With auction clearance rates slipping below 50% in some markets right now, vendors are much more open to a pre-auction offer. You’ll also find more vendors choosing a private sale over an auction because it allows them to hold out for their price and save on auction costs.
That means, if you’re ready to buy a property in the spring market, you’ll also want to be ready to drive a hard bargain. Here’s some tips on how to make a successful pre-auction offer and negotiate your price like a pro.
Offer the right price
Research is always the key to paying the right price for a property. Whether you’re buying at an auction or negotiating directly with the vendor, it pays to know the property’s correct market value before you go in guns blazing.
Research will allow you to make an offer that’s too good for the vendor to pass up, without overpaying. It pays to be realistic – you’ll have a better chance of beating the competition.
Discover the vendor’s motivation
Knowledge is power. Ask the real estate agent why the vendor is selling and use the information to your advantage. For example, if they have already put down their deposit on their next property, the vendor may have time constraints that you could exploit by offering a faster settlement. If they are in a divorce situation, you could offer a larger deposit so that both parties will have more money for their next property deposit. This could help the vendor choose your offer over someone else’s.
Have your finance in place
If you haven’t already done so, ask me to organise preapproval on your home loan before you put in an offer. That way, you’ll be confident of your finances and have a clear understanding of your upper spending limit. Having preapproval in place gives you an edge over the competition because the vendor knows the deal will go smoothly.
Play your cards close to your chest
When it comes to liaising with the vendor’s real estate agent, be mindful about giving away too much information. Never tell them your budget in advance, as they could use the information against you. Always indicate that you’re interested in several properties and have other options – if they think you’re too keen on the property they’re selling then they’ll be less flexible during negotiations.
Time your offer well
Timing is crucial when you do make an offer. Some experts suggest that you go in hard and early, well before the auction – as vendors may be more inclined to accept your offer because of the convenience factor. This may also be a good tactic in a softening market.
Others recommend waiting until right before the deadline to make the offer, to eliminate the possibility that the real estate agent will shop your offer around to other prospective buyers.
Another tactic is to stipulate a time limit – for example, tell them it’s only on the table for 48 hours. Whatever your strategy, be prepared to stay firm on your offer – don’t be too quick to budge from your original offer price as it could make you look easy.
Keep your emotions in check
It’s important not to be distracted by your emotions during negotiations. If the price is being pushed up, you may have to walk away if it goes beyond the correct market value you have researched. A common mistake is to be manipulated into paying more than a property is worth because you love the property or don’t want to be the loser in the negotiation process.
Making a winning pre-auction offer comes down to being informed and employing some strategic negotiation tactics. I can help you prepare by organising a preapproval on your home loan. Give me a call to find out more.