How to negotiate in a Buyers Market
What is a Buyers Market?
When there is downward pressure on demand for property, the market becomes what is known as a "Buyers Market" where Buyers often have the greater negotiating power than that of the Seller. It’s becoming clear that certain markets within Australia are currently sitting within the Buyers Market scenario and we now need to examine what tactics can be used from a Buyers perspective.
Analyse the stock on market; know when to low ball
It's easy to think that in a Buyers market you can simply come out swinging and hit your potential property purchase with a “low ball” offer in the hope that it is accepted, but in reality, one should reasearch and analyse the listing before considering a spray and pray method. Look at the property listing history for the following keys factors:
- Time on the market – properties listed over 30 days is optimal;
- Price reductions can be a great sign of low market interest;
- Comparable stock available in the area;
- Recent sales history of comparable stock;
After examining the property and considering the above key factors you will be able to make a reasonable first offer to the Seller that they can counter or accept. the last thing you want is to burn the chances of even beginning the negotiation process by offending both the Agent and the Seller of a newly listed property with an outrageous offer.
Knowledge is Power!
Back your offer with real data
It always helps to research the sales, market trends and valuation data of your target property and location when determining what final offer you wish to present to the agent. The following data is helpful to the research process:
- Valuation companies and websites;
- Look up recent sales of similar properties in the same area on realestate.com.au & domain.com.au;
- Check out the market trends for the city as a whole via sites like rpdata.
Having this data on hand is a powerful too if an agent rejects your offer, present the agent the facts and reasoning as to how you came to your offer.
Obtain Finance pre-approval and offer a short finance clause time-frame
It can be common for Sellers in a "Buyers market" to have experienced a previously terminated contract over their property due to the Buyer being unsuccessful in obtaining finance given the tighter lending conditions. Offering a Seller a short finance clause and advising the Agent that pre-approval has been obtained can greatly move your offer to the top of the pile.
We reached out to Finance expert and Broker of the Year, Mr Nathan Vecchio from Hunter Galloway for his tips for getting your finance sorted early in the piece:
“To obtain pre-approval a Buyer should contact their Mortgage Broker immediately to lay out a savings plan, realise your borrowing power and apply with your chosen financial institution for a conditional pre-approval. Once pre-approval is achieved some Banks will offer a 7-day turnaround for formal approval and in some instances even quicker”
Be prepared, talk to your legal team
Having a Conveyancing Solicitor on hand to talk you through potential property purchase prior to signing a contract can be the difference between a fast and confident offer or something that may fall to pieces and bite you when you least expect it. Our team of professionals at Astills will assist here with call-backs relating to contract reviews normally well within 3 business hours.
Adding Time Pressure to an Offer
Time pressure marketing is no new concept and including a time-limit to an offer can force the hand of a Seller to make a decision or it may see the deal walk away. We asked Marketing Expert, Tim Nelson from TPR Media to tell us about the benefits of Time Pressure Marketing:
Limited-time offers are a smart marketing move and have the potential to motivate the targeted consumer to overcome their inactivity and act now. If an offer is available indefinitely, then many consumers will tend to procrastinate and think that they can wait for something better or act at a later date. But it’s not the time-constraint alone that entices conversions and sales, most limited-time offers come with a certain benefit that will cause the target market to feel a sense of urgency and jump on a deal in fear of missing out (FOMO).
Bluffing with another house
If you have been in the property market, you would have experienced the classic claim a Seller makes that there is already another Buyer/s making offers on the property in an attempt to kick start a bidding war, even though another Buyer may not exist. As a Buyer in a Buyers market you have the opportunity to flip the script here and let the agent know you are bidding on another similar that you may sign at any time. This will put the pressure back on the Seller and Agent to deliberate and action accordingly.
Stay professional and friendly with Agents
Although the Agent will always act in the interest of the Seller, having rude and unprofessional behaviour towards an Agent will never assist you in getting the best outcome for your property purchase. If you are searching for a property in a specific suburb, it is common that you will run into that same agent down the track, leaving you in a less than favourable position. Here are some of the benefits to a professional attitude:
- Open communication and accessibility;
- Potential negotiation access to upcoming listing prior to anyone else; and
- Willingness to settle on a fair and reasonable deal.
Remember we are not suggesting you be soft or weak in your negotiations but rather be friendly and professional.
The wrap
Examining your situation and applying some of these tactics where applicable can greatly increase your odds of grabbing the best bang for your buck when securing a deal on your property purchase. Remember to always keep your emotions in check, stay strong and all the best with your property hunting endeavours.