Once you’ve found your ideal home, it’s time to make an offer on the property. This is rarely a simple process and usually involves negotiating a house price that both parties are happy with. But how do you negotiate so the odds are in your favour?
The first step is to fill out an Offer and Acceptance form (O&A). This specifies the price you’re offering and the terms of the transaction, so make sure you fill the O&A out carefully! Treat your O&A as if it will be a binding contract because if the seller accepts your offer straight away, it will be.
Most of the time, however, the seller will contact you with a counter-offer (often slightly lower than their asking price), and the process of negotiating a house price will begin.
This can be an emotional time, and there’s always the risk that another buyer will make a better offer during your negotiations – but it’s important to keep a level head. Giving in to pressure and offering more than you can afford is not worth the financial pressure later.
Here’s my advice for negotiating a house price:
1. Make a reasonable first offer.
While you won’t get a lower price if you don’t ask for it, an offer that’s too low will only annoy the seller and make them averse to dealing with you. Hostility does not make for a productive negotiation. Instead, make a reasonable offer. If it’s lower than the asking price, justify your offer with market information (see point 3) or honestly point out the flaws that make you reluctant to offer more.
2. Be a reliable buyer.
Make sure the seller knows you’re serious about buying and that you can be trusted. A great way to make yourself reliable in the eyes of the seller is to get your home loan pre-approved. This will assure the seller that a deal with you is less likely to fall through. As a result, the seller may look at your offer more favourably – they may even choose your offer over a higher offer from a less reliable buyer.
Know what similar properties in the area are selling for (see online property listings and REIWA’s suburb profiles), so you’re confident about how much particular properties are worth.
Also, chat to the seller’s agent to find out as much as possible about the seller’s position. Is the seller looking for a quick sale? Has the property been on the market long? Both of these may suggest that the seller is likely to consider lower offers. Because the agent’s client wants to negotiate the best house price possible, it may be hard to get a lot of information from them – but you can at least try to get a feel for the seller’s position.
4. Know your maximum.
Ideally you already have a good idea of what kind of house you’re looking for and how much you are prepared to spend. To negotiate effectively, you now need to make a definite decision about how much you’re willing to offer, and stick to it – being certain about what you want will always lead to a more satisfying purchase.
5. Keep your cards close.
You need to know what your maximum is, but the seller and their agent doesn’t. Don’t give away too much about what you’re prepared to spend, or just how much you adore the house – the seller will use this knowledge to their advantage.
6. Don’t be pressured.
Agents may try to get a quicker sale by telling you about another, higher, offer. Stay true to your maximum price. Making a snap decision due to pressure from the seller’s agent may lead to regret later, so be sensitive to the market – if there’s a lot of listings around (what’s called a ‘buyer’s market’), you can afford to take your time. If there’s a lot of buyer competition, move faster but don’t forget your maximum and your market research.
In summary, your most important tool is knowledge. Know the market and know your own price limit, and you’ll be well prepared to negotiate the right house price.
Have you had to enter into negotiations to get the property you wanted? What was your experience?