How to swing property purchase negotiations in your favour

Savvy property investors know how to negotiate a better deal for themselves by applying pressure to three critical negotiating points.

These three critical negotiating pressure points are at work in every negotiation; either you are applying them to the other party, or they are using them on you. So let’s look at then:

1. Options

When you’re buying a property it is important to convince the seller that you have more options than they do, because power in negotiation goes to the person with the most options.
Look at it this way – if a seller has two buyers lined up waiting to offer him $500,000 for his property he has options. You probably have little chance of getting him to accept your offer of $480,000.
However, it’s important to realise that in negotiation you often deal with perception rather than reality.
Agents will often tell you they have other buyers interested or better offers than yours, but they are simply applying this same pressure tactic on you.
To gain power in negotiation, you must convince the vendor through his agent that you have more options than they do. Currently this isn’t too difficult, because in most markets there’s an abundance of properties for sale.
Let the agent know that there are also other properties you are interested in. You could say something like: “We like this property, but there are two others we have in mind in a better location and at a lower price.”
Remember the person with the most options has the upper hand in the negotiation.

2. Time

If a vendor is highly motivated and under time pressure, you could find yourself a terrific buy.
While it may be hard to work out what type of pressure the vendor is under, the selling agent will sometimes tell you that they have already purchased another property and must settle at a particular time.
Other time-motivated sellers include people going through a divorce or moving interstate.
To help find out how motivated the vendor is you could ask the selling agent why the vendor is selling, where are they moving to and would they consider a lower offer for a quick settlement?
Other sensible questions to ask are:
• How long has the property been on sale?
• Have they received any offers on the property?
• How did the vendor come to his selling price?
I like to use time pressure when making a written offer to purchase. I’ve found it helps if I put a deadline on my offer, such as: “This offer expires at 6:00pm on Thursday 23, May.”
I always give an explanation to the agent, such as: “Well… I’m considering purchasing a particular property that’s going to auction this weekend, and if the vendor doesn’t accept my offer by Thursday, I’m keen to purchase the other property and can’t have this current offer remaining open when I go to the auction.”

3. Knowledge

In negotiations the side with the most knowledge will do better.
Fact is, if you’ve done the proper research you should know more about the property market in which you are buying than the seller.
However, apart from researching the local property market, it’s also good to find out what you can about the vendor. The problem is that most of what you know comes from the agent.
But the reason you should find out as much as you can about the seller and their property is that it will give you a better insight into the real motivation for selling. This could lead to a creative win-win solution that will let you buy the property at below market price.

In summary

Remember these three critical negotiating pressure points when negotiating your next property purchase. Make sure you take advantage of them and that the selling agent doesn’t apply them to you.

Michael Yardney is a director of Metropole Property Strategists, who create wealth for their clients through independent, unbiased property advice and advocacy. Subscribe to his Property Update blog.