Welcome to Say What Wednesday! Today’s question is from Mark;

“Hi guys, lovin’ the show – I’m looking to buy my first place in Brisbane and I was just wondering if you have any tips on how to negotiate with the real estate agents and work out what price I should be offering first go”

Negotiation Fundamentals

  • As former FBI Hostage Negotiator Chris Voss (author of “Never Split the Difference”) says, our life is a series of negotiation.
  • Negotiate every day in our lives; with our kids to go to sleep early, a better salary, to buy a house.
  • Negotiation is about finding a meeting point between what the sellers want for their property and what you want to spend as the buyer. When you are buying a house, everything is negotiable…

What are the best Negotiation Techniques?

  • I find I use mirroring when dealing with real estate agents…This is just repeating what the Real Estate agent said to you, helping you get more information from them.
  • The more you know about them, and the less info you give about your situation, the better the position you’re going to be in.

House Price Research

  • To start with: what a property is worth?
  • When buying a house there is no hard and fast way of determining the value of a property.
    • The price is what the market is willing to pay.
    • all properties that are being sold on the market do not have a hard and fast set price
  • Negotiating a house price is recognising that the advertised price is NOT the final sale price (vendor discounting)

So just realise that the price your future home is being advertised for isn’t necessarily the price you will need to pay! 

Suburb Distance to Brisbane (KM) Median House Price ($) Average Vendor Discounting (%)
Milton 2 $965,000 9.80%
Park Ridge 19 $555,000 13.90%
Mount Ommaney 13 $815,000 9.90%
East Ipswich 29 $269,000 9.70%
Highgate Hill 2 $1,185,000 9.50%
Carbrook 33 $915,000 8.40%
Rochedale 14 $1,045,000 9.00%

Source: CoreLogic and RealEstate.

 

Action: Work out your maximum price

  • Before you even submit your offer and start negotiating, you need to know what your upper spending limit is.
  • research will help you determine what the property is worth, but you should also speak with your mortgage brokerto determine your borrowing limit…
    • This is the maximum a lender will be willing to lend 

 

Know the Sellers Motivations

  • Knowledge is power when you negotiate.

 

Ask open-ended “What?” And “How?” questions

  • Chris Voss recommends using calibrated questionswhen negotiating…
  • These are approachable and non-threatening questions leading with “What” and “How”.

 

An advanced technique is to ask the same question three different ways

  • What are the sellers doing after they move out
  • What are the vendors plans once they sell?
  • How soon are the vendors looking to sell?

 

Action: Questions To ask the Real Estate Agent

  • What are the vendors reasons for selling the property?
  • How long has the property been for sale?
  • What was the original asking price?
  • How negotiable are the sellers on price?
  • What do you think the lower price they are willing to accept?

Consider the Real Estate Agents Motivations

  • They want to be able to sell the property at the best price
  • They want to be able to sell the property in the shortest timeframe possible. Ideally even before the property hits the market, that way they don’t even need to do an open inspection!

Get your ducks lined up

Question is: How reliable is your pre-approval?

  • What is a pre-approval? – A pre-approval is an indication from a bank that they are willing to consider approving your home loan once you find a property you want to buy.
  • Have confidence with your finances

When you start to negotiate the house price, you want to have complete confidence in your home loan and finances.

You want to know the maximum amount you can afford.

Action: Get a pre-approval today with our expert Mortgage Brokers

Amazing Contract Terms

  • Don’t sleep on property contract terms.

The most important information you need is:

  • Purchasing Entity: I.e. your full legal name, including middle names.
  • Price
  • Deposit (remember the deposit is split into 2 parts)
  • Finance and building and pest terms
  • Settlement Dates
  • Lawyer details

What are the best terms to make my contract competitive? 

Really it is going to depend on the seller’s situation as to what makes the contract more competitive.

Most first home buyers will put 21 days for finance, 21 days for building & pest and 45 days for settlement.

If you want to make your offer stick out, consider putting 7, or 14 days for finance and 30 days for settlement.

Provided your mortgage broker has arranged pre-approval these terms will be very achievable.

Signed a Contract of Sale on a Home?

  • In some cases, the Real Estate agent will ask you to sign the contract of sale to show the sellers you are serious about your offer.
  • This doesn’t mean they have accepted the offer but is usually the second step in the negotiation after you’ve made your initial offer by email.

Prepare your counter offer

This is the point where lots of first home buyers get disheartened…

The Real Estate agent will call you, say that the seller has reviewed the offer and not accepted it – but given you a counter!

Negotiating house price after building inspection

As I have mentioned before, Building & Pest reports are the single most important thing you can do when buying a house.

And when you are buying an older property, like a Queenslander in Brisbane its common for there to be small problems around the property.

  1. Cracked glass, broken windows
  2. Wet rot to cabinets in bathroom and kitchen sink
  3. Insufficient drainage

Provided the problems aren’t structural you can use these to negotiate a lower house price EVEN AFTER you’ve signed a contract of sale.

Let’s look at this example…

While it might look like these are scary problems, after talking with a builder the owner found out it would only cost between $2,000 to $3,000 to fix.

They used this to go back to the real estate agent and negotiate a further $10,000 off the price!

Be ready to walk away

As Benjamin Franklin said, by preparing to fail you are preparing to fail.
A list of recently sold homes in Brisbane, as you can see there is always going to be another home!

Bonus #1: Common Negotiation Mistakes

I think we have covered most of the mistakes above, but to summarise –

  • Remember most homes in Brisbane are discounted 5-10% off the advertised price to get to the final sale price.
  • Take time to complete property market research to make sure you don’t overpay
  • Work with an experienced Mortgage Broker who can help you get finance approved faster, and let you set amazing contract terms.
  • Use the Building & Pest report to negotiate further discounts (even after you’ve signed the contract of sale)!

Does this episode seem familiar? Jayden has shared his tips on property negotiation on the Hunter Galloway site too, here in this article.

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