We all want to buy our new home or investment property at the lowest price possible, or at least get good value for our money.
And of course, the vendor wants the most he can get for his property.
Yet you now know that the asking price quoted by the selling agent will usually be more than the owner is willing to take for their home.
It’s just part of the real estate game – they expect to come down in price as part of the negotiation process.
So when making an offer on a house, what should you do?
If you ask the selling agent what price you should offer, you’re asking the wrong person.
Remember, the agent is paid by the seller to represent them and to get the best price possible.
You are probably thinking that the agent just wants to make a sale
And in most cases you are right – in reality, the agent doesn’t get paid unless a sale is made, so obviously, he is keen to sell you the house.
But most agents prefer an easy negotiation, knowing that sellers get offended when they receive low offers on their homes.
This means they will probably recommend you make an offer close to the asking price.
So unless you use a buyers’ agent to help you negotiate, you are really going to have to rely on your own research to work out what the property is worth.
By the time you end up at the negotiation table, you should have put some of these into practice, looked at many homes and gotten a pretty good idea of what similar homes in the area have sold for.
Remember, it’s the sale price, not the asking price that you need to focus on when you’re doing your pre-negotiation homework.
In most markets (other than during boom times), houses sell for considerably less than their asking price.
There is no standard discount, but as everyone knows there will be some ‘argy-bargy’ about the price as agents tend to ‘list the property for sale’ at an asking price usually about 5-10% more than the vendor will accept to sell their home.
So the asking price is just a starting point for the negotiations
If you pay what the seller is asking you could be wasting money.
The trick is to know how much less the seller will accept.
Sometimes it’s only a few thousand dollars.
Frequently it’s about 10% or more, but in a seller’s market – a hot market, where there multiple buyers making an offer on a house like we are now experiencing – vendors may not be willing drop the asking price at all.
Is it worth getting a valuation?
Your lender will usually organise a valuation as part of the loan process, but this will occur after the deal has been done.
Not many sellers accept this type of condition and it’s possible you will lose out to somebody else who will buy the property without this type of condition.
The trouble with engaging a valuer is that it usually takes three to four days or even up to a week before you get their report, and it may cost you $400 to $600.
If you have the time and want a professionally acquired figure, then a valuer may be the way to go.
The valuation report may even provide you with ammunition to use in the negotiation process.
While your lender will require a valuation on the property as part of your finance application, not all valuers are approved by certain lenders.
Each lender only works with a small group of valuers (called their valuation panel.)
This means that if you pay for a valuation for your purposes, it may not be accepted by your lender.
And remember that if you ultimately don’t buy the property, you will still have to pay for the valuation.
So to help you determine what price you should offer if you’re considering buying a house…
Here are 5 questions to ask the agent before you make your offer:
1. How did the vendor come to the asking price for their home?
Was it from the agent’s suggestion or because that’s how much they need to buy their next dream home?
Some sellers are unrealistic and unlikely to come down from their asking price if they have to get a certain amount for a particular reason.
2. Have there been any other offers made?
This lets you know if you have any competition and how serious the vendor is about selling their home at a reasonable price.
3. How long has the home been on the market?
If it’s just been put up for sale, the seller may not be anxious to accept the first offer.
If the home has been on the market for several months it’s more likely the seller would be ready to accept your offer.
4. Why is the vendor selling?
Are they going through a divorce?
Do they have to move interstate urgently?
Have they already bought another home that would put them under pressure to sell their current home?
This will let you know how motivated the seller is.
5. Has the asking price been reduced during the time the property has been on the market?
How can you use this information?
If you’re looking at buying your next home or investment property here are 4 ways we can help you:
Sure our property markets are improving, but correct property selection is even more important than ever, as only selected sectors of the market are likely to outperform.
Why not get the independent team of property strategists and buyers’ agents at Metropole to help level the playing field for you?
We help our clients grow, protect and pass on their wealth through a range of services including:
- Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family. Planning is bringing the future into the present so you can do something about it now! Click here to learn more
- Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property. Click here to learn how we can help you.
- Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
- Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.