Newcastle Living Magazine
Buying Negotiation Tips
When it comes to buying, people often find negotiation to be the most intimidating step of the real estate process.
There’s a lot of competition, angst and uncertainty. If you offer too low you might not be taken seriously, and if you offer too high you might pay a substantial amount more than a vendor was willing to settle for. Keeping this in mind, here are just a handful of negotiation tips to help you through the process.
Be finance ready
Before you make a formal offer on a property, make sure you have pre-approval and your finances in order. If you are considering buying a property as an investment, research the expected weekly rental return versus the expected mortgage repayments. This way, you can determine what price you’re willing to pay and have time to prepare. It’s also a good idea to ask the real estate agency to provide you with a rental estimate on what they believe the property could lease for in the current market, as well as the expected demand.
Understand the local market
Whether it’s a first home, investment, or forever home, it’s essential you have a sound understanding of the local market. This knowledge will become a vital tool when you find ‘the one’ and want to enter into negotiations. This can happen quite quickly, especially when there’s a lot of competition surrounding the property or in an auction environment.
Know where to add value
Knowing what value you can add to a property is a massive advantage. Do your research on what has already been renovated and how many comparable homes with the same characteristics (such as bedrooms or car parks), are selling for in your immediate area. Knowing how much value you may be able to add to the property without over capitalising it is an incredible piece of information to carry. Whether you want to add minor or significant value to a home, understanding what trades and materials cost upfront will help you forecast expenditure and stay within your budget.
“Whether it’s a first home, investment, or forever home, it’s essential you have a sound understanding of the local market.”
Be aware of what to do if your offer isn’t accepted
Once you have put forward a formal offer on a property, it will either be accepted or the owner will make a counteroffer. If the counteroffer isn’t at a level you are willing to pay, you can often negotiate. An acceptable negotiation tactic is offering to meet the owner halfway between their counteroffer and your current offer and split the difference. This enables both parties to feel it’s been a fair and reasonable agreement.
Correctly navigate your accepted offer
One of the most exciting phone calls you’ll ever receive is finding out your offer has been accepted. While it’s both nerve-racking and exciting, it’s essential to remember you haven’t formally secured the property yet. It isn’t a deal until contracts are exchanged, and a deposit has been paid to the real estate agency. Consider the offer and acceptance more as a verbal handshake – time is of the essence during this period.
In a competitive market, you can ask the agent if they’ll allow you to take the property off the market with a .25% deposit and exchange contracts with a nominated cooling off period (standard practice is five business days). Doing this will give you time to do your due diligence and go through the contract with your legal representative. You will forfeit your .25% deposit if you rescind the contract for any reason during that cooling-off period. However, it also means the owners must honour the agreed sale price if you choose to proceed. We recommend seeking advice from your legal representative regarding the legalities of entering into a contract with a cool-off.
Contact Mel Payne
Real Estate Agent and Auctioneer
Ph. 0429 693 287