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10 property buying negotiation tips

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If you’ve found a property that you’d love to make your own, it’s time to get ready to make an offer.

When you’re buying a property, there’s likely to be an element of negotiation to the process – especially if you’re buying a property through a private sale, versus at auction.

Knowing the right negotiation techniques and being well prepared can help you secure your ideal property at a price that suits you.

In this article, we’ll go through 10 tips to help you effectively negotiate as a property buyer.

1. Understand your borrowing capacity

Before making a serious offer on any property, it’s a good idea to find out if you can actually afford it.

Your borrowing power is the amount that a lender is likely to lend you for a home loan.

Borrowers with higher incomes and low debt are likely to have a higher borrowing capacity.

Your borrowing power might not be what you think it is. It can be impacted by the following factors:

  • Income
  • Debt and liabilities
  • Assets and savings
  • Lifestyle expenses
  • Deposit size
  • How much your desired property will cost
  • Preferred home loan term, type and interest rate
  • Personal factors e.g. if you have dependents, whether you’re buying with a partner.

To figure out what your borrowing power is, try out our borrowing power calculator.

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2. Research the property and local market inside and out

Having detailed knowledge of recent property sales in the area you intend to buy in will give you more confidence that any offers you make are reasonable and competitive.

This knowledge can help you ask the right questions and figure out why the asking price is what it is. So, if you’ve come across similar properties that were recently sold for much less than the asking price of your desired property, it’s good to ask why.

If they can’t come up with a convincing answer to justify the price point, you may be able to use this as a negotiation tactic.

You should also be aware that the listed prices of properties up for sale aren’t always accurate.

Sometimes agents significantly underquote property prices, but prices can change in competitive housing markets.

Additionally, it can be hard to know just how popular a property will be with prospective buyers. In hot markets, it’s not uncommon for properties to sell significantly above their listing price (or above reserve for auctioned properties).

3. Go into negotiating with a pre-approved home loan

While our borrowing power calculator can give you an idea of how much money you might be able to borrow, a conditional home loan offer can give you even more peace of mind.

Home loan pre-approval is essentially a formal indication from a lender that they are willing to provide you with a home loan. They’ll list a specific home loan amount, but keep in mind that this is a conditional offer.

This means that the lender has the ability to reject your formal home loan application even after pre-approval. It is uncommon, but here’s why your home loan application could be declined after getting pre-approved.

However, pre-approval can inspire confidence in you as a potential buyer. Vendors are more likely to take your offers seriously and will know that this could lead to faster settlement.

Pre-approval gives you a very realistic idea of what you’ll be able to afford, meaning that you can avoid looking at properties that are out of your budget.

4. Figure out what the seller’s priorities are

If you can learn more about the seller’s interests, this could help you in a sale negotiation. You can usually learn more about the seller by speaking to the real estate agent.

Ask the agent questions like:

  • Why are the current owners selling?
  • Have the current owners already purchased a new home?
  • What kind of buyer would the seller prefer?
  • Is the vendor in a rush to sell?
  • Are there any conditions of sale?

For example, say you learn that the vendor needs to sell quickly because they’re close to settling on their new property. In this case, if you have your finances sorted, you can highlight how you’ll be able to settle quickly with minimal issues.

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5. Leverage property faults

If there are faults to the property, you may be able to leverage these in your negotiations to get a lower price.

Sometimes property faults may be obvious, other times you may need an expert to help identify them. If you’re serious about making an offer on a property, it’s smart to get it professionally inspected first.

Pest and building inspections can limit the risk of you buying a property with problems. Or, like we’ve suggested – you may be able to cite these problems as reasons why the sellers should accept a lower price.

Alternatively, you may be able to encourage the current owners to repair these issues without raising the preferred sale price.

6. Make a serious and reasonable offer

Think about what you’d ideally like to spend on the property and compare it with the asking price.

You can make an offer under the asking price but it’s best to avoid low offers when you know there is a lot of interest in the property. A really lowball offer could make you seem like you’re not a serious buyer.

When there is competition, you may have to make an offer that’s at the higher end of your budget to even get noticed. However, make sure you know your limits so that you don’t end up with a house you can’t afford.

7. Increase your offer in small, gradual increments

Your initial offer may not be accepted, or you may be told that another buyer has made a better offer.

Whichever the case, only increase your next offers by small increments. Unless there is a sense of competitive urgency, it’s wise to avoid jumping straight to your limit. You never know – the seller might accept a lower purchase price than you’d expect!

8. Know your limits

One of the most important aspects of any negotiation is knowing when to walk away. Figure out what your resistance point is – that’s the highest purchase price offer you’re willing to make before you walk away.

When determining this figure, consider the additional costs associated with buying a home. There are the standard upfront home-buying costs, but consider whether you might need to renovate, repair or make improvements to the property.

Avoid letting your emotions get the better of you because you don’t want to saddle yourself with a debt you can’t afford.

If you are a buyer who tends to be ruled by your emotions, it may be better to avoid property auctions and stick with making private sale offers.

If you are interested in a property up for auction, you can have someone go and negotiate on your behalf (e.g. a buyer’s agent).

9. You can negotiate more than just the price

While the property price will be at the top of your mind when negotiating, you can also negotiate things like:

  • The deposit you’ll make
  • How long settlement will take
  • Inclusions or exclusions of features like furniture pieces and appliances
  • Conditions for any current tenants (if applicable).

10. Sometimes you’ll just be outbid

If someone is willing and able to spend more money on the property than you, there’s not much you can do.

This is why it’s important to try and not become too attached to a property. You may have already envisioned your life in the home and have made what you deem to be a competitive offer. However, it’s possible for someone to swoop in and make an offer on the property that is $400,000 higher than yours.

But that’s life, unfortunately! There are plenty more great properties out there so don’t waste time and start looking for the next one.

Want to get home loan pre-approval or explore your mortgage options? Book an appointment with a Home Loan Specialist today to learn more.

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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.

Tags: property prices, first home buyer, auction, private treaty sale, private sale, first home, new purchase, selling property

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