At its heart, success in property investment and building a property portfolio comes down to 2 things. Firstly, buying the right property and secondly, buying it at the right price. Today we’re going to look at the second part, only and more specifically, at the how to negotiate the price you want.
Estate Agent | Property Investor
Trying to condense 8+ years of experience into one article is impossible but what I do want to share are 3 simple tips and techniques to negotiating house price which will help you close at better prices than ever before.
See the confessions of an estate agent from the Telegraph.
3 Tips on Negotiating House Price
- Ask About The Lowest Price They’ll Accept
- Depend On A Higher Authority
- Don’t Make More Than 3 Offers
1. Ask About the Lowest Price They’ll Accept
This may sound simple but, I can tell you first hand from when I worked as an estate agent, it’s amazing how seldom this question gets asked.
The answer you’ll get back will vary depending on the person you’re dealing with and an estate agent is likely to be a lot more cagey than a vendor. The truth is you won’t always get an answer at all but if you do – if you actually get a figure – it can be a game changer!
The homeowner or estate agent may well give you a completely different number to the original asking price. It is unlikely that this will be the rock bottom, lowest price they will accept but having a new base price for your negotiations could save you thousands on the final figure.
So go ahead and ask. Their answer might surprise you and in the end, you could save a lot of money.
2. Depend On A Higher Authority
It’s good practice to let the other party know (the estate agent or vendor) that you have another party that you need to refer back to. This could be a business partner, family member, solicitor, or mortgage broker …it doesn’t really matter.
This is something you should do at the very start of the process, even while going on viewings, but is something you should definitely do when you’re placing and negotiating the offer.
The reason for doing this is twofold:
- It gives you time to make decisions – so your not making them on the spot. You can bide for more time by saying you need to discuss a decision with your ‘partner’.
- It allows you to build direct rapport as an equal to the other party whilst your ‘partner’ takes the role as the one making the hard-nosed decisions. In essence, you get to play good cop, while the ‘partner’ is painted as the bad cop.
Maintaining your rapport with the other party is essential and having a business partner in the background will help you to do this. I have agreed on many deals with better terms than other investors all because I have had a better rapport with the seller than the competition has had.
3. Don’t Put In More Than 3 Offers
…and try not to give an offer with a round number.
Ok so this is actually two tips in one but both are just as important when it comes to building a property portfolio. When negotiating house price appearance is everything. You need to come across as serious and professional and how you put your offers in, is very much a part of that.
The First Offer
People will normally expect the the initial offer to be a little low and will expect to be negotiating house price a little. The initial offer is usually seen as testing the water.
Giving a best and final offer as the first offer can be seen as aggressive and not being willing to move on an offer can build barriers between you and the seller that’ll make it very hard to get a win-win deal.
By giving a little, you can gain a lot.
The Second Offer
The second offer is an opportunity for both parties to give a little ground and move towards agreement. It is your chance to show a willingness to ‘be fair’ and maybe for both parties to meet halfway.
The Third Offer
But, if the second offer isn’t accepted, your third offer needs to be your best and final offer.
If you keep increasing your figure you will never be taken seriously and the potential for the deal to fall through is increased.
So stick to the rule and only make 3 offers!
Now for the second part, never putting down an offer with a round number.
If you offer round numbers, say £70,000, then the seller will think of this as a ‘general price’ and assume you’re just testing the water. A round number will give the impression that you’re just throwing it out there and will likely be seen as speculative.
On the other hand, if you give more specific offers, say £70,250 or £69,750 – and if you give a reason as to why it’s this figure – then the seller is more likely to see it as a thoughtful bid.
Then, if the reason makes sense, the seller is more likely to believe your valuation and accept.
Negotiating house price is critical if you’re going to make a success out of building a property portfolio and these three tips can be used on any kind of deal from repossessions to refurbishments.