Negotiate a property deal like a real estate agent. It’s time to look at the ins & outs of getting the best deal when buying a property.
We speak to an experienced buyer agent whom has closed hundreds of property deals.
Supporting article: How to negotiate on property.
Negotiating A Property Purchase | Transcript
00:10 Mark Ribarsky: Welcome, welcome, welcome to the Property Investor podcast. This podcast is designed for anyone who wants to excel in real estate investing. We’ll help you build the direction and strategy necessary to thrive in property investing. I’m your host, Mark Ribarsky. I’m one of Melbourne’s leading property advisors. Before we get started, make sure you don’t miss an episode. Click the subscribe button now.
00:30 MR: So you’re going into the real estate agency office to submit an offer on a house. You feel like you’ve done all the homework and you know what the property is worth and you’re going in there to negotiate with an agent.
Did you consider though that it doesn’t matter what you offer that agent? It’s not gonna be enough. Why? Because the agents employ to win the best conditions and the best terms and highest price possible, and typically, the first offer will never be the offer that buys the property.
01:05 MR: Secondly, the agent wants the bragging rights. He is going to go to many more appraisals in the local area trying to win business from other potential sellers, and he wants to say, “Hey look, Mr. Client. I have sold XYZ property down the street from you, and I achieved a record price. I’m the best agent in town. Only I can do this kind of stuff. You need to hire me.” So in today’s podcast, we’re gonna look how not to become one of those people that pay too much for a property and also how to handle a little bit of kickback from an agent. So when they give you a no to things… When you put forward an offer, how to handle that and try and bend that to your favor.
01:50 MR: Okay, before we start getting into the hot tips, I want to give you a little disclaimer about negotiating. Now, I’m sure you’ve heard in the past that negotiation does take experience, and I agree with this, but it also takes regular practice to be a fit negotiator.
In a matter of seconds, you can overspend by tens of thousands or hundreds of thousands of dollars depending on the price range of your property if you don’t do these steps correctly. I always recommend using a buyer’s agent, a professional negotiator that’s a respected negotiator when it comes to sitting in front of a table with an agent, someone that knows how to bring balance back to the buyer.
02:34 MR: So now that the disclaimer’s out of the way, I wanted to very quickly talk about the balance of power before we go into the hot three tips. Now, the balance of power is something that you have to establish basically at the start of every negotiation, and it’s working out who has the pull in the negotiation.
So for example, if there are many buyers and only one seller, the balance of power, all the pull goes through the seller. He can choose which buyer he likes the most, their terms, their price, and can really negotiate and go back and forth and basically get the most out of that scenario. And it works the same way on the flip side. If there is only one buyer and many sellers, all of a sudden, the buyer has the power. They have the pull. So when they put their terms in, they’re able to put in more complex terms, lower prices.
03:27 MR: Now, if you mix the two up, if you have a scenario where you’re putting in low offers when there aren’t many buyers out there, there is very little chance of you pulling off this negotiation or basically no chance. So it’s important to understand what’s going on out there and basically knowing your place, and that will lead you in the right way when it comes to negotiating and getting your offer across the line. The three tips of negotiating:
03:56 MR: Tip number one: Understanding the seller’s needs and knowing what they want and it isn’t always the biggest price. So for example, you’ve got a scenario where you’re submitting an offer on a property and you find out that the people that are selling are planning on building their dream home.
They’ve purchased the land and they need funds to basically build the house and that’s why they’re selling the home. So they’re gonna need somewhere to live for 12 months while they’re building and then they’re gonna move into their dream home once they complete that whole process.
04:28 MR: Now in your negotiation, you might be in a position where you might want them to stay on in the property and say, “How about you pay me rent for 12 months? I’ll give you your asking price for the property, maybe even a little bit less,” because you’re really saving them a lot of headache and pain. And in this scenario, you’ve got a winning offer that really favours both parties, all because you’ve asked the right questions at the time of submitting an offer. This is a great tool or tactic to understand what their needs are, what the seller’s needs are, and tailor an offer through that.
