Agents come in different shapes and sizes and with different personal goals. Some may want to get the best price for the vendor, while others may just be interested in getting a sale happening. You can turn the odds in your favour by being mindful of a number of different factors.
1. Help the agent help you
“Agents may be employed by a vendor, but they still work for themselves,” says buyer's agent Nathan Birch. “At the end of the day, if a property doesn’t sell, they don’t get paid. You want to make it the path of least resistance for them.”
Birch suggests letting an agent know that you are the best option for a hassle free sale.
“If you can play on that emotion and say ‘I’m the best option for you, I’ll make it happen straight away’, they’ll know that perhaps apart from the price, you are ideal. They then look at their other option, which might be a first homebuyer who is saying ‘OK, I need to take mum, dad, my brother, my uncle, auntie and dog all through the property’, and they know this will be more painful.”
Birch says the sale itself is more important to an agent than minor increases in price.
“Remember that an extra $10,000 in sale price to a real estate agent equals $200 or $300 going to the office, based on a 2% or 3% commission,” he says.
“By the time that filters to the individual agent, he or she gets $20 or $30 extra, which isn’t even worth the petrol driving out to the property. It’s important to remember that.”
2. Leave your ego at the door
A negotiation situation is a microcosm of real life; agents will not respond well to someone who is arrogant and inflexible. If you are humble and open-minded, you will find it easier to cultivate a friendly environment.
“Some people go in and say, this is what I’m prepared to pay, anything more and I won’t pay it,” says Birch. “As long as you say that, it’s you against the agent, so you are better off remaining humble and calm about it. Say something like ‘I like the property and I wish I could afford that price. I have been able to get another $10,000 [which is still below what the vendor wants], I can exchange unconditionally for that amount’. Then see what they come back with.”
3. Give a little in return
You might see a property listed for $520,000, but also know that a similar one sold in the area for $440,000 the year before. If you want to shoot significantly lower, it is good to sweeten the deal for the agent.
“A lot of people say they want to buy low, but if you’re going to outline this to an agent, you need to offer them something too,” says Birch. “If I’m at $440,000 and they want to sell at $520,000, I come in and say ‘here’s $440,000, I’m ready to exchange it without any cooling off period, or any conditions, ready to go’. In saying this, I am realistically expecting to pay $470-480,000. From that point they might come back and say that’s too low, I’ll sell it to you for $500,000.
“I’ve now just chipped them away and got their attention. They might have other buyers sniffing around, but they know I’m serious. I might offer them $10-15,000 more, then they might come back and say ‘I can’t do that, I’ve got a $480,000 mortgage on it. The lowest I’ll go is $480,000’.
“If I had have come in at the start saying I’m only going to pay $440,000 subject to building and pest inspections and whatever else, I’d have been asking too much.”
4. Don’t look a gift listing in the mouth
Some people claim you should always take a certain percentage off the asking price when making an offer. Birch says that as a loose rule of thumb, you might be able to get $20-30,000 off a $200,000 property, but if the numbers work well, you don’t need to push for further discounts.
“If a property is well-priced, I’ll pay the full price for it,” says Birch. “That comes from knowing the market and understanding what represents good value. If you bring them down by $100,000, it might stroke your ego, but then you find out later it was listed by $100,000 too much, so you’ve done no better than pay full market price for it. If a property is poorly listed and you can pay full price for it and still get it for below market value, you have got yourself a good deal.”
5. Ask good questions
Agents are often trained not to offer up any information that may lessen the value of the house, but you can get around this by asking insightful questions.
First up, ask who set the price on the property. If the vendor set the price, there is a chance the agent believes it is worth less and will push your lower offer harder. Asking the agent how much they expect the property to sell for will also give you an idea of their opinion. If your numbers tell you the asking price is too high, yet the agent says it will sell for higher, you probably can’t count on the agent as a price ally.
Next, remind the agent that you don’t really care whether or not you buy the property. Asking what else they have in the same market for a similar price lets them know that you are not emotionally attached. If you appear desperate to purchase a certain property, you can kiss any bargaining power goodbye.
Finally, it is hard to gauge why the vendor is really selling. An agent will never tell you if the reason will make the vendor appear desperate to sell. If you are bold enough, ask the vendor’s neighbour why they are selling. The other option is to ask how long the property has been on the market, or ascertain the information from its online listing. If a house has spent a long time on the market, you may be up against a vendor that is willing to hold out, rather than budge on price. It may also reflect a problem with the property.
If you suspect the latter, ask the agent if there are problems that you should know about. If you say that any issues emerging in a building inspection will prompt you to withdraw from the deal, they might be upfront and save you the hassle. This may also give you some negotiating leverage.