident negotiation comes from knowledge. You need to understand the 'true value' of the property, and what motivates the other parties also involved in the negotiation.
Start by building a positive relationship with the real estate agent, and ask them about the seller's requirements. Have they already bought elsewhere? Are they looking for a quick settlement? Is there a particular type of buyer they would prefer to see in their home?
Try to get a gauge of what their price expectations are, but be aware under-quoting does happen, especially in markets that move quickly. You could use Domain's home price guide to get an independent perspective of the property's value and potential rental yield.
This transparency only goes one way though. Don't let the seller or their agent know your true maximum price – otherwise you might find you get pushed beyond your comfort zone.
A confident negotiation comes from knowledge.
2. Be confident at auction
If you're serious about this property, and your finances, legal advice and inspections are all in order, start your bid high on auction day. If you think the property is worth $1million, don't start at $800,000 – head straight into the $900,000 - $950,000 territory.
This will quickly sort out the bargain hunters from the real competition. It may seem aggressive, but it will mark you as a serious contender and if the property gets passed in you might have a better chance during the post-auction negotiations.
3. Make them an offer they can't refuse
Worried about getting outbid on auction day? This is where your insights into the seller's motivation can help. Some sellers may be anxious that their property won't attract the right bidders on the day, others may be keen to sell quickly because they've already committed to their next home. If that's the case, they may also be open to negotiating a sale pre-auction.
First, make sure your finances are pre-approved, you've carried out your building and pest inspections, and your solicitor has checked the conditions of the sale. Walk into the real estate agent's office with a cheque made out for the deposit amount for your proposed price. The agent will have to call the seller: it's a serious offer. If the seller refuses your initial offer, make gradual increases, but never go beyond your limit.
And even if they decide to go through with the auction, the auctioneer will be looking for your bid on the day.
4. Be prepared to waive certain things
Negotiation is about give and take. And there are a few things you may find it easy to give – in order to get the price you want. For example, you can negotiate how long settlement will take, how much deposit you will pay, conditions for existing tenants or vacant possession, and any fixtures or inclusions you do or don't want. All of these things may be up for discussion, use them to your advantage if you can.
If you're buying at auction, you need to confirm these details upfront. If you are buying by private treaty, the cooling off period is also up for negotiation. And as long as you're confident with the purchase, reducing or waiving that period can be a powerful motivator for sellers to see things your way.
5. Be realistic
Try to take your emotional attachment to the house out of the equation. You need to be able to walk away from a sale if the price is beyond your limit – whether it's at auction or private treaty. Sometimes sellers have a set figure in mind and just won't budge, and that's OK – if it's not meant to be, there will be another home that will suit you better.
If you can stay reasonably detached during negotiations, and act like the sale doesn't mean that much to you, you're also more likely to stay in control.
And if you and your partner disagree on the property decision, stop. This is one of the biggest decisions you will make together, and you both need to own the final result of your negotiation. It can be a stressful time, so seek advice from a trusted friend or buyer's agent if you need to.
6. Be ready
The most important thing you can do to be a confident negotiator is to have all your finances in order. Be clear about how much you can afford before entering the negotiation.
If your bid is accepted you will need to pay a holding deposit immediately – this is typically 5 or 10 per cent of the purchase price. You'll then sign a Contract Note and begin the conveyancing process. And then you can celebrate a successful negotiation and start planning life in your new home.
If you want to be as prepared as possible, call us on 13 62 27 to discuss the best home loan to suit your needs.