Are your negotiation skills really as good as you think they are?
So, while you may think you’ve got the skills to negotiate the best deal when buying a new home, you don’t want to leave it to chance. After all, this is no small ticket item; you’re going to be negotiating a deal on a property worth a few hundred thousand dollars or more.
According to a recent survey, 51% of Australians believe they are good negotiators, but only 41% of those with a home loan was able to secure a better interest rate with their bank.
Try these tactics to improve your negotiation skills and secure the best possible deal.
Research the market and the property
If you don’t do your research, then you won’t be able to determine the true value of your target property.
The first step is to research the property market. Find out how much similar properties have sold for in the area in the past few months, compare your property to others, analyse the current market activity for the area, and try to determine how strong the demand is. Understanding the market is key to determining the true value of the house.
Get to know the area to find out about proximity to public transport, shops, restaurants, schools, and anything else that is of importance to you. You’re trying to determine the attractiveness of the area, so also obtain local statistics where possible, such as unemployment rates, median income, and whether it’s a growing community.
Once you understand the market, it’s time to research the property itself. Look for any drawbacks of the property, such as pest problems or building defects, as well as its features. Also determine the potential of the property, such as opportunities to expand or convert it.
Research is a vital step in the process, so if you’re not keen to do it yourself, you can also use a professional to help you better understand the market and the property. Just don’t rely on what the selling agent says, as it could end up costing you a fortune.
Instead, find a buyer’s agent who can assess the properties for you and represent you during the negotiation process. Not only will using a professional save you time and stress, but you also benefit from their professional network, and this may allow you access to off-the-market properties.
Understand seller motivations
It’s worth taking the time to discover how motivated the vendor is, why they are looking to sell, and what they really want, as you can use these crucial pieces of information to determine how much to offer, what terms to include, and how hard to push.
Are they eager to sell the property quickly due to an imminent divorce or debt stress? Then you’re likely dealing with someone who would prefer a short settlement and is more likely to accept a lower price.
However, you could also be dealing someone who is looking to sell due to a lifestyle change, such as accommodating a growing family, in which case they are likely looking for an offer above market price but would still accept a fair offer if that’s the best they can get.
So, ask questions, try to understand the vendor’s motivations, and aim to create a ‘win-win’ proposition that would be difficult to turn down.
Set a realistic range
When you go in for a sit-down negotiation or head into an auction, you need to be prepared with a realistic range. Have a figure in mind that you are comfortable with and know how high you are prepared to go.
This shouldn’t be driven by the agent; if you have done your research, then you can feel confident in knowing the home’s value.
Keep in mind, going low is not always the best tactic, as it can be a time waster and gives other buyers the opportunity to swoop in with a better deal. If you’re dealing with a rising market, then it could pay to go in hard and fast; go straight in with your best offer, and you’re more likely to secure a sale before the market has a chance to catch up.
Sharpening your negotiation skills won’t just help you save money on the purchase price, but it will also help you enjoy savings on home loan interest and stamp duty. So, take the time to do your research, and you can feel confident in your negotiations.
March 22, 2018