Expert Advice by Paul Wilson
When buying or selling a property, the best way to get a good deal is to control the negotiations. Many property investors prefer to leave negotiations in the hands of their Seller’s or Buyer’s agent and that is fine. But if you would like to jump in and try your hand at negotiating, nothing can be more satisfying than knowing that you personally negotiated the deal of your dreams. Here, I am going to present seven tips which can help you better negotiate any property deal, whether you are the buyer or the seller.
1. Be Explicit/Be Compete – Have you ever heard the expression, “You don’t get what you don’t ask for?” This applies to negotiations in a very direct way.
Too often when property investors sit down to negotiate for a property they forget to ask for what they want. If you discover termite damage to the property and this is the only thing holding you back from a purchase, make it known. Most sellers would rather either lower the price or have the work done to secure the sale.
2. The Importance of Preparation – Prepare well before negotiations. For instance, I like to use a simple formula to help me prepare. I call it knowing the Good, the Bad, and the Ugly. All this means is that prior to negotiating, I know what about the property that is good and will benefit me as a buyer. I obtain all the Bad from the Pest and Building Reports and I use these as bargaining chips when cutting down the price to what I believe to be a more reasonable cost. The ugly I get from photos or a simple walk-through of the property. For instance, if a bedroom is painted Blood Red that is an Ugly item which will need to be covered (literally) before it can be rented. And red is not an easy colour to cover, so this can help me negotiate a lower price. Other points of leverage could include bad street appeal, the presence of mould, or just very dated bathrooms, showers and kitchens which although could be in good condition and functional, would be a turn off to many buyers.
3. Know your Limit (Bottom Line or Top) – Be sure to know what the highest price you will pay for the property is and keep that information secret. You know your limit and strive to obtain the property for as much below that as you can. Use the Bad and the Ugly to do this. Leave the emotion out of the equation, especially if you’re buying an investment property, all that matters are the numbers and they need to work to your ultimate benefit.
4. Try to Deal Only with the Official Deal-Maker – If you can get the actual seller to the table, that is, the owner, you stand a far better chance of getting the deal you want. This is because even if you persuade the Seller’s Agent, that agent must then convince the seller of your proposals and will certainly not have your passion in promoting the deal.
5. Have a Plan B (or even C and D) – If this deal is not proceeding as expected, have a couple of other similar properties in mind that you are also entering into negotiations on. If you have no pressure to add this particular property to your portfolio, it is much easier to simply walk away from a bad deal. Communicate to your agent that you have a backup plan and that you’re not concerned whichever way things go. This creates a greater sense of urgency for the vendors to seriously consider your offer, or risk their property remaining on the market for a longer indefinite period of time. Many times vendors discover that the first genuine offer is the best offer and regret that their property remains on the market longer while eventually settling for a slightly inferior or similar offer many weeks or months later.
6. Listen – This may sound like a no-brainer, but if you listen closely to the seller you can often negotiate a better deal. This is because sometimes the money is not the driver of the sale; there is usually something else at play. Maybe the person wants to make this sale by a certain date because they already have a vacation planned and need the money to pay for the trip. Or they may have a dream house they are trying to secure which requires the sale of their property for them to do so. By discovering the motivating factor in the sale, you will gain information which you can use to your advantage.
7. Discuss, Don’t argue – A negotiation is an opportunity for two people to both get what they want. Some approach negotiations as if it is a war to be won, but in a war only one side wins. If you can create a win-win scenario, you will always come away with a better deal and gain a reputation that will follow you, making future deals easier.
These tips can help you negotiate better deals whether you are buying or selling. If for some reason the deal does not go as planned and you must walk away, be sure to keep the door open for future negotiations and maybe even send a small thank you note afterwards. Sometimes, small gestures like this can cause an iffy buyer or seller to change their minds.
Paul Wilson is an Independent Property Investing Expert and the founder of We Find Houses, Educating Property Investors & We Find Finance. Paul has been educating and coaching investors since 2001. Paul provides valuable, independent guidance and support by teaching strategies on how you can invest successfully while protecting yourself from commission hungry sales agents and property spruikers. Protect yourself with knowledge, contact Paul today for a complimentary consultation on 1800 600 890 or email firstname.lastname@example.org
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Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.