How To Negotiate The Price Of Your Next House

Buying a home is a big decision and will probably be the largest single purchase you are ever going to make. So it is important to arm yourself with knowledge a few key negotiating skills to give yourself the best chance of securing a purchase price that you’re happy with. Here are a few tips to help you negotiate the purchase price of your next house, like a boss.

1. Be prepared

In order to negotiate confidently, you need to have your finances in order and know exactly how much you can afford. Your mortgage broker can help to assess your borrowing capacity and assist you with applying for pre-approval. Pre-approval (sometimes referred to as conditional pre-approval or approval in principle) is an indication from your chosen lender as to how much you may be eligible to borrow, subject to certain conditions. Having this in place will not only help you to set a realistic budget, but it also demonstrates to the agent and the vendor that you are serious about purchasing a home.

2. Do your research

There are several pieces of information you should seek out before putting in an offer or entering into a negotiation:

– Find out the seller’s motivations: ask the real estate agent why the vendor is selling, as this information can be used to your advantage. If the seller has already bought another property and needs to sell and settle quickly, you can let the agent know that you are happy to agree to a shorter settlement (if that is something you are willing to do). This may give you one up on the competition.

– Ask the agent if there are other variables that are important to the vendor, that might assist with negotiations e.g., a preferred settlement date or a larger deposit.

– The vendor’s true price expectations: try to ascertain from the agent what price the vendor would be willing to accept, bearing in mind that underquoting does occur, and that the advertised price range is sometimes wildly inaccurate.

– The purchase prices of comparable properties in the area: research recently sold properties in the neighbourhood to get a gauge on the local market and to ascertain what might be considered a reasonable offer. Also ask your mortgage broker if they can obtain a property report that will provide market estimates and recent sales.

– The length of time the property has been on the market: if the property has only been on the market for a short period, it’s unlikely that the seller will accept the first offer they receive. If the property has been on the market for a while, the seller may be growing restless and might entertain a lower offer.

– Market conditions: Auction clearance rates and the supply of properties up for sale will give you a fair indication as to whether it’s a seller’s or buyer’s market, which can help to shape your negotiating strategy. If the market is hot and competition is fierce for instance, a low-ball offer may backfire.

3. Keep your cards close to your chest

When chatting with the real estate agent, never reveal your maximum purchase price. Play it cool and don’t appear too keen because the agent is working on behalf of the seller, not you. If you enter pre-auction or private sale negotiations, you don’t want the agent to know your budget because if you offer a price below your maximum, the agent might advise the seller to hold off until auction or to reject your offer in the hope that you increase it.

4. Remain emotionally detached

Don’t let your emotions dictate your negotiating behaviour. Stick to your budget and be prepared to walk away if a counter offer exceeds your maximum price. Also try not to become too disheartened if your first offer is rejected. This is quite common and is usually the seller’s way of trying to push the price up.

5. Engage a building and pest inspector

Once you find a home that you like, it is wise to organise a building and pest inspection before making an offer or starting any negotiations. Or alternatively, you could make a conditional offer, subject to the building inspection being satisfactory. Not only will the building and pest inspection report provide you with an overview of any property damage and/or safety hazards, but you can use any minor defects, such as cracked glass or poor drainage, to your advantage when negotiating the price of the home.

6. Make an offer in writing

If a real estate agent is managing the sale, then you must make your offer through the agent. It is wise to do so in writing. Also indicate the date by which your offer will lapse and request a written response from the seller so there is no room for confusion. Also consider making your offer ‘subject to finance’, even if your loan has been approved. Mention a specific lender and a date that approval needs to be provided. This condition will act as your safety net in the event that any issues arise with your loan.

7. Private sale vs. Auction

There is generally more room for negotiation with a private sale because there is less time pressure involved. It can also be a slightly less stressful way of purchasing a property because you can make

an offer from the comfort of your own home, at your own pace, unlike at an auction where everything happens very fast and very publicly. Communications usually bounce back and forth between the vendor and the buyer via the agent during a private sale negotiation, until a price is agreed upon. If there are several parties interested in the property, it might be worth offering a price at the higher end of your budget to eliminate some competition early. At an auction, there is not much room for negotiation. By bidding, you are essentially accepting the terms of the contract on display.

8. Buyer’s advocates are also an option

If you are feeling unsure or uneasy about negotiating the terms of a contract or the price of a home, you can employ a buyer’s advocate to do the negotiating for you. They are experienced and knowledgeable, and will fight hard to secure the property at a favourable price.

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