Negotiating A Good Price As A Buyer
There is a long list of little tips and tricks that Realtors such as myself use to try and get a better price for our clients while trying to bring a deal together. The following is not such a list of tricks of the trade, as that would be too long and complex and not to mention bad business sense on my part to share. The following is some tips and tricks that are meant for the client who is buying a property.
Make sure you have seen enough properties in person that are in a reasonably similar price range and have reasonably similar criteria. I usually recommend at least 6-8. Again, this is in person and not just peering at listings online. You can’t take a picture of a smell and details in the description like “ocean view” can be applied to a wide variety of actual views. Listings are, after all, a form of ad. Once you have viewed even a handful of places you will know which property among them has the best price, you’ll know what a certain range of your options are in that price range, and ultimately you will know that you are not being hasty in your choice of properties when you choose to make an offer on one.
Know what you can afford. The first thing I ask every buyer is if they’re pre approved for a mortgage. There’s no sense in going shopping if you don’t know for sure what’s in your wallet. The Seller’s Realtor may ask if you’ve been pre-approved and any answer other than “Yes.” from your Realtor is not going to help the Seller take you or your offer seriously. They will, (quite correctly) wonder if you will be able to get the mortgage and be able to buy the place at all. Should they accept your offer, they will have to virtually take their property off the market while you sort out the mortgage and all the other things you have to do before finalizing things. You see, while that Seller has an accepted offer with you, they won’t be able to accept another offer except as a backup offer (subject to yours falling apart) which by the way they aren’t likely to get unless the place is really really sharply priced.
Buyers have a way being able to afford x but wanting x+y and willing to spend x-z. This is part of human nature but try not to give in to your emotions too much. Hoping for too much while having too little can really put stress on you during the negotiation process and then later down the road when life’s little surprises come along. I’m talking about more than just real estate here. Jobs, relationships, interest rate changes, illness or death are all potential game changers. These things are a double edged sword though as they may make it easier for you to afford the property now or down the road as well. Time will tell, but in the meantime play safe.
Be wary of lowballing. There are times when lowballing is a good idea, but most of the time coming in at $35,000 below the asking price (in the Nanaimo market) is just a waste of paper and a waste of everyone’s time including yours. Generally it will just be torn up by the Seller and/or it just starts a tug of war in which the Sellers just dig their heels in. Not good for the buyer. Even if you do come to some sort of agreement on price after a long negotiation battle, if you find something during the property inspection (that no one knew about) that costs money to fix, or you want to change a date for subject removal, getting the Seller to play along is likely to be much harder. These things come up fairly often by the way.
If, however there is a reason to lowball that you can substantiate, then it may just be just the thing for you. For example, you may know that there are a handful of nearly identical places are on the market for a much lower price but there is a certain minor detail that makes this one stand out for you. There may be a divorce, death or some other hardship involved with the property that you know about. These things also may make the Seller more responsive to a lower price.
Be flexible on other details of the contract. For example, perhaps a certain completion date works really well for that Seller. Giving them what they want in that regard may help you justify that lower price.
Negotiations are a game of give and take. Sure, there are ways to play on the other side’s fears and desires to get them to do what you want. Leave this sort of thing to your Realtor, as these things are delicate and there are so many legalities that must be navigated that it’s best left to the professionals.
Listen to your Realtor. It’s likely that it’s fairly early in the getting to know your Realtor process at the point of writing an offer. This is when your confidence in them to know what they’re doing and to be straightforward with you really starts to count. You need to trust your Realtor’s guidance. If you don’t, why are you working with them?
I have had many clients who try to outsmart the system without commiting themselves to the process despite my urging them to listen to my explanations about how the system works. I have also had many clients who listen to the info I present them with and make clear minded decisions. Guess who does better in the end.
There will be many details that are specific only to the property and the offer you are working on. It’s natural to get emotional at this point, but an emotional mindset is a terrible place to be when dealing with large numbers and many pages of contracts and forms filled to the brim with legalese. Listen to your Realtor, but don’t forget that they (I) need to hear what’s on your mind too.
In the end, don’t forget what you’re buying the property for. For most of you, it will be your home. You need to be able to live there, and you need to be able to make those payments in the long term. These two details are so fundamental that they are often overlooked while people start talking at length about finer details, which is why I mention them here and in many other places in this blog.