Published at: 6/21/2016 3:28:59 PM
It’s a fine line between offering too little and paying too much. We lift the lid on successful price negotiations.
Some of us are natural hagglers. For others, the thought of asking for a discount brings on cold shivers. But buying your first home calls for smart tactics, and big rewards are up for grabs for those who can master the negotiation process.
On a home costing, say $500,000, knocking just one percent off the list price can mean a saving of $5,000. It will also keep a lid on stamp duty, which is levied on the final purchase price.
That’s why it pays to follow our five steps to master price negotiations on your first home.
1. Know the market
Any offer you make needs to be realistic. No vendor will accept a ridiculously low offer, but it’s impossible to know what a fair price is unless you have done your homework. Check out what other properties are selling for in your area to get a feel for current values.
2. Keep your cool
It’s hard to drive a bargain if you’ve been gushing about how much you love the place to the selling agent. Try to give the impression that you aren’t as keen on the property as you really are. If the agent thinks you’re completely hooked your attempts to negotiate could fall on deaf ears.
3. Be ready to act
Having conditional loan approval in place can be a game changer when it comes to price negotiations. It lets you know just how much you can really afford to pay, and it adds credibility to any offer you make.
Don’t be afraid to let the selling agent know you have conditional loan approval. It confirms your status as a serious buyer who can finalise the deal without delay. Your ME Mobile Bank Manager can organise conditional loan approval before you even begin checking out ‘open home’ inspections.
4. Knock off around 5%
There is no such thing as a typical buying discount. Vendor discounts vary widely in line with the state of the local market, the nature of the property and the vendor’s individual circumstances.
If you think a property’s asking price is fairly realistic, offer 5% to 10% less than the advertised price. If you believe the asking price is way over the top, or you know the property has been languishing on the market for a long time, try to knock off 15%.
5. Don’t let it get personal
The longer price negotiations take, the greater the odds that another buyer will jump in and snatch the property from under you. So don’t let negotiations turn into a battle of wills.
A quality property will rise in value over time and the long term capital gains can more than compensate for the difference between a 10% versus 5% price discount.