How to negotiate buying a house the right way
Here are our top negotiation tips to get the house you want for less.
When it comes to home buying negotiations, the key is to stay calm, be respectful, and keep your wits about you. Good negotiating skills could save you tens of thousands of dollars when you do it right.
Here are our top negotiation tips to get the house you want for less.
Do your research, then do it again
It’s impossible to know what a fair price is until you’ve done your market research. You can bet the vendor will have done theirs.
Market knowledge is the best tool in your arsenal when entering negotiations. Use a suburb report or property report to get a better understanding of the locale.
Look at recent sales of similar properties in the area. Compare properties that have the same characteristics as the one you’re looking at. Take the age, structure, and condition of the home into consideration, along with nearby amenities like shops, schools, and the like.
Additionally, you want to observe how long properties are on the market to get a clearer picture of the level of competition you may face. The less time properties stay on the market, the more competition you may have. Keep an eye on auction clearance rates as this can help you determine whether it’s a seller’s or buyer’s market. If the market is favouring buyers (i.e., prices are dropping), you may have more wiggle room when negotiating a price
Understand the seller’s motives
Figuring out why the vendor is selling a property can help you craft an offer tailored to their needs. It can also give you insight into the property and whether any issues with it are causing the vendor to sell.
Ask the seller or the real estate agent the following:
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Why are they selling?
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Have they bought a property elsewhere?
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Are they looking for a quick or long settlement?
If a seller needs to sell their home quickly, they may be happy to opt for a shorter settlement period and a lower offer. However, if they’re in no rush to sell their property, they may be willing to wait for an offer.
A seller that is motivated to sell quickly could be open to a variety of offers. Whereas a vendor who’s in no rush to sell may be willing to wait until they’re offered the price they’re after.
Get a pre-approved loan
With a pre-approved mortgage, you can negotiate with confidence. Your offer will also be much more attractive to the vendor than an offer from an interested buyer who doesn’t have pre-approval. Vendors want to deal with serious buyers who are ready to act.
Sellers don’t want to wait around on paperwork that could’ve been done before the offer was made, or risk losing a pre-approved buyer if the other loan doesn’t get approved.
It’s important to remember that pre-approval doesn’t guarantee you will receive the loan. Changes in interest rates, your financial circumstances, and lending policies are a few of the reasons your loan may not be approved even after receiving pre-approval.
Know your financial limits
The key to a successful negotiation is knowing when to push and when to give up. Be realistic about your goals and budget so you won’t be disappointed. When it’s time to send an offer, you need to stick to your budget, even if you’re head over heels in love with the house.
Decide the maximum price you want to pay for the property, where your ‘wiggle room sits,’ and if you would be willing to pay above what you think is fair value to secure the property. It’s always best to think these things through carefully so when the time comes, you aren’t unsure of your next steps.
Be a respectful negotiator; if the vendor simply won’t come down to a price you believe is fair, be willing to let the property go and look for another one. In other words, don’t let your emotions get in the way and know when to walk away.
Time your offer right
Timing is important especially when you’re buying a house. Gauge the eagerness of the seller to close the deal so you can time your offer just right. Ideally, you want to be chased by the vendor and not the other way around.
If you’re continuously chasing the seller, this may mean you have a lot of competition. Or you could give the vendor the impression that you’re desperate to buy the house, which puts you at a disadvantage at the negotiating table.
But if you really like the property, you can give your offer immediately. What’s important is that you don’t get carried away when you send the offer. Remember, this is a business transaction. At the end of the day, you and the seller are just trying to get a good deal on the house.
Keep your cool during negotiations
You love this property. It’s your dream home. You want to scream from the rooftop “this is the one!” But save your emotions for the car ride home or when you’re out of earshot from the agent or vendor to avoid impacting your bargaining power.
If they know how much you love the property, they’ll be less likely to come down in price and assume you’ll be willing to pay more. Of course, there is no point in underplaying things either, as you could risk appearing like you’re not that interested and therefore not worth negotiating with at all. Show your interest but keep your cool.
When it comes to buying a property, communicating clearly about your intentions will help put you in the best position possible to get the price you’re after.
Make an offer in writing
When you put an offer down in writing, it shows the vendor that you’re a serious buyer and wanting to go ahead with the property.
Similarly, if a property is set to be auctioned, you may still be able to make a pre-auction offer. Typically, vendors will accept pre-auction offers if they’re motivated to sell or if they’re concerned the property might pass in at auction.
By submitting a pre-auction offer, you could get your foot in the door before any other buyers do.
Ready to start your home buying journey?
When it comes to negotiating the price of a home, preparation is key. Do your groundwork, know your budget, communicate clearly, and make sure you’re seen as a serious buyer. If you are in the process of buying a home, get in touch with our friendly lending specialists!
Apply online today or check out our range of home loans to learn more!
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