How to land a property deal
Published on 28/06/2011
With any purchase, you like to feel you are getting value for money. That's never more important than when buying a house, because it could well be the biggest financial commitment you make - especially with property prices as high as they are.
Whether you are looking for an investment property or a home to live in, there are two things you need to do to bag a bargain: leave your emotions behind and hone your negotiating skills.
''Good negotiators are good listeners and can pick up on why a property is being sold,'' says the managing director of buyer advocacy specialist Keyhole Property Investments, Melissa Opie.
They also tend to ask a lot of questions ''but keep a lot of information close to their chest''.
Opie says people buying a ''heart home'' - one that they intend to live in - need to be particularly careful not to let their emotions get in the way.
''People will put a price on the quality of life and are more likely to pay more for a heart home but they still need to think with a business mind - like will the banks value the property for what you are prepared to pay,'' Opie says. As an investor, there is always another property, she adds.
If you are buying property as an investment then you should be prepared to work for a better price, says a property and finance adviser with Smartline Personal Mortgage Advisers, Kevin Lee.
And if you are going to negotiate with a vendor, you should do it based on facts.
This means educating yourself on investing in property, being realistic about what you can afford, seeking professional advice and developing an appropriate strategy.
''If you're prepared to learn, you will mitigate the chance of being ripped off because you are so much more in control of the sales process,'' Lee says. ''The dream deal is doing your homework and paying a fair price for a property that fits within your strategy - it's where everybody wins.''
Opie agrees knowledge is power.
''Do your research,'' she says. ''You have to have undergone due diligence in the market and the house in order to know what the right price is. Some of the critical research may be finding out the sale prices of similar properties in the area and finding out why the vendor is selling.''
The chief executive of McGrath Estate Agents, John McGrath, says getting finance approved before making an offer is a powerful demonstration of commitment to buy.
''The best way of showing you're serious is by signing the contract and attaching a cheque for the deposit,'' he says.
''This makes your offer a lot more seductive to the vendor. Alternatively, put your offer in writing and mention you have your finance approved.''
McGrath advises against starting negotiations with your best offer.
Vendors always assume your first offer will not be your last, he says. ''If the property is overpriced, it's OK to start with a cheeky offer as long as you've done your research and can justify it using market information and comparable sales.''
And a professional valuer's appraisal that is much lower than the asking price is also great ammunition, McGrath says.
Understand any quoted prices
Consumer advocate Neil Jenman says experienced buyers know that agents underquote the selling price by about 20 per cent. So when an agent tells you bidding at an auction will start at $300,000, the price is more likely to be about $360,000.
''If your maximum price is $320,000, be careful. You could spend money on inspections, get your heart set on buying the home and all to no avail,'' Jenman says.
His tip for buyers who can't get a straight answer from an agent about the price, or who are certain they are being misled, is to ask the sellers about the price. Either write to them at home or via their lawyer.
The other point about a quoted price is to understand when the price was set.
The sellers understandably want to get the best price they can for their property. But that doesn't mean it is the price it will sell for.
If a property has been on the market for several months or even years, it becomes what is known as ''stale''.
Depending on the desperation of a seller's situation, the price might start dropping to something that is closer to the fair price it probably should have started at.
Months later, all they might want to do is sell the property at whatever price someone is prepared to pay.
Buyers who have done their research will know what the price should be, possibly put in a lower offer and pick up the property for an apparent bargain.
The buying game
Auctions can be a stressful experience for the unprepared, which is why many people engage the services of a professional to do the bidding on their behalf.
''Buying a property is all to do with psychology and affordability,'' Opie says. ''The average person is not a seasoned bidder at auctions. I've seen people put in bids over their own bid and push the price up.''
If a property is going to auction but a buyer wants to put in a bid beforehand, that buyer needs to understand whether he or she is paying too much.
That understanding can only come through doing the research as outlined above.
That knowledge will be equally important if you are the highest bidder at auction but are yet to reach the vendor's reserve price and start entering into negotiations. Stand your ground about what you are prepared - and can afford - to pay.
If you can't get your price, get your conditions, which McGrath says are ''powerful bargaining chips''.
''You can negotiate the length of settlement, inclusions (such as furniture), an early release of the deposit and/or offering to rent the property to the vendors after settlement if they haven't yet bought a new home,'' McGrath says.