We can learn a lot about developing strong negotiation skills by listening to how top negotiators work. Recently I asked two top property negotiators for their tips. The audio interview was originally produced for Real Estate Talk, but here is a transcript:
Kevin: Top negotiators are always great people to talk to, especially if you want to get a bit of an edge when negotiating to get the best deal. I’m going to feature two tips from one of Australia’s top negotiators, Nhan Nguyen from Advanced Property Strategies, about the tactics he uses to get the price right when he’s buying a property.
Thanks for agreeing to do this today, Nhan.
Nhan: Thanks, Kevin, and thanks for having me. The thing I love about property is that it is a game – it’s like chess – and you have to treat it like that. One of the best tips I can give people when they’re buying a property or selling a property is asking for more than what they’re willing to accept.
I’ll give an example. Let’s say a property is asking for $300,000 and you’re happy to pay $260,000; you might offer them $240,000 or $230,000. Why you ask for more than what you’re willing to accept is that it gives you room for leeway in negotiation. If you’re happy to pay a $5000 deposit, maybe you just offer them a $1000 deposit.
If you’re happy to settle in 30 days, maybe offer them a 60-day settlement. You’re always wanting to ask for more than what you’re willing to accept because people, when they come back to you and say, “We don’t want 60; we want 30,” which is what you’re happy with originally, then they feel like they’ve had a win.
Another big tip when you’re negotiating is try to leave the negotiating table with the other party feeling like they’ve had a win. Whether they have or not is another story, but if they feel like they’ve had a win and they feel like they’ve been able to have the final say, that’s definitely a win-win.
I’d say that the last tip, if you can, in a negotiation is aim for win-wins. It might be their price and your terms or your price and their terms.
Kevin: Nhan Nguyen there from Advanced Property Strategies. Nhan, thanks for your time.
Nhan: Thanks, mate. My pleasure.
Kevin: In a strong market, many buyers fear the auction process because competition drives prices out of their reach. Auction clearance rates, of course, are high, so there’s no doubt we’re going to see a continuation of a large number of buyers trying to avoid the auction process.
What happens when you’ve been through a property a few times and you absolutely love it and then comes the call from the agent: the vendor has received an acceptable offer? What do you do? What are your options?
Mark Armstrong has faced this on a number of occasions and has written some articles about it as well with some really good advice. He joins me.
Hi, Mark. Thanks for your time.
Mark: Hi, Kevin.
Kevin: That must be the dreaded call for all property buyers – when their agent calls with that information.
Mark: Yes, it really is. Buyers are out of their comfort zone anyway when they’re buying property via the auction process, but when you get that phone call, there are a lot of unknowns around what is going on. You don’t really know how many people have an interest in the property. You don’t really know exactly where their offers are.
At least, in an auction process, you can see every buyer and you know what’s going on, but when you get that phone call to buyers prior to auction, it can be very difficult.
Kevin: There’s a temptation, too, for many buyers to not believe the agent and believe it’s really just a ploy on their part to try and pump them up or to get an early offer.
Mark: You have to be careful. I think that the key to it is to make sure that the agent tells you that the offer on the table is acceptable and that the property is going to be sold.
I think in some instances, an agent can ring up and say, “Look, we have interest in the property and it might be sold, so we encourage you to put in an offer.” That’s the instance where they may not have any other offers and they may not have any other interest in the property, but they’re just trying to force your hand to do something prior to auction.
Kevin: Yes, in some states of Australia, agents actually put out what they call a multiple offer form, which indicates and asks the buyer to sign a form saying they’ve been advised that there are other offers and they’ve been encouraged to put an offer forward, which could be their only opportunity to buy.
I think when you see those sorts of forms, you know that the agent is pretty much on the level.
Mark: Absolutely. There are a lot of agents around who have a very clear system that they use for dealing with acceptable offers and they really have an obligation. I think there’s the perception that someone who puts in an offer before auction and their offer is accepted, they have the impression that they’ve won and the property has now been sold, but it really just triggers a process where the agent has an obligation to call anyone else who has seen the property and who has registered an interest in the property to give them the right to try and buy the property, as well.
Kevin: When you find yourself in that position, let’s step through the process now, Mark. Your advice is the first step is to fast-track your preparation.
Mark: Yes. Buying before auction is usually unconditional just like buying at auction, so you have to make sure that you have all of your finances approved. You have to make sure you get your building inspections done, contracts checked, and really make sure you’ve done all of your due diligence before you put in any offer. That’s really, really important.
Kevin: Also important is the second step of that, which is determining your spending limit and then being pretty well fixed on that.
Mark: That’s right. You really have to do your work on what the property is worth and really have done your research and know exactly where your upper limit is. Usually with the buying prior to auction, you have one shot at it. You have one opportunity to put an offer on the table and you usually find out whether you’ve won or not won.
Kevin: We’ll talk about price in just a moment, but I think the next step then, you say, is to call the agent. Is it fair that the agent would give you an indication about the other buyer’s offer?
Mark: They can’t tell you exactly what the offer is. In some cases, they do, but I don’t believe it’s ethical to say exactly where the offer is. But they’ll certainly give you an idea of saying, “You’ll need to be above $500,000,” or “You’ll need to be above $600,000” or whatever the case may be. The agent can give you guidance as to where you need to be.
It’s really important. The agent is there working for the vendor, so their job is to get as much money as possible. They also have an obligation to their vendor to guide any buyers through the process to still try and maximize that sale price.
When we’re stuck in this process of buying before auction, we talk to the agent as much as possible, find out a little bit more information, find out how many other buyers have an interest in the property. Really get as much information as you can before you put in that offer.
Kevin: Yes, and I think, too, remember, it’s not all about price. Sometimes it’s good to ask the agent, “What’s the motivation of the seller? Do they actually want a settlement earlier if they’ve purchased somewhere else?” because those things can actually help in your offer.
Mark: Absolutely. We’ve bought property in the past where our offer has actually been slightly lower than the best offer but our settlement terms were 30 days as opposed to 90 or 120 days. When you’re buying a property that’s worth hundreds of thousands of dollars, the interest savings that the vendor gets by selling and settling earlier can run into $5000 or $10,000 or even more, so it’s not all about the money.
Kevin: From there, the offer must be submitted in writing, Mark?
Mark: Yes, it must be submitted in writing. It’s a binding offer. You have to put a check on the table, as well. If it’s acceptable and the vendor countersigns, then you’ve bought the property and it’s a binding contract.
Kevin: Yes, and the reason you’d would want to put in writing, too, is to show the seller that you are serious. Verbal offers really don’t carry any weight at all.
I guess the bottom line, too, just to finish this conversation off, is to always remember to make your best offer, sit back and wait, but remember, there’s always another property.
Mark: Yes, that’s right. I think people buying properties before auction, the motivation to do it usually is born out of frustration because they have been to so many auctions and they’ve missed out so many times. You can often make a mistake buying before auction because you do get too emotional and do get too carried away.
But you’re right; there is always another property around the corner. You have to go through the process methodically, understand what you’re buying, understand the price point, and follow that sort of routine.
Kevin: Good advice from Mark Armstrong. If you’re going to be out shopping around for an auction this weekend and you want to make that offer, there’s a great guideline for you.
Mark, thanks for your time.
Mark: Thanks, Kevin.