By Rich Harvey, CEO & Founder, propertybuyer.com.au
We’ve gone past an inflection point in the market. After a year and half of incredible price growth, sellers are no longer sitting in prime position. When listings were low and buyers were plentiful, vendors could make extraordinary demands around price and conditions. They knew full well that if the first prospective purchaser didn’t come to the party, a dozen would be waiting in the wings for their chance.
But the winds of change have blown in very quickly like a summer thunderstorm. In the three months to August, national dwelling values fell 2.0 per cent, while Sydney values dropped 4.7 per cent. The actual price reductions that we are negotiating for clients on the ground is far better than these outdated price figures – we are getting 10% discounts or more compared to last years’ prices.
The first rate hike during the May federal election campaign signalled a dramatic turn of fortune for property owners.
But buyers aren’t fully in the box seat just yet. Rising interest rates weigh on their borrowing capacity and budgets. Also, many vendors are choosing to hold off listing their homes. Limited supply continues and that means purchasers still need to bargain hard when buying.
We are at a point of rebalance where dominance in property dealings can swing either way. So, how do you negotiate from a position of strength when a market is in flux?
Here are my top five tips.
1. Understand your market
Being well educated about the market makes you a formidable foe in the negotiation stakes. It’s daunting for an agent to enter a conversation with a potential buyer, only to discover the purchaser knows as much about recent sales as they do.
To be effective during negotiations, become an area expert. Attend as many auctions and open homes as you can. Read the local listings. Keep track of posts, articles and blogs about your suburb. Consume data and be up to date on what’s driving prices.
Having a wealth of knowledge that backs up you position during negotiations makes you a daunting prospect for an agent.
2. Know the property’s real market value
I’ve written before about the importance of market value, but it’s well worth repeating.
Knowing what a property should reasonably sell for on the open market removes a plethora of doubt for you as the buyer.
It provides a guide for your reasonable first offer. It also enables you to draw ‘the line of reasonableness’. If a seller is holding firm above market value, then they’re not paying attention to what is actually happening in real estate right now. You can confidently walk away if they won’t play ball.
Determining real market value takes skill and logic. You are comparing your potential purchase to other recent sales in the same area. You must put aside emotion and weigh up the pros and cons rationally and without fear or favour. This is far more challenging than most people realise and a good reason why it’s smart to seek professional help when appraising value.
3. Have multiple property options
Have you ever heard of BATNA? It stands for “Best Alternative To a Negotiated Agreement” and was detailed in one of my favourite books, ‘Getting To Yes’ by Roger Fisher and William Ury (members of the Harvard Negotition Project).
Essentially, it describes having safety-net alternatives in case a deal you’re negotiating can’t reach agreeance.
For property buyers this simply means you must spend time strategising on what you’ll do if the negotiations break down.
The best fallback is simply to have other properties on your purchase list. Even when you think you’ve found a home that will fit your needs, don’t stop looking at what else is on the market. During the negotiation process, continue to attend open homes and researching listings.
Why? Well, you might unearth an even better prospect and pursue that instead.
But the main reason to keep looking is that alternate buying options will alleviate your desperation to do the deal. It helps you draw a line in the sand and feel confident that if this purchase doesn’t work out, there will be others.
Also, think about non-property alternatives. If the negotiation doesn’t reach conclusion, what are your choices? Is renting a possibility? Could the market still be softening? Will you take time to save more deposit?
Having more than one option is a power play in negotiations that can save your tens of thousands in overpaying.
4. Stay well connected
The fourth tip I have is to keep good relations with your selling agent network.
Agents are at the coalface of new listings and market movements. Maintaining good lines of communication will see you among the first to be contacted when a hot property listing comes up.
Selling agents are also great sources of ongoing market knowledge. You can make negotiation decisions based on up-to-date info from other agents.
A good network can bring extraordinary benefits to buyers.
5. Rely on a professional
Of course, if all of this sounds daunting, there is a hassle-free solution.
Busy buyers are increasingly seeking the assistance of specialist Buyers’ Advocates/ Buyers’ Agents. Not only are they knowledgeable and well networked, but they’re also highly skilled negotiators. You can achieve incredible outcomes simply by relying on your experienced advocate who will ensure the best possible outcome on your property purchase.
To have one of our friendly Buyers' Advocate's contact you, click here to:
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call us on 1300 655 615 today.
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