Negotiating the Right Price for the Right Property | Real Estate

After what seemed an eternity of searching, you’ve finally found the right property.  Now it’s time to negotiate the right price. A real estate transaction is a little like a board game with two players where the outcome of the game sometimes does not yield a clear winner.  It is possible, though rare, for a selling price to be reached that makes both parties feel like winners.  What’s more common is for a seller to agree to accept less than he or she had hoped for, and a buyer to agree to pay more than hoped for.  In any negotiation, leverage – a strategic advantage -- goes a long way towards determining the outcome.

In the game of real estate the condition of the overall market generally provides the greatest leverage.  In a buyers market – where the supply of homes exceeds the demand for those homes – leverage goes to the buyer.  Since there are more sellers chasing fewer buyers, the seller can be much tougher in negotiating a price.  The opposite is true in a sellers market – where the demand for homes is greater than the available supply.  Here you have many buyers chasing fewer homes, and sellers use that to their advantage in negotiations.

Right now Australia is still in a sellers market in most areas.   Even here there are other potential sources of leverage available to buyers.  Leverage opportunities center on contract terms.  If two buyers are competing to buy the same house and Buyer A can close on the house in 30 days while Buyer B needs 60 days to close, Buyer A has a clear advantage.  Contingencies are another potential source of leverage.  Some buyers want to make the contract contingent on the sale of their existing home.  From the seller’s point of view, they are being asked to take their home off the market in the hope that the buyer will be able to sell his or her home, which is not 100% certain.  Limit contingencies in your offer and you’ll have more leverage.

There is a major caveat for buyers determined to get the lowest price possible in a sellers market:  losing the home.  If you’re haggling over a $5,000 price difference between what you are willing to pay and what the seller is willing to sell for, a good Real Estate Agent should point out when you stretch that $5,000 over the life of the home mortgage, you’re looking at a few dollars a day, or less.  Are you willing to lose your dream home in a possibly misguided attempt to get the lowest possible price?

If, for whatever reason, getting the absolute best price is extremely important to you, think about securing the services of a “true Buyers Agent”, instead of a traditional Real Estate Agent.  First, remember, unlike the game analogy where players face each other across the board, the true players in a real estate transaction negotiate through representatives, not directly.  While Real Estate Lawyers are generally involved, they rarely participate in price negotiations, focusing their advice instead on the legalities of the terms of the contract.  The negotiations are done through the agents, both of whom have a vested interest in a quick sale of the home.  Neither makes any money until a contract is signed, and the deed actually changes hands at closing.  While in some cases a true Buyers Agent may share in the commission, they are hired by buyers either on an hourly or flat fee basis.  Thus they have less of an incentive to get a deal done at any price.  While this can be an attractive option, some prospective buyers feel the cost of the Buyers Agent may not justify the potential savings from negotiating a lower sale price.