How to negotiate your property purchase
Negotiating your offer can be one of the trickiest steps in acquiring your property, but knowing the base process will help provide clarity and a good foundation to put you ahead of other buyers.
There are two main ways to take the final step to buy your property – auction and private treaty negotiation. Before we come to this pivotal point, check you have the necessary information to position yourself for success. At a minimum, ensure you have collected and reviewed the following items.
- Contract – outlines key points such about the property as well as the seller’s desired settlement terms – note the contract should also be reviewed by your solicitor.
- Building and pest inspection reports.
- Strata report – for those properties that are strata titled (will have shared areas) as opposed to torrens title (only one owner).
- Determine how much to pay and what your initial offer will be – review recent sales and currently advertised property with similar features to the one you’re planning to purchase.
- Conditions – review the contract for the seller’s requirements and then list your conditions – this should include duration of cooling off and settlement periods, satisfactory building and pest, finance approval after bank valuation, your initial deposit (usually 0.25% of the purchase price), the full deposit you will pay when the cooling period is over and whether you will agree to items such as rent backs to the sellers.
A word about conditions
It’s important to understand a successful offer often won’t be all about the purchase price. Sellers will often make the decision about accepting an offer because the broader conditions are suitable to them. For this reason, it’s important to speak to the agent or – ideally the seller – to find out what conditions are compelling to the seller. For example, they may prefer a longer settlement, or may want to take something like the dishwasher with them. The list is limitless but can be pivotal if you can identify the points that mean the most to the seller.
Auctions can be quite enjoyable if you have prepared well and have a good understanding of market expectations. The benefit of auctions is the open approach so you’ll easily see who you’re competing against and the price they’re prepared to pay.
One insider tip to remember with auctions is to negotiate your conditions prior to the auction. Your solicitor can do this for you if you’re not comfortable dealing with the agent and should include negotiating the deposit and settlement terms at a bare minimum.
When it comes to auction day, there’s a range of approaches to take but the easiest is to be the first bidder at a price point that tests the bottom end of the guide price, then bid to your limit and no further. The aim, of course, is to beat the competition before you reach your limit. Auction participation is a skill and we cover this area in more detail in our buyers ecosystem – The Profitable Property Formula – however at a minimum aim to attend a few auctions and observe the process prior to bidding on your dream property.
Private treaty negotiation
Each State and Territory has different nuances but most are similar in that you will negotiate an offer with the real estate agent and sign a contract, then the seller will sign which makes the contract official.
If you haven’t negotiated a specific time, there will be a set ‘cooling’ period of between five to 10 days, during which time your inspections (such as strata, building and pest) and finance approvals will need to be completed. After the cooling period, the contract will be considered ‘unconditional’ and you will have no opportunity to withdraw without major penalty.
In Queensland, the process is different and favours the buyer over the seller. This is because there is more flexibility for the buyer to withdraw for various reasons after the contract has been signed.
Private treaty negotiations will be different depending on the market and the popularity of the property. If the market is slow (eg – properties take four or more weeks to sell), you will have the opportunity to negotiate assertively with a view to obtaining a bargain. If the market is fast (eg – properties take less than a week to sell) you will need to offer a good price and move efficiently to complete your research prior to purchase.
Negotiation best practice
Apart from the points outlined above, use broader negotiation best practice similar to the way you would negotiate in other circumstances or when purchasing items other than property. This includes listening carefully to the seller / agent and obtaining clarification if you’re not clear; be prepared to walk away if your limit has been reached (there will always be another property); and be prepared to uncover middle ground – a good negotiation will result in a win for you as well as the seller. The final piece of advice – stay positive. Negotiation is part of the property process and can be a fantastic experience . . .particularly if you’re successful in the purchase : – ).
Buy smarter = limitless ways to build lifetime income
Crave Property Advisory is a unique property strategy and buyers agent service. As the only independent and unbiased advisory that can help you use any property strategy Australia-wide, Crave’s services extend to home, investment and commercial property. A highly client focused organization, Crave developed the Modular Investing System (MI System) to provide clients with the ability to use a tailored mix of strategies and efficiently build profitable portfolios that create lifetime income.
Debra Beck-Mewing is the CEO of Crave Property Advisory, and has more than 20 years’ experience in property investing, Australia-wide. She has used a range of strategies to build her property portfolio including renovating, granny flats, sub-division and development. Debra is a master in sourcing properties that have multiple uses and multiple exit strategies, and is a passionate advocate for increasing transparency in the property and wealth industries. She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business. A skilled communicator, Debra is a speaker, author, host of a range of podcasts, Editor in Chief of Property Portfolio Magazine and participates on numerous committees including the Property Owners’ Association.