What you should know about negotiating
You’re looking for your perfect investment property which needs to be in the right price bracket for your budget; these two factors are the most crucial elements in your investment journey. You’ve found that so what next?
The North West is full of properties with lots of potential and it’s where I’m based. My experience in Estate Agency and as a property investor turned property sourcer has provided me with years of helpful tips and tricks of the trade that I hope can help you on your way to reap the benefits of investing in property.
You may think yourself a complete haggling genius when you’ve been to the souks of Morocco, but property negotiating is a different kettle of fish, so to speak.
I have learnt, in my 15 years negotiating, that not many people will ask one of the most important and decision-making questions which is
‘What is the lowest price you will accept on this property?’
Now, I’m going to let you into a big secret, not many people pay the price the seller answers with. It’s about being confident with your numbers and having the confidence in yourself. Although offering less on a property is uncomfortable, learning the art of negotiation is a valuable skill to have under your belt, especially if you wish to buy more in the future.
Once the question has been asked you might not receive a reply back from the vendor straight away. But, then there are the moments that you do and if you do this could be in fact one of the biggest catalysts in your property investment journey and in fact could save you a tonne of money.
Whatever the response listen to it carefully, I mean listen.
What next ?
Always be courteous and let the vendor and their agents know that you have to liaise directly with your partner (business or personal) or your broker. Having this time will prevent making impulsive decisions, it will allow you time to mull things over and reflect on your options and in addition will give you the time to ensure that you are working within your parameters. Allow yourself time to revisit any research you have undertaken on the property, crunch your numbers so you are entirely comfortable with the commitments you will be making. Then put in your offer, you can do it in writing and you can give some background as to why you’ve chosen that figure.
Be upfront, because building a solid foundation with all parties will give you a strong grounding in the current negotiation deal as well as for any future deals you may wish to follow through on.
You want to ensure everyone’s feeling happy, no eye rolling. Throughout all negotiations you must deliver a smooth business transaction. Being polite and respectful now will help when you get further down the line. No one wants to feel like there being taken advantage of. For me, I don’t want to fuel any negative stereotypes of the cheeky rich property investor stealing a house. The best positioning you can have is from that of solving the vendors problem.
What not to do.
So far you have put a great deal into the homework, the numbers and negotiation don’t ruin it now by bombarding the vendor with multiple offers!!
You asked the question ‘What would be the lowest price you would accept on this property?’ and followed it up with your initial offer. Unfortunately, the likely hood is the vendor said that this was too low!
Let the art of negotiation begin…
You went in to low; not enough it was insulting but low enough for it to be refused. Never go in first with your final offer, the general view is this is to aggressive and could you set you up to fall at the first hurdle.
Now, you have the opportunity to deliver a second offer, something that will give you the option to move the fence post a little. The second offer is that place where you can gently nudge to a unity of agreement; it’s the place where you can control the delivery of an offer by being a fair-minded, honest and even-handed to prevent aggravation of the vendor.
Your approach is important! You don’t want the sale of the property to fall through and then you are ultimately back at square one. You want to create a win win outcome for everyone.
However, now your second offer has been declined, you need to really think about what you are going to do for your final offer.
Find out why the seller rejected your offers, start thinking strategically. Are there things you can do to sweeten the deal? As a property sourcer this is where I get creative, looking at offering to pay moving costs or helping with legals.
If you do get to this point it’s likely you’ll be looking at hundreds not thousands of pounds from reaching an agreement. Ask yourself is it worth it? There is nothing more frustrating than to loose an opportunity because your ego got in the way. Remember for you this is an investment, the seller has other motivations.
With negotiation comes technique, I don’t feel you should never ever go in with more than three offers. Offering more than three makes you appear like an amateur and in this instance the vendor will be placed at an advantage, to them you appear desperate for the property and they will be under the impression you will go ultimately up to their top price.
And finally a little bit of psychology for you.
Psychological pricing is a strategy based on the idea that certain prices psychologically affect buyers and sellers in different ways.
Prestige pricing is when figures are rounded e.g. £120,000 and are identified by the brain quickly. In the same instance when rounded numbers are sent to a vendor to consider it can appear as though the figure has been sent to them to test the waters.
However, when figures are sent that are more specific e.g. £119,995 (known as charm pricing) and you give an explanation why you have provided this offer it will appear to the vendor or agent that you have considered a more thoughtful offer making sense to the vendor.
If all of that puts you off, then pick up the phone and chat to me about letting me take care of finding your investment property.