Of course selling agents negotiate on behalf of their vendors regularly and therefore have much more practice than most buyers, who may only negotiate the purchase of a big ticket item like a house a handful of times in their lives.
But there are ways to improve your skills in this areas by avoiding some of these common mistakes during a sales negotiation.
1. Being emotional
This is perhaps one of the biggest mistakes you can make when buying property.
If you’re buying an investment property, of course, it's vitally important to look objectively at the asset to determine if it's going to fulfil its purpose, help you implement your investment strategy (you do have one – don’t you?) and make you money.
When buying your own home, it’s considerably more difficult to divest yourself of emotions.
But whether it's for a home or for an investment, don’t feel pushed into making an offer that is above what you are prepared to pay.
Just because an opportunity has arisen doesn’t mean you should do whatever it takes to seize it – there are literally thousands of other properties on the market that you could consider.
It’s easy to be overcome by the thrill of buying your "dream home", but don’t put yourself in a situation where the joy of the purchase is replaced with the stress of paying too much.
2. Not enough research
It's surprising, and scary, that so many people don't do enough research when buying an investment property, because we're not talking about buying lollipops here.
Don’t simply believe the selling agent or property marketer - if you haven’t done your own due diligence, if you haven’t seriously investigated all aspects of a property, you shouldn’t make an offer.
You have to intimately understand the local market, including comparable recent sales, so you can make an informed decision, and an educated offer on the property.
3. Not enough eggs in your basket
If an agent knows you are solely focused on the property they are selling, you can bet your bottom dollar they will leverage that during the negotiation.
To mitigate this, find another property that suits your criteria in a similar price bracket – preferably a bit cheaper – and let the agent know you’re also interested in this alternative.
Having another property in your back pocket helps you retain more power when dealing with selling agents and takes some of the pressure off you.
3. Not submitting a written offer
Fact is: it's only a written offer that will be classified as a legally binding one.
Many buyers are surprised when they're usurped in negotiations after they've verbally made an offer but weren't prepared to put it down on paper.
If you are making an offer to an agent, submit it in writing on a contract of sale, which the agent can present to the vendor.
A verbal offer or casual email does nothing more than show your hand to the agent – but they know it doesn’t bind you.
4. Submitting a high offer
Judging a property’s price can be tricky and one of the worst things you can do is put forward an offer that is too high and far over the true value of the property.
Of course if you’re making an offer prior to auction, you are effectively asking the selling agent to cancel the auction so you can purchase the property. For an agent to do this, they would have to be tempted with a good offer, so you’ll have to be prepared to pay a top price to get to the front of the line.
However, there's always the danger that you will pay more than is necessary to be first in and best dressed.
Showing your hand like this requires a pretty cool head to tempt the agent, but don’t act out of desperation.
Again, this can be due to being too emotionally invested in the property.
Inexperience and lack of understanding of the property is also a contributing factor.
5. Submitting a low offer
This can be just as bad as as offering too much for a property.
Not only do you waste a lot of time and emotion submitting an offer that's potentially insulting and likely to end up being rejected, but you lose credibility in the eyes of the selling agent.
Your offer of $580,000 on a property advertised for $640,000 plus, quickly falls to the back of the line.
If that agent doesn’t end up getting the desired $640,000, there is probably another offer closer behind that they will consider instead.
Submitting a figure that is too low will probably see you fall out of the game all-together and end up back at countless open for inspections once more.
6. Not using a buyers' agent
The biggest mistake you can make when purchasing a property is trying to do it all on your own and not seeking professional advice.
So, why not engage someone to guide you through the process whose job it is to buy property all of the time and can therefore negotiate on your behalf?
Using a professional buyers' agent to handle negotiations, as well as the search, will level the playing field – remember they’re also professional negotiators. Plus they’re likely to have ac cess to some silent sales – off market properties – that you wouldn’t have found on your own
Shannon Davis is Director of Metropole Property Strategists in Brisbane and as a successful property investor and licensed estate agent, his years of industry experience helps his clients maximize the performance of their investment properties.
He is a regular commentator for Michael Yardney’s Property Update.
Read more Expert Advice from Shannon here!
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.