How to negotiate a lower purchase price - September 2023
September 8, 2023 / Written by Rich Harvey
So, you’ve found a property that ticks your boxes, but standing between you and the front door key is a series of challenges that begin with negotiating a contract price.
The thing is that Australian buyers are often at a disadvantage with this from the get-go. You see, most buyers must engage with a selling agent who has probably pulled together hundreds of deals over many years. In comparison, most homebuyers will only purchase a property just a few times in their lifetime.
So, with the odds stacked against you, what can you do to secure the lowest possible price on your next home?
Here are six suggestions.
1. Be prepared
Be like a boy scout and ensure you never enter a negotiation without being fully informed on some key elements.
First up, you must have accurately appraised the property’s real market value. This is the price the home should achieve on the open market – all else being equal. I have described in previous articles how to assess value by utilising comparable sales. It takes some skill and effort but is very important.
Knowing the market value is the best guide for ensuring you make an appropriate initial offer, and that you don’t eventually pay too much.
You should also ensure your financial arrangements are in order. This gives you a position of strength, particularly if you can make an offer that isn’t subject to finance. Many sellers will accept a lower purchase price if this sort of conditional clause can be excluded from the contract.
2. Ask questions
Find out why the property is listed for sale and what the seller’s position is.
You should also ask the agent about any competing buyers. Do they have others interested? Has the seller rejected any offers? How long has the home been on the market? Have they altered their listing price during the campaign?
You should also ask about the history of the home. Has it been on the market before and, if so, what price were they asking then? Did it go to auction and what was the outcome?
The right types of questions help you gain an appreciation of the level of buyer competition, and the vendor’s eagerness to sell.
3. Identify the pros and cons
When doing your personal due diligence on a property, scrutinise every positive and negative you can.
From the home’s condition, location and position through to the impacts of town planning and environment, you should have a full list of the holding’s attractive and detrimental features.
During the inspection, look for necessary maintenance issues. Also, get a feel for things like layout and room size. Be scrupulous in your walk throughs.
You should also do comprehensive searches with the local authority for approvals, services and facilities, planned infrastructure and development in the community, surrounding uses and whatever else may impact your enjoyment of that home.
Keep all of these things on hand for two primary reasons:
• To justify to yourself what you are willing to pay.
• To communicate to the agent why you think your offer is fair.
My big tip with this is to always be respectful, even when you point out the property’s flaws. Never be offensive when describing negative elements. It is someone’s home after all, and creating spite from the sellers by being too aggressive in your criticism can blow up in your face.
4. Be cool
This can be difficult if you love the home, but you must exercise patience and restraint during a negotiation.
Put forward your offer and then… be prepared to wait for a while.
If you call back every couple of hours checking in with the agent, you give away your desperation to secure the home. They will try to work that to their advantage and press you for more money.
The other way to be cool is to have more than one buying option. Keep looking at other homes while you are in negotiations. You may unearth another listing that suits your needs. Now you can play one off against the other during the discussions, helping create some desperation of your own with the sellers.
Also – and I only mention this because I’ve seen it happen – keep your discussions about price and other terms private. Talking about your walkaway price in front of the agent will give away your top figure. Arguing with your spouse about how much you love the home within earshot of the seller’s representative will do you no favours either.
5. Be flexible
Sometimes the seller will discount the asking price for a buyer who can be flexible on other terms.
See if they desire a short or longer settlement period. Check they aren’t looking for leaseback terms or ask whether waiving the pest and building on a knockdown proposition will help get your offer over the line.
Look for ways to meet the seller’s needs, and they may accept something less than expected on the price.
6. Use a buyers’ advocate
This is obviously my number one tip for getting the best price.
A buyers’ advocate is truly the most effective way to ensure you don’t overpay for a property. Buyers’ advocates are professional negotiators who remove the emotion and work diligently on your behalf.
We are often able to glean further insights into the vendor’s motivation for selling and gain other information about the status of other purchasers currently negotiating on the property… and we will use this information to put you in the box seat.
We also know how to use the right tone when discussing your offer with the agent, the best level to go in at when presenting that first offer, and the best pace when providing second or subsequent offers. And when it gets to the pointy end of negotiations, buyers’ advocates know how to close out the deal in your favour.
Buyers’ advocates utilise all their skills and experience to achieve an ideal outcome for you with the result being the right property at the best possible price.
To have one of our friendly Buyers' Advocate's contact you, click here to:
call us on 1300 655 615 today.