Negotiation is NOT just Price
As an investor who only buys in property troughs or depressed markets, I can buy the property at it’s cheapest within that property cycle. Along with negotiating ultra hard on price, I can assure you that the price is not the only aspect I negotiate hard on.
So this story is a little tough on the vendor, and the story may come across as a little ruthless. That’s because when I buy property for myself and for my clients, I am only concerned about one thing: the purchaser.
That’s the REAL job of a Buyer’s Agent… to look after the buyer’s interests.
I make no apologies for the amount of money that the vendor is losing when they accept my offer. It was their own investment decision to sign on the dotted line when they purchased, as well as when they decided to sell.
I understand that many of those vendors were sold properties through marketing companies, builders, and not so ethical property companies. At the end of the day, they made the decision to buy in the height of the cycle and then again made the decision to sell in the low.
Now back to my story. When I negotiate on a property it’s not only the price I haggle on, but also a raft of conditions that are included in the deal. If the price is accepted and the conditions are not, then we DON’T have a deal… When I buy, it’s my way or the Highway.
Because of my hard arse approach to buying property, a few real estate agents find me too hard to deal with. These agents are generally the “old school” style of agent who barely even know what email is. When you buy properties in a depressed market, the real estate agents are looking for any possible buyer they can get their hands on. Real Estate Agents don’t earn income unless they sell. I quickly become their best friend, but boy, don’t I make em earn their commission.
On every offer, for every property, I do it by way of a Letter of Offer with an Annexure page attached. This way there is no confusion as to what the deal is. So, on the Letter of Offer there is usually the: dollar figure, settlement terms, deposit size, and the finance clause. Then, on my Annexure I include many more conditions.
I include such things like:
- Access to the property once the deal becomes unconditional. This is so that my chosen property manager can show prospective tenants to let the property. This is so we can have a tenant lined up and ready to move in by settlement
- A statement ensuring that the lawns and garden are neat and tidy at the time of my final inspection
- A statement that guarantees everything that turns off and on and shuts and closes is in good working order at the time of my final inspection
Those were three of the basic ones from a list of eleven I currently use. Did you think I was going to give away all my secrets?
There are extra conditions that are designed to protect you, the purchaser…
Now to really step up my ruthlessness. When you buy a property from a vendor, at a well below market value, the vendor goes through some fairly intense emotions. And it’s these emotions that I play on.
When they finally accept that their property is worth, say $100,000 less than what they paid for it 5 years earlier, they are initially very disappointed with themselves for making such a bad investment decision all that time ago. This is where you must have a contract signed and back to the agent ASAP so they can have the vendor sign immediately. You need to push the agent to get this signed that day before the vendor gets “ cold feet “.
The vendor then feels relief generally in the days following knowing that this property is not going to be a burden on them for much longer.
My Building and Pest inspection clauses are generally due within two weeks of a fully signed contract ( 5 days NSW and up to 40 days WA ). So on the last day the reports must be accepted, I go back to the agent and solicitor/ conveyancer with a list of demands that the building and pest inspector has pointed out that should be done to make the property sound, or threaten to pull out of the deal. My contracts are worded to allow for this.
These can be little things such as adjusting the kitchen cupboard doors, cleaning out the leaves in the gutters, and extending the hot water system overflow hose so water stays away from the property. They are little repairs ( generally ) but they all cost money.
I have been able to negotiate new retaining walls, fences, and major repairs in the past that have cost over $10,000.
This is where your building and pest inspector must be the best in the area. NEVER go with a recommended inspector from the agent, as the agent (generally) has chosen an inspector that does simple reports. They (generally) do this so their deals do not fall over.
Now at this stage the vendor has gone back into a very sad emotional state as they thought the property was definitely sold. And at this stage we find that over 95% of the time the vendor will accept to your list of demands, as they simply want the property sold. They also know I am the only serious buyer around.
Better the repairs be paid for out of their pocket, rather than yours…
Now this style of negotiating can only be successful in a property trough or depressed property market where you are the only buyer. In a market where there are multiple buyers, they are all all fighting to secure the property for way too much than it is worth to invest. If you were to present these extra list of demands to an agent, they will tell you to go jump, and simply sell the property to another buyer.
On a final note: there is no such thing as an offer TOO low, what’s the worst can happen, the vendor says no?