03 May How to win in a sellers’ market?
In today’s show Michael Yardney explains the 3 critical property negotiating pressure points at work in every negotiation; either you are applying them to the other party or they are using them on you.
Kevin: A strong competition for properties in rising prices has created a seller’s market in many parts of Australia, so how do property buyers tip the scales in their favor? Well, let’s find out. We’ll ask one! Michael Yardney is one of the best-known buyer’s agents in Australia from Metropole Property Strategists. He’s also a regular guest on our show.
Good day, Michael.
Michael: Hello, Kevin.
Kevin: How do you tip the scales in your favor?
Michael: I believe negotiating, even in this hot market, can help savvy property investors get themselves a pretty good deal. What they really need to understand, Kevin, are the three critical negotiating pressure points.
Kevin: Okay. What are they, Michael?
Michael: These work in every negotiation. Either you’re going to apply them, or they’re going to be used on you by real estate agents who have been taught well how to negotiate. The first one in my opinion is options. The person with the most options has the most power.
When you’re buying a property, it’s important to convince the seller that you have more options than they do because the power of negotiation, as I said, goes to the person with the most options. Look at it this way. If a seller has two buyers willing to offer him $500,000, you probably don’t have the option or the ability to get your offer of $480,000 accepted.
However, it’s important to realize that in negotiations, often perception is the reality. Agents will often tell you this other buyer is interested or they have better offers than you, and maybe it’s not the case; it’s just a pressure tactic.
Kevin: What sort of language can we use in this case, Michael?
Michael: I’d let the agent know that you’re interested in the property, but I’d say something like, “I like this property, but there are two others I have in mind. One is in a bit of a better location. One is maybe in not as good a location.” You actually let him know that yes, you’re interested, but not that much – because the person with the most options has the upper hand.
Kevin: Wow, that’s very powerful. What’s the other one, Michael?
Michael: Time is another critical pressure point in negotiations. If the vendor is highly motivated, if they’re under time pressures, you can find yourself a terrific buy. Now, sometimes it’s hard to know the pressures on the vendor. Some agents will sometimes tell you, but other times, it’s worth asking some questions, Kevin, to try and see what’s really behind it.
Kevin: Michael, what sort of questions?
Michael: Now, you may even know the answer to these, but what you want to know is what’s going on in the background. I’d ask questions like, “How long has the property been for sale? Have you received any other offers? By the way, how did the vendor come to his price? Was this your suggestion? Was it his suggestion?”
Kevin, I like to use time pressures when writing an offer. I put my offers in writing, but I tend to put a deadline. I put in an offer something like this: “This offer expires at 6:00 P.M. on Thursday the 15th of the month,” but I give a reason why to make it make sense.
Kevin: What is that reason, Michael?
Michael: Well, I say something along the lines of, “I’m considering purchasing this property – that’s why I’m going to give you an offer – but if it doesn’t come off, there’s another one I’m looking forward to go to at auction this weekend. If the vendor doesn’t accept my offer by Thursday afternoon, I really have to withdraw my offer because I can’t have it remaining open and end up at the weekend possibly end up owning two properties.”
Kevin: Yes, I suppose by explaining it that way to the agent, you’re giving yourself a better chance for it to be portrayed in that way to the seller, Michael?
Michael: You are. It’s actually giving a reason for it rather than just being a bully.
Kevin: And the third one?
Michael: The other big pressure point is knowledge. In negotiations, the side with the most knowledge will do better. The fact is that most property investors have done homework, have done research, and they really probably know more than the seller and sometimes even more than the estate agent, who may only know a particular segment of the market.
Apart from researching the local market, you also have to find out a bit about the vendor, like we’ve already said. Get yourself as much knowledge as you can. Be confident that you’re therefore making a good offer at the right time of the property cycle, and this could create a win-win solution that’s going to let you buy a good property at a fair market price.
Kevin: The thing that comes through for me listening to you, Michael, is that it’s not always about just making a cheeky low offer as the strategy, is it?
Michael: It is. You’re right. There is some thought process to it, and most Australians are uncomfortable with negotiation. They’re taught to be courteous and polite. While you can still do that, there’s no reason why we can’t negotiate hard. Remember if you don’t, the other side will against you.
Kevin: It’s always good talking to you, Michael Yardley from Metropole Property Strategists. Now, I know how you do it! Thanks, Michael.
Michael: My pleasure, Kevin.