Interest rates remain at a record low currently, and the property market has been heating up despite the economic challenges due to the pandemic. Listings are currently lower which means buyers are competing for properties. So, if you are a first home buyer in a good financial position and considering buying using the First Home Loan Deposit Scheme, it’s a good idea to arm yourself with some sharp bargaining tactics before diving in.
Nobody wants to pay more than the current market value for a home. Here are six negotiation tactics to help you get the right price on your property purchase.
1. Research the market value in advance
When it comes to the sale price, it pays to do your research. Knowing the correct market value of a property will allow you to negotiate the price with confidence. Speak to your broker to access a property and suburb profile report which will provide valuable insights so you can make a fair and educated offer that reels the vendor in, whilst avoiding overspending.
2. Know your ceiling price
Before you begin negotiating, it’s important to know your spending limit. The easiest way to find out is to speak to your mortgage broker who can research your borrowing power. This is the amount a lender may be willing to let you borrow, given your personal financial circumstances.
Knowing your ceiling price is particularly important when bidding at auction. With private treaty sales, you can insert a ‘subject to finance’ clause in the contract that will allow you to back out if a lender won’t come to the party. But once the hammer goes down at an auction, you cannot pull out without being in breach of the contract and out of pocket for the deposit.
3. Be confident of your finances
When negotiating, you’ll be more confident if you know your finances are good to go. Pre-approval gives you that peace of mind and it gives you an advantage over buyers who don’t have their finance in order (If you are new to buying property, pre-approval is an indication from a lender that you qualify for a home loan up to a certain limit).
4. Understand the seller’s motivations
Find out why the vendor is selling. If the sale is time-sensitive, you may be able to offer a shorter settlement period for a discounted price. This is often the case if the vendor is in a hurry to relocate for work or family reasons. Try to close the deal by changing the settlement terms or conditions to suit their needs, or perhaps the deposit arrangement (for example, you could offer a larger cash deposit).
5. Use your building and pest inspection report as a negotiation tool
If your building and pest inspection reports come back with a few surprises, it may give you leverage to get the vendor to lower the price. Of course, you may not want to buy a property that’s infested with termites, but if the issues are minor, you may consider buying anyway.
6. Know when to walk away
The number one rule when buying property is not to get emotional. When you determine the fair price for a property, be firm. If the vendor isn’t budging on price and is unwilling to meet the market, you may have to walk away. Once you do, you may find they turn around and agree to accept your offer.
There’s an art to successfully negotiating the purchase of a property. However, with careful research and preparation, you can come out on top. Before you begin shopping for a home or investment property, remember to talk to your mortgage broker about getting your finance pre-approved so you’ll be ready to negotiate with confidence.
Happy property hunting!