Buying a home
Negotiating 101 for Home Buying
15 December 2017
Knowing how to negotiate is one of the most important skills you’ll need in the home buying process, up there with conducting your own inspections, and sweet-talking friends and family into helping you move.
Not all of us are negotiation experts, especially if it’s our first time buying. It’s natural to feel overwhelmed, or to worry that an unscrupulous vendor will try to squeeze you for all you’re worth.
But the process doesn’t have to be all that rough. Just keep a few simple things in mind and it’ll be smooth sailing.
Know your budget
Before you enter any price negotiations, you should have a clear idea of how much you can spend. If you don’t have a budget in mind, you could commit to spending a lot more than you should. Of course, the agent with whom you’re dealing doesn’t need to know your budget. If they do, they’ll know how much they can potentially get from you, so keep that info hush-hush.
Contacting Suncorp Bank and enquiring about a home loan pre-approval is a good way to determine your budget. If you are pre-approved for a certain amount, and negotiations push the price above that amount, you’ll know to walk away.
Obtaining pre-approval can also let vendors know that you’re a serious buyer. They’re likely to give your offer stronger consideration than they would if it were subject to financing approval.
Know the house
Get to know the property. Conduct multiple visits if you need to, along with organising professional building and pest inspections. How old is the place? Have there been significant renovations? Are the walls thick enough to protect your neighbours from your late-night karaoke sessions?
You should compare the property against similar ones in the area. Look for similar size, same number of rooms, same age, and so on. If there are places like yours that have sold recently, make a note of the price they went for.
When you gather as much information as you can, you’ll be able to estimate how much it’s worth, and whether the selling price expected by the vendor is realistic or whether you’re in a “tell ‘em they’re dreamin’” situation.
Know the area
Getting to know the property is important, but it’s also good to know what surrounds it. There are a few external factors that can drive down a property’s value, such as:
- Planned developments nearby, especially high-density and multi-storey developments that can impede sunlight and increase traffic;
- Whether the property is on a main road, with a lot of traffic;
- Whether the property is in a suburb with a high crime rate;
- Flood or bushfire risk;
- Nearby sources of loud noise, such as train lines and airports; and
- Large overhead power lines.
On the flip side, there are a few things that can increase a property’s value, including:
- Being close to schools, kindergartens and child care facilities;
- Having shops, restaurants and cafes nearby;
- Being within walking distance of public transport; and
- Being close to parks or beach.
It’s natural to feel a strong emotional connection to a potential home, even if you’re seeing it for the first time. After all, this is where you’re going to be living, raising your family, and storing that vinyl collection that you’ve spent way too much time and money on.
You shouldn’t let this emotion colour the negotiating process. Having your heart set on a property could lead to offering more than you really should, as the idea of missing out on your dream home will be unthinkable.
If you’re especially passionate about a place, a savvy real estate agent will be able to tell. They may use that knowledge to drive the price up further, knowing that they’ve got you on the hook.
You may think that negotiation is just about settling on the best price, but that’s not true. The vendor may get several offers of the same price (or similar), but be inclined towards the one that includes favourable conditions. This could mean a shorter settlement period, or – if there are any repairs or upgrades needed – accepting the house as-is and tackling those yourself. You may not want to take on a big re-stumping job by yourself, but replacing smaller fittings or touching up paint work should be simple.
This is especially true if the property you like is in high demand. Vendors and agents don’t want to deal with aggressive or rude buyers, so if they’re not comfortable with you, they’ll keep negotiating with someone else.
And, if the agent really likes you, when you finally buy the place you might get a hamper when you pick up your keys. You’ll need those crackers and choccies for energy on moving day.
Don’t be put off
You’ll probably hit some speedbumps. Offers get rejected, counter offers get made, demands – reasonable and otherwise – can be issued both ways. This is all part of the process, and each step gets you closer to your new home. Stay optimistic and keep the lines of communication open.
Get professional help
If you’re still not confident in your ability to negotiate effectively, you can consider enlisting a buyer’s advocate to do so on your behalf. This will have a few benefits, including:
- They won’t let emotion affect their decision making.
- They’ll know the methods that agents use to get more money out of a buyer (i.e. you).
- You’ll probably find the whole process less stressful.
- They’re familiar with market fluctuations and trends, giving them a good idea of fair pricing.
Be aware, though, that their services won’t come cheap. You’ll have to decide whether the potential benefits of having a pro negotiate on your behalf are worth the extra hit to your wallet.
The information is intended to be of a general nature only. We do not accept any legal responsibility for any loss incurred as a result of reliance upon it – please make your own enquiries.