How to negotiate buying a house the right way
If the word “bargain” sends shivers down your spine, it could be costing you more than you realise.
If the word “bargain” sends shivers down your spine, it could be costing you more than you realise. The simple phrase “what’s your best price?” can lead to significant discounts when it comes to everyday buys, so when it comes to buying a house, good negotiating skills could save you tens of thousands of dollars.
No-one wants to be a sucker. And no-one wants to waste time. So when it comes to negotiating, the key is to stay calm, be respectful, and keep your wits about you.
Buying a house is the biggest purchase you’re ever likely to make. Here are our top negotiation tips to get the house you want for less.
1. 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.
Take a look at recent sales of similar properties in the area, making sure you compare properties that have the same characteristics as the one you’re looking at. For example, if you’re considering a three bedroom home on a large block, look for similar homes that have recently sold. You also want to take the age, structure, and condition of the home into consideration, along with nearby amenities i.e. shops, schools.
Additionally, you want to observe how long properties are lasting for on the market so you can get a clearer picture of the level of competition you may face.
The last thing you may want to do is attend any inspections or auctions in the area, and keep your eye on auction clearance rates. From there, you can determine whether it’s a sellers’ or buyers’ market. If the market is favouring buyers (i.e. prices are dropping), you may have more wiggle room when negotiating a price.
2. Understand the seller’s motives
It’s always beneficial to find out why the vendor is selling their property as it gives you the chance to tailor your offer around their needs.
Ask questions (usually to the real estate agent) like:
- Why are they selling?
- Have they bought elsewhere?
- 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 till they’re offered the price they’re after.
A confident negotiation comes from knowledge. Make sure you understand market conditions, and what the vendor is looking for.
3. Determine your budget
Before you start house shopping, you should work out how much you can afford. Our home mortgage calculator will give you a rough estimate of what your repayments will be according to the home mortgage rate, term, and loan amount.
You don’t want to go shopping for a house unless you’re aware of your borrowing power.
4. Set realistic goals and stick with your budget
Remember to set realistic goals with your buying criteria and budget. For instance, if you’re looking for a three-bedroom house near Sydney’s CBD that’s below the price range of $500,000, this may not be a reasonable price for that location. Be realistic with your goals and budget so you won’t be disappointed.
You could do this by having a plan written down. 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 talk these things through so when the time comes, you aren’t unsure of your next steps.
In saying that, it’s always a good idea to stick to your budget as much as possible. Having a budget will help ensure you don’t go overboard when negotiating on a house.
5. Time your offers
When negotiating, you want to be chased by the vendor and not the other way around. You can time your offers by determining how eager the vendor is to sell. If you’re continuously chasing the vendor, this may mean that you have a lot of competition. If you really like the property you can give your offer immediately.
6. Get pre-approval
If you’ve got pre-approval from your lender for a home loan, your offer will 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.
They 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.
If it comes down to you and someone else with pre-approval, even if your offer is slightly higher the vendor may just do the deal with them instead.
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.
7. Stay calm when negotiating
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.
8. Be prepared to let the property go
Be a respectful negotiator, and if the vendor simply won’t come down to a price you believe is fair, is stringing things along, or is getting nasty, be willing to let the property go and look for another one. There is every chance they may come back to you with a deal, but don’t rely on it.
In other words, don’t let your emotions get in the way.
One thing you can do to stop your emotions from impacting the negotiations of a purchase is to consider what aspects you value the most in a home. It may be that you solely value the price of the home, or the location, or the style. Having an understanding of what you value most in a property will help you down the line with a successful negotiation.
9. 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.
When it comes to negotiating the price of a home, preparation is key.
Do your ground work, 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 contact with us online, or speak to our friendly team over the phone.
Find out in under 2 minutes if you qualify for one of our low rate home loans.
About the article
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.