05:11 MR: Tip number two: Preparation. I once had an old boss that said to me, “If you fail to prep, you plan to fail.” So what I mean by planning your preparation is understanding the value of the property, doing all the homework. So you’ve inspected the property. You understand the value that it has in comparison to the properties that have sold recently in the area. Knowing the true price of that property gives you your boundaries and your limits, a walk-away point. This knowledge will help you act the right way under pressure. It will help you act rather than react, I should say. And this is normally where most people fail.
05:52 MR: In a market where prices are going up, real estate agents selling tactics are normally pricing property below market value. So if you start a negotiation not understanding what the real price of a property is, you’re most likely gonna fail before you even start.
06:11 MR: The third tip is probably the most underestimated tip. I call it emotional equity, and it’s about sharing your story as the seller to the buyer. So for instance, let’s think about a couple buying their first home. Now, if they present… If I’m able to present that through the agent and say, “Hey, look, these are a young couple and they absolutely love this house. This is gonna be their first home and they’re gonna literally look after it and treat it like gold and have their family in there. They’re gonna grow up and have kids,” all that kind of… I guess all that kind of story that goes along with that.
06:50 MR: When the owner hears that story, he’ll most likely have three or four offers in front of him, and two could be investors that are basically faceless. They’re just buying a property to put tenants in and not really take much care about it. So what you’ve got going on here is an emotional story that really pulls on the heartstrings of the seller. You’ve got a seller that once upon a time was a first-home buyer, potentially was married or is married, and they’ve gone through the whole process of moving into their first home and having kids and loving something like a house and fixing it and making it good. So the power of sharing that story in this example really breaks down a lot of walls. What I normally find is that people like to make decisions based on how they feel. Of course, there’s a lot of factors involved in that, but on both sides of the table where I’ve got your sellers and your buyers, whenever I’ve represented both these parties over the years, I’ve found that a lot of people will make decisions based on, “Look, I like these guys. I think there’s just something about them because they’ve heard that story and they’re able to relate to it.”
07:55 MR: So, in summary, you understand that balance of power. You understand what kind of real estate market you’re in. So when you are submitting an offer, you take into consideration the seller’s needs and you understand why they’re selling so you’re able to tailor an offer around that. You understand the market value of the property, and you’ve done all your homework when it comes to playing the game and having a walk-away price. And you’ve shared your story. You’ve given the agent some sort of meets to pass on to the seller to help them pull on their heartstrings a little bit and able to work that price a little bit if you can’t afford maybe that top price that they’re selling.
08:33 MR: But what happens if you do all these three and the agent comes back to you and it’s a no or they’re asking for something else? So if you do get hit with a no, it’s definitely not the end of the world. It’s most likely the start of a really good negotiation. And this is what I really enjoy, this part of it.
08:55 MR: Because you’ve done all the homework and you know where the boundaries are at. And what’s happening is the agent’s really just testing you. And that’s the job of every skilled agent. It’s to get in there and try and get more out of you, and this is how it’s done. This is how they get the extra 10,000 or 20,000 or how they scrap the finance clause. So when you get hit with that no, work out and ask the agent what a yes looks like. And then it’s up to you to kind of bridge that gap between the no and yes with something that’s halfway of maybe what they’re saying.
09:30 MR: With this strategy, with this process, you might go back and forth a few times, but you’re able to really demonstrate your ability as a skilled negotiator and not burn the deal all together. And in the same process carefully be a bit shrewd and try your absolute best to make everyone happy. So there it is. All my tips in negotiating.
Look, it’s important to know that every negotiation is different, but if you follow the steps and work really hard, these steps will serve you well. If you need help with negotiating, feel free to leave your details in our website. We can definitely help you with this. Visit wiserealestateadvice.com.au. You can give a call from this site or just leave your details there. If you’re interested in more podcast on the topic of real estate, check out Property Investor podcast. Thanks for listening.