There are not many occasions when haggling, bartering, or more politely put, negotiating, the price of an item is acceptable outside of a weekend flea market, but in the world of real estate it’s a given that there will be some to-ing and fro-ing between buyer and seller before a mutually agreeable price for a home is reached.
Andrea Tucker, Director of MortgageMe says, “It’s important when entering into negotiations over what will possibly be the single biggest financial decision you will make, to be sure of your start and end point, and to stick to a game plan which should be in place before you even start looking for your perfect dream home.”
And that’s one of the difficulties with looking for a house for you and your family, as opposed to one as an investment opportunity. With lots of emotion involved, it’s easy to fall in love with a property and become side-tracked by the need to have it at all costs. Nothing is ‘perfect’ if you can’t afford it.
Tucker adds, “Securing a purchase ‘at all costs’ can be a disastrous move when you are purchasing a house. There are some key points every buyer should keep in mind when embarking on the home buying journey.”
Have a game plan before your start
This includes doing your sums and calculating your maximum purchase price, which, come what may, you must not exceed. It helps to get pre-approval for a mortgage which sets your borrowing limit, and don’t forget to shop around for the best Ts&Cs on a bond. The difference of a single percentage point in the interest rate can make a huge difference to your repayments. Also, consider the price bracket and area in which you want to look. Much like a car, houses come with ‘running costs’ including municipal rates and taxes which may vary from suburb to suburb, and the costs of buying into and living in an estate or complex with a body corporate.
Do your homework – The market
Once you have found a house on which you would like to put an offer, do some research which may determine how flexible the seller will be on the asking price. All the information you need should be forthcoming from the agent (but who, never forget, is working for the seller. He who pays the piper calls the tune, after all) but if they prefer not to answer your questions, there are other sources including companies that do property and suburb valuations. Also consider talking to other agents who are selling properties in the suburbs you’re looking in; they might be a bit more impartial with their opinions.
How long has the house been for sale, and what is the overall state of the market in that suburb? Are houses selling and what kind of prices have they been fetching? Remember to compare apples with apples.
Do your homework – The agent
Also consider the track record of the agent who is an area specialist. How long have they had the mandate for this property? Have they been struggling to sell it?
Do your homework – The seller and the property
After establishing that the seller is asking a fair but presumably negotiable price, find out some more information about them. How long have they owned the property? If it has been a family home for many years, they may consider more than just price when accepting an offer, wanting to pass it on to a buyer who will love it as much as they have. If they have only owned it for a short time, they may be trying to turn a profit on the sale and be less flexible. Or, they may be in financial difficulty; there may be a divorce, or a retrenchment that is forcing the sale. It never feels comfortable to exploit someone else’s misfortune, but this information can be valuable.
Before you sign on the dotted line be sure to book another viewing of the property. And, taking your time, and as much emotion out of the equation as possible, look critically at aspects of the property you can use in negotiating a final offer. Check for obvious signs of a lack of maintenance, ask questions about gutters, flooring, fittings and fixtures so you can use these to justify a slightly lower asking price.
Make a realistic offer
Most sellers expect offers to come in under their asking price, but buyers must also be realistic. ‘Cheeky’ offers may simply be disregarded and you could lose out to another buyer. If you have done your research, you should be able to estimate what the seller will and won’t accept.
Put your offer in writing
Insist that the agent write up your offer for submission to the seller. Include a time frame in the offer document if you don’t see one or you’d like a different one to what the seller has requested.
Be prepared for a counter-offer
The seller may not accept your offer, but may counter it, either on the price, or in the terms and conditions of the sale. These terms may include ‘subject to finance’, ‘subject to the sale of your current home’ for example, or a short or extended sale completion date. This is where your game plan kicks in. Do not deviate from what you can and cannot accept or afford. Remember to keep your emotions out negotiations. And, remember, if you lose this one, there’s another home out there waiting for you.
Happy house hunting!