When it comes down to it, it’s often the art of negotiation which will win or lose a property investment deal.
Selling agents negotiate on behalf of their vendors regularly and therefore have much more practice than most buyers, who may only do it a handful of times in their lives.
But there are ways to improve your skills in this areas by avoiding some of these common mistakes during a sales negotiation.
1. Being emotional
This is perhaps one of the biggest mistakes you can make when buying property.
If you’re buying an investment property, of course, it’s vitally important to look objectively at the asset to determine if it’s going to fulfill its purpose and make you money.
Buying your own home is considerably more difficult to divest yourself emotionally.
But whether it’s for a home or for an investment, don’t feel pushed into making an offer that is above what you are prepared to pay.
Just because an opportunity has arisen doesn’t mean you should do whatever it takes to seize it – there are literally thousands of other properties on the market at any given time to consider.
It can be easy to be overcome by the thrill of buying your “dream home”, but don’t put yourself in a situation where the joy of the purchase is replaced with the stress of paying too much.
2. Not enough research
It’s surprising, and scary, that so many people don’t do enough research when buying an investment property because we’re not talking about buying lollipops here.
If you haven’t seriously investigated all aspects of a property, you shouldn’t make an offer.
You have to understand the local market, including comparable recent sales, so you can make an informed decision, and an educated offer, about the property.
3. Not enough eggs in your basket
If an agent knows you are solely focused on the property they are selling, you can bet your last dollar they will leverage that during the negotiation.
To mitigate this, find another property that suits your criteria in a similar price bracket – preferably a bit cheaper – and let the agent know you’re interested in an alternative.
Having another property in your back pocket helps you retain more power when dealing with selling agents.
4. Not submitting a written offer
Generally speaking, it’s only a written offer that will be classified as a legally binding one.
Many buyers are surprised when they’re usurped in negotiations after they’ve verbally offered a number at the open for inspection but weren’t prepared to put it down on paper.
If you are making an offer to an agent, submit it in writing through a contract of sale, which the agent can present to the vendor.
A verbal offer or casual email does nothing more than show your hand to the agent – they aren’t required to inform the vendor of your proposal.
5. Submitting a high offer
Judging the property’s price can be tricky and one of the worst things you can do is propose an offer that is too high and far over the value of the property.
If you’re making an offer prior to auction, you are effectively asking the selling agent to cancel the auction so you can purchase the property.
For an agent to do this, they would have to be tempted with a good offer, so be prepared to pay a premium to get to the front of the line.
However, there’s always the danger that you will pay more than is necessary to be first in and best dressed.
Showing your hand like this requires a pretty cool head to tempt the agent, but not act out of desperation.
Again, this can be due to being too emotionally invested in the property.
Inexperience and lack of understanding of the property is also a contributing factor.
6. Submitting a low offer
This is perhaps even worse than offering too much for a property.
Not only do you waste a lot of time submitting an offer that’s potentially insulting and likely to end up being rejected, but you lose credibility in the eyes of the selling agent.
Your offer of $580,000 on a property advertised for $640,000 plus quickly falls to the back of the line.
If that agent doesn’t end up getting the desired $640,000, there is probably another offer closer behind that they will consider instead.
Submitting a figure that is too low will see you probably fall out of the game all-together and end up back at countless open for inspections once more.
7. Not using a buyers’ agent
The biggest mistake you can make when purchasing a property is not seeking professional advice.
So, why not engage someone to guide you through the process whose job it is to buy property all of the time and can therefore negotiate on your behalf?
Using a professional buyers’ agent to handle negotiations, as well as the search, will mean you’re always in front at the end of the day.