Real Estate Agents
The most common way of buying property is by private treaty through an agent. As the agents are working in the interests of the vendor, most buyers are skeptical about believing everything an agent will tell them – and for good reason. For example, an agent selling a small property on a large block may entice would-be buyers to subdivide or even demolish and rebuild, however unless they can show you planning permission from the local council, be aware that there may be regulations possibly forbidding or restricting any projects you may have in mind. If you do have a specific reason for buying a particular property, make sure you go through the proper channels to find out whether your project is going to be feasible. That said, a good agent can be your ally in finding your new house as they are most likely to be more in touch with housing issues than you and will be able to keep you informed about new and upcoming properties being listed.
Establishing a good relationship
It is therefore important you establish a good relationship with those agents selling properties in your desired area. When you introduce yourself, make sure you are able to demonstrate you are a serious potential buyer able to pay within a certain range and with the required finance arranged. You will not want to disclose the highest price you are able to pay to the agent, however, let them know the type of property you are interested in. A good agent should take note of your interests and will endeavour to inform you of any suitable properties on the market. In the event there is nothing available which matches your needs, the agent will hopefully keep your details and stay in contact with you when anything suitable is up for sale. When you do attend an inspection, the agent should be able to accurately gauge your requirements and will hopefully get a feel for the type of property you are interested in. The best agents will keep you informed of properties just coming onto the market, having established your needs and tastes – these are the ones to look out for as they can save so much time.
Negotiating the price
What is the best approach to negotiating the price of a house? This really depends on a few things – are you buying in a seller’s market – when competition for property is high and houses are quickly sold after they appear on the market, or at a time when the market is flooded with properties or is it somewhere in between? Have you seen every other house for sale in the area and how much would you care if you missed out on a particular property? Has the property been on the market long, has the owner already refused lower offers and do you know if they are in a hurry to sell? Obviously, your negotiation power is subject to the circumstances in which the property is for sale. There are however, some techniques on how to deal with agents when it comes to negotiating the price that you may wish to employ depending on the circumstances just mentioned.
Mild manner: When you inspect a property do not appear too enthusiastic, even if you really like it. If the agent senses you are keen, they will advise the vendor to give little room in negotiations. You want to be taken seriously so without being scathing about the property, point out the negative features to the agent to indicate that perhaps you would be interested, but only for the right price.
Hide your hand: Do not reveal your highest purchase price to the agent, but state that you will buy if the price is right. Remain approachable and leave a fall back position. Where buyers are few, your persistence could well pay off.
Stand Your Ground: Where the vendor will not compromise on the asking price and the agent is trying to talk you round, use the same tactics on them to justify why you believe the asking price should be lowered. For instance, point out the adverse characteristics of the house indicating that the agent could miss out on the sale. Be careful not to alienate the agent however, and make sure he knows he can ring you any time for your absolute final offer.
Bargaining Chip: If you live in the area and believe you are dealing with an agent of skill and good practice, you may decide to offer your property for sale with them, provided that you are able to find suitable premises as your new home. While a good agent will not accept this as an incentive to lower the asking price of another property you are interested in, you may be able to use this angle to get preferred status with the agent which could be especially useful if there is much competition for the properties you like.
Get an appraisal: The best way of judging whether the asking price of a property reflects its real value is to have the property appraised. If you are serious about purchasing the property, an independent appraisal could be a wise investment as it will confirm whether you are paying the right price and give you more influence when negotiating a lower price if the valuation has revealed the property is overpriced. Of course if the appraisal shows the property is under-priced you may wish to keep this to yourself and snap it up before someone else does!
Ask the right questions: Good agents should never reveal the circumstances or tactics of the sale of a property, however not all agents are good and may reveal details which can give you a little more negotiation power. For example, asking ‘why the house has been set at this price?’ may put an agent at ill-ease if they believe the property is over priced and you will therefore know by their response that the agent is likely to try and talk the vendor into accepting a lower offer. Other questions relating to the reason the vendors are selling can also help determine whether the vendor wants a fast exchange, however should the agent answer reveal such confidential information, make a mental note never to list your property for sale with them and warn your friends to do the same!
Built-in buffer: Most houses do not sell for the full asking price as there is a built-in buffer for negotiations. As a general rule, offer the vendor about 10 percent lower than they are asking unless the property is exceptional or the market is very strong. In the normal back and forth of the negotiation process, an agreement is usually made somewhere between 2.5 – 5 percent lower than the original asking price.
Staying Power: Getting a good buy can be a matter of being in the right place at the right time, and putting in the time to view so many houses that you can say exactly where they stand in comparison to every other house in the area. This can be tough as you may feel like you are constantly letting good houses pass you by, and indeed, if you do find the right house you may not wish to wait for something better. However, by knowing the market and watching out for properties in which the rest of the market appears to have lost interest such as failed auctions and those listed following a drop in market value can position you well to find a ‘bargain’. Always bear in mind however, it is not a bargain until its physical, technical and legal properties have been verified.
Word of Advice: While there is something in all of us that loves to get a bargain, don’t forget that what you are really after is the right home, not the cheapest! A house that costs less (or one that you know you could get down in price) may be tempting, but paying the full price for the right house is far more likely to give long term satisfaction.
Securing your offer
When you make an offer on a property you will usually be required to give a deposit (normally ten percent) along with the written statement of your offer for the vendor to consider. The deposit does not guarantee you will be the successful buyer as several deposits may be taken for one property. However, if your offer is made prior to some else’s higher offer, you should at least be given the chance to increase your offer, though the agent may not tell you how much higher you will need to go in order to beat another buyer in the hope of extracting your highest price. If you are not the successful buyer, your deposit will be returned to you, however always make sure that you receive a receipt for the deposit from the agent or holding authority when you initially give it to them. Make sure that if your offer is accepted you get written acknowledgement of the agreed purchase price along with any other terms negotiated such as the inclusion of white goods or a shortened exchange period.