Tips to ensure property investors make money when they buy
Negotiating the right property deal is simply a matter of doing your homework and arming yourself with first-class skills.
The old adage “you make your money when you buy” is paramount in real estate investing, especially in the current market, where there is a shortage of quality properties up for grabs. The only way to do that is to improve your negotiation skills so you can compete with other buyers and avoid paying too much.
There are a number of tips to take into negotiating, including:
#1 – Learn the Seller’s Motivation
Knowing the reason a property was for sale could be useful in knowing how hard you can negotiate. Listen out for any hidden signs indicating how motivated the seller is, or that the sale is urgent. You can often gauge much about the seller’s determination from their counter offers during your negotiation.
#2- The Interest Factor
Be careful not to appear too keen, as advertising the fact that you desperately want a property could force the price up. On the other hand, if you’re interested and intend to make an offer, do let the agent know. If you’re considering other properties tell them that also, as it can often cause them to place more value on your offer. And if they ask how much you intend to offer, let them know you’ll make a final decision shortly and will confirm in writing at an agreed time. Even giving a general figure of what you’re prepared to spend is not advised as it can work against you in the negotiation stages.
#3- The Selling Agent has the Upper Hand
Investors should remember that selling agents are trained professionals. Unlike most investors, they negotiate property deals very regularly and have honed their skills over time. It pays to remember that their sole purpose is to sell the property for the highest possible price – to be clear, they are working for the seller, not the buyer.
#4- The Game
While negotiating a discount could provide real thrills, there was a real danger of chasing the “buzz” at the expense of a great deal. If your research shows the property you want is already under fair market value, snap it up. Attempting to haggle further or go in low will probably just mean you lose the property because other informed buyers grab it.
#5- The Offer
Knowing what to offer was not an exact science, but there are key factors to consider to avoid going in too high or too low. How you read the owner and agent’s motivation, how many other offers are on the table and your assessment of asking price versus value all come into play when deciding what to offer. And if you’re looking at other properties, then placing an expiry date on an offer can be useful as it can act as a signal to the agent that they need to treat your offer with some urgency. But it won’t work in a situation where you’re competing with other buyers.
#6- Terms and Conditions
Many buyers don’t place enough importance on the terms and conditions of sale, but remember that a seller’s agent’s obligation is to propose terms and conditions to suit the seller. Paying attention to the terms and conditions as a buyer can mean, for example, that crucial time is not lost between settlement and finding a tenant for an investment property.
#7- Professional Advice
If the negotiating process is too daunting, or investors want to ensure the best return on their investment, getting advice from a buyer’s agent is a good option. If the seller has a professional on their side, you probably should too.
Property buyers have the experience and inside knowledge and know the tricks of the trade to help you get the upper hand, thereby negotiating the lowest price and best terms and conditions.
By Liz Sterzel
Property Adviser, Coach, Director and Property Investor
Property Wizards Property Buyer’s Agents