5 Real Estate Negotiation Tips That Work!
Have you ever negotiated like this?
– Car salesman: “The price is K10,000”
– You: “I’m willing to pay K5,000”
– Car salesman “I can give you a small discount, how about K8,500”
– You: “What about K6,500”
– Car salesman “Ok, I spoke to my manager K7,500 is our final offer”
– You: “Done. I’ll take it”
In the above example you and the car salesman start with a K5,000 gap and eventually ‘meet in the middle’. This is the most common form of negotiation and is known as ‘positional bargaining’.
Unfortunately positional bargaining generally results in poor outcomes for both parties because everyone gives up the same amount and therefore neither party gets what they really want. Thankfully there are other ways to negotiate!
The following are 5 real estate negotiation tips to help you think more laterally in your negotiations and achieve better outcomes. After all, why meet in the middle when both parties can achieve their goals?
1. Consider the objectives of all of the parties
As a property buyer, the most important person in the transaction is the seller and you should focus on their desires first. Do some research with the agent and find out what is really motivating them to sell. Especially focus on non-monetary considerations. You would be surprised how often the sale of a home or other property turns on something other than money.
– The seller needs to move from Port Moresby back to another country urgently: Perhaps offer shortened settlement terms, for example 30 days. Or offer to pay a 50% deposit immediately and the balance in a longer period.
– The seller is building a new home to move into: Offer to rent the seller the property after the purchase on a month-to-month basis until their new home is complete.
– The wife of the seller is reluctant to sell the family home: Offer to have a professional photographer to come in and take portraits of the family in the home before they move out. This will give the wife some comfort as she then has a permanent memento of the home.
2. Don’t forget the real estate agent!
Remember a big part of any real estate purchase is the real estate agent. The agent represents the interest of the seller, but they are also self-motivated. Therefore, it’s critical to have the agent on your side in any negotiation so that they put your offer in the best possible light to the seller. For example, if two offers are equal on a financial basis, the agent will likely influence the seller to accept the offer from the buyer they prefer.
There are a range of things you can do to improve your negotiation tactics with the real estate agent:
– Promise the re-sale of the property to the agent.
– Offer to appoint the agent as the rental manager of the property.
– Offer the agent a written, or even video, testimonial should the sale proceed regarding their great service.
– Promise to give the real estate agent a written referral to all of your friends should you be the successful buyer.
3. Trust your judgment and make genuine offers
There is a saying in real estate that ‘time kills deals’ and in a fast paced property market such as those in Lae and Port Moresby this is definitely the case. As such, we suggest researching the real estate market thoroughly and making an offer that is at, or very close to, your maximum. Of course we also recommend starting your research at Hausples.com.pg to conveniently view all available properties in PNG!
By making an offer for what you know the property is worth, you have a strong chance of buying the home, land or commercial property, before other buyers swoop in and offer more. Don’t get caught out offering less than you know the property is worth, if this occurs you are likely to miss out as more aggressive buyers pay more and close the deal.
4. Loose lips sink ships
Never let the other party know how much you have available to spend or what is motivating you to buy; this risks the seller using these great negotiating tactics on you!
Similarly, given so many properties in PNG are marketed as “Price On Application”, it is very important to always make the seller name a price first. With that information you are well placed to make a counter-offer in the context of the seller’s price. If a buyer makes the first offer, they in danger of over-pricing the property from the start and that can only ever result in a bad deal.
5. Cash is king
Sellers hate any uncertainty in a deal and offers made ‘subject to finance’ can be a deal breaker when a competing offer is for cash – even if the offer is for less. This is why it’s critical to have your finance arranged and be ready to settle on a deal very quickly once the price is agreed.
Being able to offer cash gives the seller absolute confidence in your offer and this is often worth more to a seller than a higher offer that may never settle.