3 Key Negotiation tips. 19/08/12

A lot of people that write for magazines and blogs in this industry are all about wealth creation and making money whilst trading in property. I suppose for the most part that’s what I do as well, however I see myself more as a negotiator and a deal maker than a property portfolio planner. Sure, I am happy to guide you through the fundamentals of property accumulation and the “hows” and “whys” when it comes to property selection and purchasing, but that’s only because to be effective in this game you need to know how to play it and as a result I have accumulated the knowledge relevant to this.

With all this in mind it’s when you buy that you make your money. To simplify the concept, buy well and watch them grow. And it’s this action of buying well that first drew me to real estate and the real estate transactions, not the concept of wealth creation or multiple property portfolios. It’s the game of the deal I enjoy playing, and the wealth benefits I create for my clients are a result of that game I play.  But just how do you play? What are some of the key actions required to buy well and to get the deal done? Well for a start here are three, that if followed, will make a big difference the next time you go to buy property or anything really.

  1. Time: Only fools rush in. Not mine but a great saying none the less. This applies to property purchases, but not in the way that you would think. Let’s assume you have spent the time preparing for the purchase, now it’s all about investing the time in the process. Contact the agent and get to know them on the phone for a start. Engage them in conversation. Be sure to explain to them your motives for purchase, the strength in your intent, the fact that you are prepared financially and all other things that a selling agent loves to hear. Book a time to visit the property and try to make it outside the scheduled inspection times so they are coming out especially to meet you. Meet and greet the agent, establishing a name to the face. Get them to walk you through the property and explain all its features. Ask them about the seller and their motivations. Discuss the other competition looking at the property. Get their view on the market.

 

The aim of all this is to have the selling agent spend as much time with you (and less with your competition) as possible. As a seller of anything, there is nothing more frustrating than putting a great deal of time and effort into a prospective purchaser only to have them walk away from the deal at the eleventh hour. The more you continue to engage the Selling agent by phone or email or in person, the more time they invest in trying to get you over the line. Now, if a selling agent has spent hours with you, and they can smell a deal in the air, then they are more likely to work on their vendor to get a price adjustment when the time actually comes for negotiating the deal. You see, too many people see a deal as the “setting of a transactional price” when in fact it is the whole dance before during and after that fact, and it includes more than just price. The selling agent has spent countless hours with you and he or she are going to do everything in their power to ensure that investment in time wasn’t wasted.

 

  1. Conditioning the Seller: A lot of the time buyers go to opens and talk to agents expecting the information flow to be all one way. The buyer asks all the right questions about the property. You know, those really pointed, wise questions that no-one else would dream of asking. How much do the vendors really want? How many people are seriously interested? How long has it been on the market? Ever wondered why the selling agent begins the answer to these questions almost just before you have finished asking them? It’s a standard format everywhere and in most cases what they tell you isn’t quite the truth but it’s not quite a lie either. They talk in ranges when it comes to money. Who can really define how many are interested? If people read the ad they are interested right? And the reason the vendor is selling? No one will ever admit they have to sell. Yet we ask these things. And this in turn gives the agent a chance to ask us questions in return. How much do you have to spend? When are you looking to buy? How serious are you. And when the table is turned and these questions are asked you would be surprised how many buyers fend off the questions with silly or smart answers or simply clam up. Why would you give key information away?

 

Tell the agent what you have to spend, just don’t be exact about it. Let’s say the place is listed at $450,000, you tell them that you have “near that amount to spend”, and that you will be “very close to that mark”. I would say $400,000 is near $450,000, although I’m sure others would disagree. Don’t be afraid to explain your motivation for buying either. It shows that you are serious.  Expect that they will bring it back up during the price section of the negotiation though to motivate a decision from you. Not necessarily a bad thing, just a mechanism of the sale process. By giving them this little bit of truth too it helps to strengthen everything else you have to say. When asked when you are looking to make a purchase, the answer is “we are ready now”, every time. Let’s face it, if they offered you the house for a dollar would you be ready to buy it now?  In the answer to these three questions, you have told the Agent that you are motivated, cashed up and near the asking price, without giving away your budget or intentions for this specific property.  They hear yes, yes, yes but is that what you really said?

 

This is the point where you can begin to condition the selling agent. You have him excited, and he has you on a short list. Let them know that subject to having a read of the section 32 you will be putting offers in within 48 hours. That’s exactly what they all love to hear. However as you drop this little gem, follow it up with a suggestion that it won’t be at the figure they are requesting. It will be close, and you won’t be shy about making your strongest offer, but it won’t be their asking price. This conditions the selling agent to be prepared to do a little price work when the offer comes in. It also gives them the chance to pass the feedback on to the vendor to prepare them for your initial offer. If they are expecting big dollars and you offer little ones, then Sellers tend to get all upset and not listen to anything else you have to say. If they are expecting smaller dollars and that’s what comes, then they are more prepared and willing to deal with the situation. Resist the urge to ask them if they will take a specific dollar amount. That constitutes a verbal offer and verbal offers do the buyer untold damage. As a rule of thumb, the old school sellers are taught that a buyer’s first verbal offer is 10% lower than the amount of money they have to spend. To nominate a specific figure is a recipe for disaster. If you must, then discuss an offer “in the range of x to y”.

 

  1. After you make you r offer…shut up:  Might sound simple but you would be surprised how many people mess this one up.  The old adage is the first person to speak after a dollar offer is on the table, loses. “Is this your best offer” is the question you will be asked. There is only one answer. Yes. Not, “let me know what the seller says”, or“for the moment” or “take it to them and see what they say”. It’s a tough one guys, but when you make your offer, stand your ground. Worst case is you lose the place, and with 600 plus properties on the Victorian market each week your dream home is bound to come along at least 3-4 times this year alone!

Always negotiate hard, but fair. Have fun and buy well.


Garry McPherson

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