{"id":21661,"date":"2018-07-08T01:00:04","date_gmt":"2018-07-07T15:00:04","guid":{"rendered":"https:\/\/realestatetalk.com.au\/?p=21661"},"modified":"2018-07-08T01:00:04","modified_gmt":"2018-07-07T15:00:04","slug":"strategy-for-negotiating-in-a-sellers-market-simon-pressley","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/strategy-for-negotiating-in-a-sellers-market-simon-pressley\/","title":{"rendered":"Strategy for negotiating in a seller\u2019s market \u2013 Simon Pressley"},"content":{"rendered":"<p>How do you negotiate in a rising market?\u00a0 A market that is already moving and sellers know they are in the box seat.\u00a0 There is a chance that you might have to pay more than the asking price.\u00a0 Is that a good idea?\u00a0 How far do you go and how do you make sure you are doing the right thing?\u00a0 <strong>Simon Pressley<\/strong> has had to do this and he has some advice on how and when to do it sensibly.<\/p>\n<p><strong>Transcript:<\/strong><\/p>\n<p><strong>Kevin:\u00a0\u00a0<\/strong>There are some markets around Australia, and they vary from time to time, but they\u2019re always there. There\u2019s always some market where when you\u2019re negotiating, when you\u2019re buying a property, you may end up having to pay more than the asking price. That\u2019s definitely a rising market. Now, in this market, it is happening, and it is happening in various markets in different places around Australia. This is an experience that buyer\u2019s agents have all the time when they\u2019re negotiating.<\/p>\n<p>Simon Pressley from Propertyology was talking to me recently \u2013 and he\u2019s going to join me in just a moment \u2013 telling me about some experiences where this is happening all the time.<\/p>\n<p>Good day, Simon. How are you doing?<\/p>\n<p><strong>Simon:\u00a0\u00a0<\/strong>Good, Kevin. An interesting topic, negotiating.<\/p>\n<p><strong>Kevin:\u00a0\u00a0<\/strong>It is. It\u2019s one that\u2019s difficult. I know you guys do it all the time, but people who buy and sell property only once or twice in their lifetime find it hard to understand why you would actually have to pay more than the asking price.<\/p>\n<p><strong>Simon:\u00a0\u00a0<\/strong>Yes. And admittedly, it\u2019s not that common, but it depends on the individual market that you\u2019re transacting in and where that market is in its cycle at the time. In a general sense, Kevin, the typical property somewhere in Australia will be listed at price X, and the eventual sale price, give or take, might end up being 3% below the list price.<\/p>\n<p>That\u2019s typically what happens in a normal market, and I think for a majority of DIY buyers when they see a property listed for sale \u2013 let\u2019s say the list price is $500,000 on Domain or RealEstate.com \u2013 before the negotiation winds up too much, that person who\u2019s interested in it might expect it to land under $500,000, maybe $480,000 or $490,000, something like that.<\/p>\n<p>I understand why people think that, but there are times\u2026 And we\u2019re transacting in a market at the moment where we\u2019re seeing a typical property listed at $400,000 and selling for $440,000 or one sold for $450,000. That\u2019s a massive markup on what it was listed at.<\/p>\n<p><strong>Kevin:\u00a0\u00a0<\/strong>Indeed. There\u2019s no doubt that there is a skill to negotiating. What do you see as the qualities someone requires?<\/p>\n<p><strong>Simon:\u00a0\u00a0<\/strong>Some of us have negotiating skills that we use in our daily role. I\u2019m not talking property people: a lot of sales roles for example, a lot of business owners.<\/p>\n<p><strong>Kevin:\u00a0\u00a0<\/strong>Bringing up kids.<\/p>\n<p><strong>Simon:\u00a0\u00a0<\/strong>Great example, Kevin. And that is a skill, the ability to negotiate. But what makes a really skilled negotiator is when those skills are used for a particular purpose. So, someone who has skills in selling apples or oranges or widgets or whatever, what they don\u2019t have is the property-specific skill of negotiating.<\/p>\n<p>It\u2019s having knowledge, that\u2019s what our buyer\u2019s agents find the most important quality to have \u2013 knowledge about that individual market, knowledge about that property, knowledge about the vendor\u2019s circumstance. Just being armed with as much information as possible.<\/p>\n<p>Knowing something like the vendor\u2019s circumstances can be useful, because for there to be a transaction to actually materialize, both parties need to feel like they\u2019ve had a win. For the buyers, the win is ultimately the price, but while the vendor, sure they probably want the highest price, but there might be some other circumstances in their personal life that can be used in that negotiation as well.