Ten must-have negotiation skills
31 July 2015
Negotiating skills are important in buying a property – especially if you want to buy at the right price without getting a vendor off-side. Here are the ten skills needed to succeed at the negotiation process.
In negotiation, the most important thing is confidence. If you do not feel confident there are people who can negotiate the property for you. You could use a trusted friend or pay a buyers’ agent. Or you can learn as much as you can about the art of negotiating to increase your confidence. Successful negotiation often comes down to knowledge so it is very important to know recent sales and know the positives as well as negatives of the property to help you keep things in perspective. Find out as much as you can about the seller too – if they have already bought elsewhere or are under pressure financially you may gain the upper hand in any negotiations more easily. If you don’t feel confident, act it!
You are in a stronger position if you keep your feelings under control or at least hidden from the other party in the negotiation. Even if you are desperate to buy the property, it is better to play a waiting game and not jump in and go higher just because the seller is taking too long to get back to you. This technique works very well when there aren’t many buyers. It doesn’t work so well when there are lots or buyers and the market is going up in leaps and bounds. It also doesn’t work well for sought after or rare types of properties. Wait too long and someone else will buy it!
Be aware that many agents will try and create urgency by saying standard lines such as, ‘There are other buyers interested'. They are working primarily for the vendor and they are trained to create pressure.
3. Length of time on the market
Be aware of how long the property has been on the market. If it is a new listing, some owners are so flushed with success at the thought of having a buyer already that they try to hold out for the asking price or close to it. Be aware that you are more likely to miss out on a property if you are making an offer early in the marketing programme because of vendor hubris. Sadly, many vendors turn down early offers that turn out to be the best they will actually get. If you are making an offer early in the marketing programme, make sure you show evidence of your research and knowledge of prices e.g. 39 Smith Lane sold for $x and it had 2 bathrooms or 45 Jones St might be on the market for the same price but it hasn’t sold after 6 months etc.
It is generally easier to get an offer accepted if the property has been on the market for a few weeks.
4. Good cop, bad cop
Those who have watched crime shows will instantly understand this buying strategy. If you are a couple, one person seems very keen and the other person shows little interest. If you aren’t a couple, take your mother, daughter or friend. In this situation, showing some emotion is OK. After all, one of you might refuse point blank to buy so the agent might need to get the deal done fast in case the second person finds a house they prefer! If you indicate that you are not the sole decision maker it will be difficult for the agent to close the deal for a higher price.
5. Look at the deal from the vendor’s point of view
In a home sale negotiation, it's essential to look at the deal from the opposite side of the table. Try and imagine what the vendor is worried about, what pressures they may be feeling. Sellers today could be facing any number of anxieties. Perhaps the local housing market is weaker than the national one. Maybe the seller has landed a job in another city and already bought a home there. He or she could even be facing bankruptcy. Any information you can obtain about the local real estate market or the seller will strengthen your negotiating position. Have a look around the home. Is it a hot Sydney day in February and the property has no air-con? Things like this may give you a sense of how much the seller would like to move on
6. Don’t go up as fast as the seller is coming down
When negotiating, there will usually be gap in price between what the seller wants to receive and what the buyer wants to pay. When making offers and receiving counter-offers, the important element is that you must move your price in smaller increments than the seller. The increments shouldn’t be so small that the seller doesn’t take you seriously, feels insulted and refuses to continue negotiating. Also, if it’s a real Buyers’ Market, this may cause you to lose the property to someone more desperate.
7. Avoid talking
Remember the childhood game The one who blinks loses? In negotiation it’s the one who talks first. Try and get the agent talking by asking lots of questions or even answering a question with a question. For example, if the agent asks whether you have finance approved, you could ask Is the owner keen to sell? almost as if that’s what you were thinking about and you didn’t hear the agent. The response could be - Is the owner desperate to sell? Don’t be a smart alec though – getting people offside could lose you the property if there are other buyers. Likewise if you make an offer don’t keep talking. Just listen for the agent’s reaction as this could tell you a lot. Many people do not like silence so a good negotiator asks a question then is comfortable with silence forcing the person to answer or to say something.
8. Call them back
This is a good idea to fall back on when an agent calls you and you haven’t composed your thoughts and may not say things the best way. If you say that you are in a meeting and ask the agent if you can call them back, you will have a chance to get your responses ready, perhaps even make notes. A good agent who is working hard on the seller’s behalf will want you to do the talking as they try to get you to provide them with information that they can then use when negotiating with you. When you call them back, you can be ready with what you want to say not what they want you to reveal.
9. Have other options in mind
When you begin negotiating on a property, make sure you don’t feel emotionally that it’s an all or nothing scenario. If you have identified several other homes you'd be happy with – even if they are not quite as good – you won’t feel as if everything rests on this negotiation. It also helps if you can say this to the agent. Make sure you only say it if it’s true - people lack conviction when they make things up as they can’t add any corroborating details when questioned.
10. Drop any feeling of win/lose
Never lose sight of the fact that your goal is to buy a home not beat the seller. Losing a house you like and can afford over the last few thousand just because you’ve turned against the seller because they wouldn’t cooperate with your plans could actually cost you money in the long run if the market is going up or if your timeline is out of whack as a result. Ask yourself whether it’s just ego stopping you from going up the last few thousand to get the deal done.