With auction clearance rates slipping below 50% in some markets right now, vendors are much more open to a pre-auction offer. You’ll also find more vendors choosing a private sale over an auction because it allows them to hold out for their price and save on auction costs.
That means, if you’re ready to buy a property in the spring market, you’ll also want to be prepared to drive a hard bargain. Here are some tips on how to make a successful pre-auction offer and negotiate your price like a pro.
Have your finance in place
If you haven’t already done so, ask us to organise pre-approval on your home or investment loan before you put in an offer. That way, you’ll be confident of your finances and have a clear understanding of your upper spending limit. Having pre-approval in place gives you an edge over the competition because the vendor knows the deal will go smoothly.
Offer the right price
Research is always the key to paying the right price for a property. Whether you’re buying at an auction or negotiating directly with the vendor, it pays to know the property’s correct market value before you go in guns blazing.
Research will allow you to make an offer that’s too good for the vendor to pass up, without overpaying. It pays to be realistic – you’ll have a better chance of beating the competition.
Discover the vendor’s motivation
Knowledge is power. Ask the real estate agent why the vendor is selling and use the information to your advantage. For example, if they have already put down their deposit on their next property, the vendor may have time constraints that you could exploit by offering a faster settlement. If they are in a divorce situation, you could provide a more substantial deposit so that both parties will have more money for their next property deposit, which could help the vendor choose your offer over someone else’s.
Play your cards close to your chest
When it comes to liaising with the vendor’s real estate agent, be mindful about giving away too much information. Never tell them your budget in advance, as they could use the information against you. Always indicate that you’re interested in several properties and have other options – if they think you’re too keen on the property they’re selling, then they’ll be less flexible during negotiations.
Time your offer well
Timing is crucial when you do make an offer. Some experts suggest that you go in hard and early, well before the auction – as vendors may be more inclined to accept your offer because of the convenience factor, which may also be a good tactic in a softening market.
Others recommend waiting until right before the deadline to make the offer, to eliminate the possibility that the real estate agent will shop your offer around to other prospective buyers.
Another tactic is to stipulate a time limit – for example, tell them it’s only on the table for 48 hours. Whatever your strategy, be prepared to stay firm on your offer – don’t be too quick to budge from your original offer price as it could make you look comfortable.
Keep your emotions in check
It’s important not to be distracted by your emotions during negotiations. If the price is being pushed up, you may have to walk away if it goes beyond the correct market value you have researched. A common mistake is to be manipulated into paying more than a property is worth because you love the property or don’t want to be the loser in the negotiation process.
Making a winning pre-auction offer comes down to being informed and employing some strategic negotiation tactics. I can help you prepare by organising a pre-approval on your home loan.
Get a buyers advocate
If it is just getting all too hard you might like to consider some professional help.
Utilising the services that buyers advocates offer is becoming more popular across Australia, as buyers recognize the benefits having their own advocate brings to the entire purchasing process.
Buyer’s agents are professionals who specialize in searching, locating, evaluating and negotiating the purchase of property on behalf of buyers. They do not sell real estate. They are engaged independently and paid for by the buyer to act on their behalf. The key difference between a selling agent and buyer’s agent is who they represent as, by law, an agent cannot act for and accept a commission from both parties in the same transaction.
Buyer’s agents offer a number of different service options, ranging from complete searches through to auction bidding and single property reports. Their aim is to ensure that the purchaser is as fully informed as possible and doesn’t overpay for the property. Having an experienced advocate on side who is familiar with suburb values and the purchasing process also assists in maintaining objectivity when it comes to negotiating the best possible outcome.
Give us a call to find out more or for an introduction to one of our preferred buyers advocates.
This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed before acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice about your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.