If you are interested in buying property, particularly in the bigger auction cities of Melbourne and Sydney, chances are for the good ones in the metropolitan area you are going to have to attend and bid at an auction. And for a lot of people, auctions are daunting. The combination of high emotion and uncertainty can test the nerves. But what happens if the property passes into you?
Well, if you thought it was tough bidding when everyone is looking at you and the auctioneer is probing you for more bids, it’s even tougher when you have to walk inside and negotiate with the real estate agent directly.
Knowing what to do, what to say, when to say it, and just as importantly what not to say and what not to do, is so crucial to achieving the best possible result.
However, the first thing to do is take a couple of deep breaths then follow the 7 tips below and you may find yourself in the driver’s seat if a property passes into you.
Tip 1: Pay attention to the auction
There are a number of factors that influence how strong your negotiation position is. During the auction pay particular attention to the momentum and the number of bidders and at what point they stop bidding. Generally, the fewer the bidders, the slower the momentum and the more vendor bids placed, the stronger your position.
Tip 2: Bring a Friend
When you head inside the real estate agent is going to take you and sit you down. The location they sit you in can be strategic and part of their negotiation tactics. They may sit you somewhere where you can’t see out the front and leverage that during negotiations. They will say there are people out the front that they will negotiate with if you don’t accept the price. And if you can’t see outside, you might be boxing in the shadows.
In this situation, I would recommend one of two things: stay in a position that enables you to see outside or bring a friend/family member and have them wait outside. That way you will know what is happening outside.
Remember if the property passes into you, the selling agents can’t talk to any other interested buyers until they have finished negotiations with you. This is often referred to as the first right of refusal.
Tip 3: Determine the reserve price & any other factors.
The next thing you need to do is to determine the vendor’s reserve price.
The agent may give you a higher price but you need something from the vendor before you increase your bid. You are trying to find out if there is a big discrepancy between your last bid and the vendor’s asking price. Usually the bigger the difference, the harder the battle.
It is also important to determine if there are any other factors that can be used to help secure the deal, such as settlement terms.
Tip 4: Send a message
The next thing to do is to let the games begin. Because it’s all about the negotiation that is about to happen.
So once the reserve is known, we like to make a statement:
“WOW!”, “Pfft!” or “The Vendors are dreaming”.
Essentially, even if they say a price that you are prepared to pay, you need to send a message that their reserve is a big number that is miles away from reality. This will give your negotiation position some strength.
Tip 5: Know your market
This is when your preparation and research pays off . The better you know the market at a micro level, the stronger the position you are in. You should know if the market is strong, balanced, or weak? And more specifically what is happening at ground level in the areas you are trying to buy in.
If you haven’t done your research, the selling agent is going to see you coming and start licking their lips.
The agent will probably tell you about another property that sold around the corner last week for a much higher price, so you need to know about that property and what the market is prepared to pay for the property you are trying to buy. Have some comparable sales at hand. For example, if the vendor’s reserve is $850k and similar properties are selling for $800k, you know the asking price is unrealistic.
Tip 6: Set the increments
You don’t need to negotiate in increments that are equal to the agents.
It’s not about matching or mirroring the agent regarding what they are offering. It’s about negotiating the best outcome for you.
Strategically increase your offer according to how the agent has responded to your initial reaction to the reserve price.
Tip 7: Watch your body language
Already remember that around 90% of communication is done through non-verbal language. That includes eye contact, facial expressions and body language. Try not to give too much away with your body language and your eye contact. The agent is reading yours and you should try to read theirs.
It really is like playing poker and just like Kenny Rogers said in his song, “You got to know when to hold them, you got to know when to fold them, got to know when to walk and got to know when to run.”
The art of negotiation requires patience, knowledge, a bit of charm, a cooperative but firm stance and a very good poker face!
We wish you all the best if a property passes into you but if you are concerned about your poker face or that you will be intimidated by the process, then an experienced and professional buyer’s agent on your side will maximise your chance of successfully purchasing at the lowest possible price.
Book a Complimentary Consultation
Let’s catch up and talk property!
Take advantage of our free 30 minute consultation.
We can discuss your property goals, the market and answer your questions.