Negotiating when buying from a Real Estate Agent
I have wanted to write this article for a while. When you look around the
internet trying to find information on how to negotiate with Real Estate agents,
you only find articles written by real estate agents. They are obviously not
going to tell you how to successfully negotiate the price down, they try to give
the impression you are negotiating with the sellers instead of them. Don’t use
these guidelines when negotiating with someone who is selling their own home,
those negotiations require a different set of rules as you are actually dealing
with the seller.
Real Estate Agent Motivations
While the sellers do have a say, it’s the Real Estate Agents priority to get the
highest amount for the property regardless of what they say to you. Real Estate
agents get a percentage commission from the sale of a house, so they want a
higher commission which means a higher sale price. Before I disclose some
tactics it’s also good to be aware of the market. If you are currently in a
property boom, just pay the asking price unless you are up for a challenge.
During most property booms a house is sold at or above market value before the
home is even open for inspection. Also be aware that property booms overheat and
end, so it might not be wise to pay the asking price near the end of the boom.
But if you want a challenge don’t let me stop you. In a property low (or a
buyer’s market) here is where you can be very successful in getting a great
bargain.
The Sellers Motivations
Why is the property being sold? This is a great question to ask the real estate
agent, but be prepared to sift through their response. If the owner is eager to
sell they might try to down play it when speaking with you. Or the other tactic
they may use is it’s a very urgent sale, to entice you to put an offer in (even
if it’s low). Once you have put an offer in the Real Estate agent uses a variety
of other tricks to force your offer up. But let’s say we get an offer through to
the seller, we need to think of what they will respond. It’s very hard to judge
this as we have no contact with them, but you may be able to glean something
from their reason to sell. If a property is not up for urgent sale or has not
being on the market for a long time, the seller will most likely decline any
very low offers. If it is a buyer’s market and property has been on the market
for months and they have already moved out or their investment property is
empty, they will be more open to lower prices as they would want to remove the
overhead costs they are incurring.
The Emotion
It’s what every real estate agent (ones that I have met anyway) uses in some
form to get the buyer to raise their offer. The first sign of the emotion you
will see is they will always talk to the female first, and about the kitchen
and/or laundry. Yes it’s a stereotype but they still use it. Next if they see
children they will say things such as “look at all the room in the back garden
your children have to play in”. They will try to see anything about you, be it
you’re a family, you like cars (big workshop would be handy), you are a wine
drinker (cellar, or wine storage) etc. They point out the features you would be
most interested in or suggest it’s easy to change features that might not suit
you.
The next round of emotion is when you put an offer in on the property. If you
put in an offer under the asking price you can get anything from that’s a bit
low but we can see what the sellers say, to “Whoa, you want to offer how much?”
I have experienced both and here is how you can handle them. The first “it’s a
bit low” response is only there to prep you up for a higher counter offer and
make you feel a bit guilty or embarrassed to offer so low. Take no notice of
these comments and proceed as per your plan. At the other side of the scale, for
one you actually have offered too low or they want you to put up your offer
there and then. The key to this is not to budge. Just have no reaction to their
emotion and proceed as planned. If they aren’t even considering writing it down,
just say “well thank you for your time” and walk out of the door. You will be
surprised at their change of attitude and how they approach you. I have received
the extreme response from offering 25% less than the asking price (admittedly I
might have deserved some of it) to offering even as low as 1% less of the asking
price and still getting a harsh response. No matter what you offer, if it’s
below the asking price they will normally pull out these cards to play.
The Lies and Misinformation
Whether or not a real estate agent lies or carefully words something so it’s not
actually a lie but misleading, you need to be prepared full of information on
the property. Preparation in a negotiation is paramount to a successful outcome.
It still astounds me at the lack of information some real estate agents have on
the property they are selling even during the down times. You can have a large
advantage knowing things such as
·
How long it has been on the market (check out
http://www.thepropertydomain.com/)
·
The sales history of the house (normally the
government or institutions have the actual sale prices since the property was
established)
·
Future roads, shopping centres and train lines in
the area. Major roads and train lines are planned years if not decades in
advance. You can even look at a street map to see if there are any area’s
proposed.
·
Look for surrounding bush land that it’s national
park or reserve. These areas are normally ear marked for future development.
Final Thoughts
Make sure you know the negotiation process and how the offer and acceptance
works. When negotiating you need to know everything about buying a house. This
way you will not feel uncomfortable if they ask you something you don’t know how
to respond to. Remember that real estate agents are actually people to. They are
working to feed their family or themselves and while they still should be honest
you should take care as to what they might resort to during down times.
Negotiation always takes practice; hopefully this will help you with your next
home purchase.