When purchasing a property you want to be able to negotiate like a pro. This is because negotiations are an integral part of purchasing a property and getting a great deal. Real estate agents want to achieve the highest sale price for their clients. While investors want to get the best deal, they can. So there is a tug of war between the two parties to ensure they get the best outcome. Real estate agents are trained in negotiations so it is important investors develop their negotiations skills too. As an investor developing the ability to negotiate will ensure you get a great deal,
Agents aren’t working for you
To negotiate like a pro the first thing to understand is that real estate agents aren’t working for you. Agents are the middleman of the transaction engaged by the vendor to get top dollar. Their main intention is the sale of the property, not to assist you in purchasing a quality investment. So don’t expect the agent to truly be working in your best interest. They are employed by the vendor who is the opposing party in this transaction. Instead, understand the agent has an agenda and you need to determine the value of a property yourself.
Dealing with agents
Tread with caution when dealing with real estate agents. Many times, agents will employ numerous sales tactics to exaggerate information. For example, agents may pressure buyers by proposing there is a multiple buyer situation. This could be true or may just be a bargaining tool to raise the purchase price. Alternatively, they may suggest a property is an excellent investment but it fails to demonstrate any of the key fundamentals of an investment property. Understanding how to identify the fact from the fiction will go a long way during negotiations. So it is important to be cautious when receiving information from a real estate agent.
Emotional buyers
When negotiating with an agent, don’t become an emotional buyer. It is important you don’t become emotional during a property purchase as this can be detrimental to your success as an investor. Know what you are willing to pay for a property and the clauses you need to include to make the purchase possible. If the property doesn’t meet these requirements then move on to the next property. If you make your best offer and are unsuccessful then move onto the next property. There will always be more properties on the market. Don’t be disheartened and fall into the trap of making an emotional purchase that doesn’t align with your goals and overarching strategy.
Property price
Firstly note, the market value of a property is not always the same as the listed price. In many circumstances, a property can be sold above or below its market value. If a home buyer falls in love with a property, they may make an offer over the perceived value of a property. Similarly, if a property needs to be sold quickly a seller may decide to accept an offer below the property’s true value. So property is not always sold at the expected market value. Why is there a discrepancy? This is because agents are testing the market or trying to provoke a greater price for a property. You shouldn’t assume that if a property is listed at a certain price that this is a true reflection of the property’s value.
Cheaper isn’t better
Cheaper doesn’t always mean better. When the purchase price is below the listed price an investor may think they have got a great deal. Although, many times a property that is listed cheaper can be cheaper for a reason. For example, if the median value of a suburb is 500k that doesn’t mean you have bought below market value if you paid 450k. The property may require extensive renovations or have some kind of structural issue that impacts its value. A property needs to be considered in a case-by-case scenario where that individual property is compared to other properties of a similar nature (construction type, location, configuration, condition, land size). Understanding the market value of a property will help the investor during their negotiations as they can rationalise their offer and get a better deal.
Your negotiating power
As a prospective buyer, you always want to have the best hand to play. What this means is being ready to place the best offer on the table. To do this, an investor may want to consider having a preapproval with a larger down payment. In doing so the investor can minimise the clauses placed on an offer making it more attractive. Sometimes sellers are willing to accept lower offers with greater terms. If an investor has an unconditional offer the seller will be more inclined to accept this offer. Being prepared for purchase and planning ahead will give the investor the best chance to negotiate like a pro and get a great deal.
The verdict
There are numerous considerations that should be accounted for in order to negotiate like a pro. Note that the real estate agent is not working for you. Therefore, you must take the initiative to ensure you get the best outcome. The agent will always have information that isn’t revealed to you. However, by educating yourself around the circumstances of the deal you can aim to achieve the best outcome for yourself. While developing a greater knowledge of the property in question will aid in your negotiations. Finally, you want to be able to have the best hand when searching for a property, this can put you above other potential buyers and make it easier to purchase. Considering each of these steps will enable the investor to make better-informed investment decisions.
