You're in the market for a property and stumble upon the perfect 3-bedroom house in the neighbourhood of your choice. The asking price is within budget. How do you know if you're paying too much or if the property is something you should even make an offer on?
The answer:
information. Going into negotiations armed with accurate, up-to-date information gives you a competitive edge over less-informed buyers, boosts your confidence levels, puts the real estate agent on notice that you know what you are talking about, and increases your likelihood of securing the property you want at the right price.
One of the best ways of obtaining information is by asking. Ask open-ended questions, those that open the way to more questions and more information, and eventually – the right answers.
Here are ten useful questions every buyer should be armed with when talking with the vendors, or what is more likely, the real estate agent.
1. Why are the vendors asking this price for the property?
If you've done your homework beforehand, you would already have an idea of what would be a reasonable price range the property can fetch.
By asking the basis for the asking price, you are trying to find out whether the figure is backed by comparable sales in the neighbourhood, or if it is something plucked out of the air by either the vendor or the agent. The real estate industry is notorious for commission rage, which can drive agents to do almost anything to secure a listing and the commission that follows when the property is sold.
2. Has the price been reduced while it was on the market?
If it has, this tells you that the vendor's initial expectations may have been on the high side, and he has since had to reduce the price to something the market will realistically accept. A vendor who may be feeling somewhat deflated over a price reduction may be more open to negotiating with you.
3. How long has the property been on the market?
The longer a property has been on the market with no takers, the more likely the vendor will be prepared to be flexible about the asking price. In contrast, if the property has been newly listed, the vendor may not be so flexible because he wants to wait and see if better offers come along. Suppose you find out that a property has been on the market for 3 months. From your own due diligence, you may even be able to figure out why. For instance, the property may be on the main road, or next to a school, or perhaps it has an electrical substation on it. Knowing this can give you additional leverage during negotiations, assuming you aren't already put off making an offer.
4. Why are the vendors selling?
Are the vendors moving interstate? Upgrading to a bigger home? Has there been a divorce or death in the family? Such changes in circumstances could make the vendors motivated to sell quickly so they can move on with their lives. A motivated vendor could present an opportunity for a shrewd buyer.
5. What offers have the vendors had?
If there have been plenty of offers, you know you have competition, and you will need to be prepared to offer more than you originally planned if you want a decent chance of securing the property. On the other hand, if there have been no offers, the vendor may be more open to negotiations, giving you leeway to present an offer below the asking price.
There is another possible scenario: there have been several offers, but the vendors have turned them all down because the price wasn't right or the conditions were too restrictive. Knowing why the previous offers were rejected gives you additional information to factor into your decision-making, and the opportunity to present your offer with the best possible chance of success.
6. When do the occupants have to move out?
Are the current occupants the owners or tenants? If they are tenants, their stay would be subject to the terms of the tenancy agreement and whether they wish to stay on. If they are the owners, you would want to know if they are in a hurry to move. For instance, they may have bought another property and their new property is due for settlement. If you are able to offer a quick settlement, the vendors would appreciate it and may be more prepared to accept a lower offer than they otherwise would have.
7. What price will you take?
The asking price is not the final price that the vendors are prepared to accept. They may be flexible within a certain range, say $5,000.
8. What's included in the sale?
The agent may tell you "anything that is fixed to the house stays", but for your own protection, you should ask specific questions. Does the dishwasher come with the house? Will the light shades remain or will the vendors take them, leaving only the globes? What about the cubby house in the backyard? The inclusions and exclusions (if you prefer the house as bare as possible) are another opportunity to negotiate a win-win deal.
9. How flexible is the vendor with contract conditions?
In contracts of sale, it is standard for the buyer to specify that the purchase is subject to certain conditions. The more common ones are:
*Subject to finance: This means that if you aren't able to obtain loan approval from your lender, you are legally entitled to cancel the contract and have your deposit refunded.
*Subject to satisfactory pest and building inspection: As a buyer, you are entitled to engage qualified professionals to physically inspect the property to see if there are any problems with termites, timber rot, electrical installations and the like. If you are not satisfied with the report outcome, you can use the repairs required as a bargaining tool in negotiations.
A flexible vendor would allow you to include most, if not all, of your conditions for buying the property. Some vendors, however, may not want the hassle because they want a quick sale. If you have too many conditions, they may just reject your offer and sell the property to a less demanding buyer.
10. Is there anything else I need to know?
You never know what the vendor or agent might say if you ask this question. In their efforts to close the sale, they may unwittingly disclose valuable information that could help you make that final call.
Serena Tan is a writer and career coach living in Melbourne, Australia. She helps people evaluate their careers, health and wellness, personal growth, and ethical ways of making money online.
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