<\/p>\n<p>But there are other tactics as well. The pregnant pause, sometimes deadly silence after we\u2019ve made an offer on a property, and whilst we\u2019re itching and we really want to wind it up, sometimes the best tactic that our buyer\u2019s agents might use is to deliberately ignore that agent and let them feel like we\u2019re not interested. And then when we see their number come up on our phone two days later, we know before even answering that phone we have a really good chance there. Different tactics.<\/p>\n<p><strong>Kevin:\u00a0\u00a0<\/strong>Talking about negotiating, Donald Trump, president of the United States, has always said that he\u2019s one of the world\u2019s best negotiators. Yet if you look at his negotiation style, it\u2019s all about hardball, it\u2019s all about bullying. Is that what it\u2019s all about? Is negotiation all about hardball?<\/p>\n<p><strong>Simon:\u00a0\u00a0<\/strong>Not at all. There are times when hardball is the way to play, but what we can see is the market movement, and that varies from location to location that we\u2019re investing in, the agent we\u2019re dealing with, and as I said earlier, the vendor\u2019s circumstances.<\/p>\n<p>Different agents will use different tactics, so as a skilled buyer\u2019s agent, there\u2019s no point in us just having the one tactic and trying to hardball everything.<\/p>\n<p>The Ray Whites and LJ Hookers of the world for example, some of them advertise properties differently to others. Some might be what\u2019s called a lowball lister: they\u2019ll advertise a property that they expect to sell for $500,000 but they\u2019ll list it for $470,000. So when a buyer sees that, they think they\u2019re going to get a bargain, but really, they\u2019re trying to get a Dutch auction.<\/p>\n<p>Now, a DIY buyer won\u2019t know that that agent uses that tactic, but a skilled buyer\u2019s agent will know different agents use different tactics, and we need to adapt our negotiation style for the unique circumstances for that particular property.<\/p>\n<p><strong>Kevin:\u00a0\u00a0<\/strong>How much does emotion influence negotiations?<\/p>\n<p><strong>Simon:\u00a0\u00a0<\/strong>It influences emotions a lot, especially if you are negotiating for yourself, if you are the purchaser. Plenty of people will try to kid themselves and say \u201cNo, I won\u2019t let my emotion get in the way.\u201d Let me tell you, when you\u2019re in the heat of the battle and all sorts of information is being thrown at you from the agent representing the seller, emotions will get in the way.<\/p>\n<p>A buyer\u2019s agent has not only had a lot of training at keeping emotions in check, but because they\u2019re representing the buyer and they aren\u2019t the buyer, they have a much greater ability of not allowing emotions to get in the way and paying more than what they need to or saying something that might adversely upset the agent and crash that negotiation.<\/p>\n<p>It does play a role. A lot of DIY buyers end up paying more than what they need to for a property.<\/p>\n<p><strong>Kevin:\u00a0\u00a0<\/strong>Because of their lack of skill at negotiating or understanding what the ground rules are?<\/p>\n<p><strong>Simon:\u00a0\u00a0<\/strong>A lack of skill, emotions getting in the way, not having the breadth of knowledge about that property or that market that someone who\u2019s transacting in it everyday for a living will have. At the end of the day, as human beings none of us know what we don\u2019t know. But when someone is doing something all day every day, they\u2019re going to know a lot more than someone who does it occasionally.<\/p>\n<p><strong>Kevin:\u00a0\u00a0<\/strong>I gather from the conversation you and I had, both in this interview and off air, that you\u2019ve obviously paid over the list price on some occasions.<\/p>\n<p><strong>Simon:\u00a0\u00a0<\/strong>Yes. And I know that this is teasing listeners \u2013 this isn\u2019t my attention \u2013 but there\u2019s a market, not a capital city location, a really strong regional market that we are really enjoying getting as many investors in as we can. I feel this market has just commenced its growth cycle, but a 20% pace is what it\u2019s moving at.<\/p>\n<p>Now, if you think about what our capital cities are doing at the moment, people won\u2019t believe it. But it\u2019s unfolding before our very eyes, and pretty much every property that meets our selection criteria in this particular location, if it\u2019s listed at $400,000 or $420,000 or whatever, we\u2019re missing out on 50% of the properties that we\u2019d want to buy, and then when we go back and talk to that agent a week or two later and find out what it actually sold for, it\u2019s selling for $20,000, $30,000, $40,000, sometimes $50,000 over the list price.<\/p>\n<p>So, our skills as a negotiator representing a buyer in a market like that are different to the skills we\u2019d use within a flat market. In a really rising market like this, we expect more often than not to pay above list price, but we still have to help our buyer work out what\u2019s a good decision and when do we pull up stumps?