Step 7 - Making Offers and Negotiating
Tip 1: Don't overpay by going over your upper purchase limit
Assuming you have done your CMA properly, you know the market value of the property so don't get FOMO and go well above your CMA just to secure a property.
It is normally fine to go a few thousand dollars over, but don't go pay tens of thousands of dollars over just to get into the market - the other potential buyers may do this, but they probably haven't done the work you have.
Equally, don't be afraid to offer your upper purchase limit - paying market value for a property is perfectly fine. If you keep sending low-ball offers you will frustrate agents and ultimately not purchase any property.
Tip 2: Call the more junior sales agent for more information and don't be afraid to ask questions
The junior agent on the sale will often give up more information than the lead sales agent as they lack experience.
Don't be afraid to ask questions such as "what price would get the deal signed today" - as this is a question some agents may give a straight answer to.
Tip 3: Add a deadline to your last few offers, not every single offer
If you add a deadline to every offer and not stick to it then the agents will catch-on that it is technically a fake deadline, so you should think about adding deadlines to your last few offers if you think you are getting close to a deal.
Tip 4: Use odd numbers in your last few offers, never use round / whole numbers in the offer price
If you use offer prices such as $550,000 or $600,000 then it looks like a generic offer that hasn't involved much thought and there may be a few other offers with the same exact price.
Instead, if you end your offer with an odd number such as $556,600 or $556,778 then it looks like a number which has been thought about carefully. It also means that you will beat out all the other numbers which are whole numbers, which is very valuable in circumstances where the Seller just wants to go with the highest price.
This is one of the best tips you can use in a negotiation - it's really a game changer. I have had a few deals where I have literally secured the property by adding an extra $600 or $1,100 to my price.
Tip 5: Avoid auctions if possible, especially in hot markets
We want to avoid auctions because you will be competing with emotion-based buyers which may result in bidding wars, increased FOMO and anchoring on the current bid rather than the actual market value of the property - overall this can lead to you paying more than necessary / over market value for the property.
This is especially true in hotter markets, where the auctions can result in the property selling for significantly more than market value.
However, I appreciate that in some markets auctions are the norm, so it may be impossible to avoid them. In which cases you want to ensure that you understand that at an auction you are giving an unconditional offer so it is vital that you have done the following prior to the auction:
Asked the agent if they are open to accepting offers prior to auction
Conducted a building and pest inspection prior to the auction (don't rely on a report provided by the Seller… but you can potentially buy a report that an independent inspector has issued to another potential buyer)
Checked with your mortgage broker that they are comfortable with you proceeding to auction
Have the funds available to pay the relevant deposit on the day of the auction
You should also make sure you have a strategy going into the auction and that you do not go significantly over your CMA amount, no matter how much FOMO you may get - do not get caught up in the hype of the auction, walk away once your limit is reached. Feel free to check out the below video for auction tips.
Tip 6: If you don’t ask, you don’t recieve
Ask the sales agent as many questions as you need in order to get a better understanding of where your offer stands and to put yourself in the best situation to secure the property.
Simply ask the question you want to know the answer to, and if they can’t give you a clear answer try and ask the question in another way so you can get some information from the agent - for example, if you ask the agent what price a competing offer is at and they say they can’t tell you then just ask is it within or above the range, if they say they can’t answer that then ask if it is above $[X] value, if they say no then you’ve just learnt something you didn’t know before and then you can ask if it is above a different $[X] value. The worst they can say is no, but if you don’t at least ask the question you will never know.
You should also not be shy of making requests of the sales agent - for example, if it is a best and final offer scenario you can ask the agent if you can be the last person they call before they finalise offers - they might not take you up on this and you should try be the last person to make the offer anyway, but if you don’t ask, you don’t recieve.
Tip 7: Shut up and listen…
The “art of silence” is a common and important negotiation tactic - it is is a strategy where you deliberately pause, say less, and allow silence to influence the conversation. Instead of filling every gap with words, you let the other person speak more, reveal information, or feel the pressure to respond.
This means that when you ask important questions to the agent such as “would $[X] be a competitive offer” you should be pausing straight afterwards and not just talking for the sake of talking to fill awkward silences and you should do the same once you recieve the response, don’t feel pressured to respond straight away - this is something people are often naturally inclined to do so it will feel strange at first, but you will be surprised how effective it is.
When you stop talking for the sake of talking and aren’t afraid to sit in silence you invite the sales agent to give you more information than they ordinarily would have and they may even start negotiating against themselves.