<\/p>\n<p><strong>Kevin:\u00a0\u00a0<\/strong>When you\u2019re going in for a negotiation like that, do you have several prices that you prep your client with? In other words, you\u2019ll say \u201cThe asking price on this is $450,000, but we may end up having to go to $470,000 or something to secure it.\u201d In other words, so you\u2019re prepared and they are prepared as well?<\/p>\n<p><strong>Simon:\u00a0\u00a0<\/strong>Yes, that\u2019s right. What we do is we arm our buyer with as much evidence as we can. We say \u201cHere\u2019s the property, this is what its list price is, here are some comparable properties, this is what they have sold for,\u201d but then the hard thing when a market is moving so hot as this, you actually need to build in a little bit of \u201cThis is what it would have sold for last month, and this is what we\u2019re happy paying now.\u201d<\/p>\n<p>No one wants to pay any more than they need to, Kevin, but the thing is when you\u2019ve identified a market that\u2019s at the very early stages of a growth cycle and the pace has picked up in a very short period of time, you want to get into that market as quickly as you can. So, if we get too conservative \u2013 \u201cNo, we won\u2019t pay that\u201d \u2013 and someone else eventually buys it for $10,000 more than us, and we continue and repeat that process for the next two months\u2026<\/p>\n<p><strong>Kevin:\u00a0 \u2026<\/strong>You\u2019re chasing your growing market.<\/p>\n<p><strong>Simon:\u00a0\u00a0<\/strong>Absolutely. We would have been better off buying that first property and paying that $10,000 extra and getting in. So, it\u2019s a fine balance.<\/p>\n<p><strong>Kevin:\u00a0\u00a0<\/strong>A really good example of that would be Hobart. I know that\u2019s one market that you\u2019ve picked well ahead of anyone else, and there are still people saying \u201cGet into Hobart, get into Hobart.\u201d I don\u2019t know whether you\u2019re still buying there, but the time to buy there was two years ago when you were talking about it.<\/p>\n<p><strong>Simon:\u00a0\u00a0<\/strong>Yes. We stopped buying there mid-2016. That doesn\u2019t mean that buying there today would be a bad decision; it\u2019s just that we got in when that market was flat, not like the market that I\u2019m talking about now. So, our clients benefited from 100% of the growth cycle.<\/p>\n<p>Buying there now, we don\u2019t know when the cycle will end. I don\u2019t think it\u2019s going to end in the next 6 or 12 months, but we\u2019re probably in the second half of the growth cycle.<\/p>\n<p><strong>Kevin:\u00a0\u00a0<\/strong>That doesn\u2019t really matter, does it? If you bought two years ago, you\u2019re enjoying the growth now for as long as it goes. That\u2019s the benefit of it.<\/p>\n<p><strong>Simon:\u00a0\u00a0<\/strong>Absolutely. The time to get into a market, Kevin, is before the growth cycle really ramps up. No one can tell us how long a growth cycle is going to last for, but typically, from start to finish, it\u2019s two years to\u2026 We saw Sydney and Melbourne last about four and a half years. That\u2019s probably longer than what a growth cycle normally lasts.<\/p>\n<p>But you don\u2019t want to be buying two years into a growth cycle, I don\u2019t think, and when we\u2019re spoilt for choice in a country as big as Australia, there will be markets at any given time, I can promise you, where the growth cycle hasn\u2019t started yet.<\/p>\n<p>That\u2019s our strategy: get in while it\u2019s flat, or in this particular case, we started a couple of months ago when it was flat and it\u2019s just starting to heat up now. It might have three years of good growth ahead of us, so we want to get as many people in as we can right at this early stage.<\/p>\n<p><strong>Kevin:\u00a0\u00a0<\/strong>Good talking to you, mate. And if you want to find out a little bit more, just go to Propertyology.com.au. Simon Pressley has been my guest. Thanks, Simon, talk to you again soon.<\/p>\n<p><strong>Simon:\u00a0\u00a0<\/strong>Thanks, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>How do you negotiate in a rising market?\u00a0 A market that is already moving and sellers know they are in the box seat.\u00a0 There is a chance that you might have to pay more than the asking price.\u00a0 Is that a good idea?\u00a0 How far&#8230;<\/p>\n","protected":false},"author":176692473,"featured_media":21677,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[32,33,34,10,11,13,22,25],"tags":[101],"class_list":["post-21661","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying-a-property-topic","category-case-studies-topic","category-finance-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-research-topic","category-sponsored-channels","tag-podcast"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - 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