Newbies Guide To Property Negotiation

It can be very daunting negotiating an investment property but having a good negotiation strategy can get you an amazing result even if you’re not a great negotiator. Here’s how to negotiate on property even if you’re not great at it.

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0:00 – Introduction
1:03 – The negotiation progress this buyer’s agency uses
4:11 – How do you know where to start?
10:02 – How do you know what your first offer should be?
11:56 – How to counteroffer
14:20 – You need to help the agent convince the seller that they should do this deal
17:38 – What if they don’t accept your final offer?

Recommended Videos:

Step-by-Step Exactly How To Negotiate on an Investment Property

How To Inspect a Property Series

Transcription:

Ryan 0:00
they can be very daunting negotiating on a property because it’s so much money you’re negotiating with a real estate agent who’s going to you know obviously try and get the best price for the seller and having a good negotiation strategy and a good process to follow can give you a good result even if you’re getting mixed messages from the agent or you’re not the best negotiator yourself so today i have with me buyer’s agent adam i don’t even know his last name

Adam 0:31
i love that introduction

Ryan 0:32
we just pulled an adze here and i’ve just called you aggie for years because that’s how ben introduced me to you

Adam 0:38
yeah i guess my nickname

Ryan 0:40
so adam negotiates on a lot of properties for clients here at pumped on property and they have a very set process that they follow and so we want to talk a bit about that versus i guess how like a couple years ago before you’d ever invested in property or negotiating on property how you might have not even been able to take any action but having a process has really helped you so do you want to just quickly talk about the process that you guys do follow because i had done a full video with ben on negotiation on negotiate negotiation which i’ll link down below but yeah just for people who haven’t watched that give us a quick rundown of the two step three step process

Adam 1:20
yeah so we’ve got i guess two different avenues will take depending on the market at the time so if it’s quite a hot property or even a hot market as a whole we’ll be looking to do a quicker two step process which is basically coming in close to your best and final trying to put good terms in that you’ve come to that you’ve discussed with the agent that they’ve let you know should be favorable for the sellers but leaving a little bit of space there and then you put that in you let them know that you’re best and final see what they can do with it hopefully you get something back from the agent there and then you come back in for the second step process which is you can put that on is your actual best and final which is coming up that last little bit and then perhaps even putting a bit of time constraint on that one which is going to line up with what they want anyway but it just puts that pressure on which is what we like

Ryan 2:06
yeah so the two step process is yeah as you said you put in a good offer with good terms but you leave a bit of wiggle room then when the agent comes back and negotiate you can put in your best and final offer but i think the key there which a lot of people don’t talk about is actually then putting a time pressure on the agent yeah so rather than just making that offer you say okay i make this offer in a hot market how long do you give agent 24 hours or 48 hours

Adam 2:30
he did that

Ryan 2:31
yeah close a business today if we don’t actually finish this deal by close of business today then my offer is withdrawn yeah and so putting that time pressure on the agent in a hot market especially you know really gets the ball rolling

Adam 2:44
yeah because like in a hot market just got to remember just really quickly that they know there’s other offers coming so it’s like you don’t you want them to be scared that okay maybe it’s not as good as this one this is a good offer they want you to they you want them to think okay i’ve got to close the deal here rather than think oh well this is a good offer let’s see what else we can get coming in and if not we can always go back to these guys yeah

Ryan 3:04
exactly and then in a cooler market it’s a three step process so basically the same process but you just make a lowball offer with poor terms at the start correct

Adam 3:14
exactly and that’s that’s not trying to get yourself a bargain or rip anyone off for anything this is to understand where pricing needs to be out because you can’t always trust where the listing prices are what the agents put on and knowing someone who’s negotiated so many properties and experienced this you can get very mixed messages like you touched on you get told that okay enough around here should be enough to buy it you start there and then get a candidate $50,000 more which you just you sit there kind of wanting to pull your hair out because it makes you want to walk away or not feel like it’s even worthwhile perhaps you’ve wasted your time

Ryan 3:47
yeah so often when people are looking at this negotiation process this is probably the most overwhelming part of purchasing a property is actually going through the negotiation some people love it and thrive off it i know ben does it’s just his vibe he loves it me not so much and so having a good process to follow can just take the overwhelm out of this situation

Adam 4:11
definitely and so i guess one of the key things that i wanted to focus on and this is something that i come to terms with is that it’s very hard to know where to start yeah that’s the biggest thing so it’s like if we’re in a hot market and you’ve got to put in a good offer it makes it a bit easier to know where to start because you know what you want to pay when it’s an investment you need to kind of understand the value a little bit more in the numbers so that gets a bit trickier so maybe a hot market might not be the first place to start with your first negotiation might be better with somewhere where you can do a three step process and what i really like about that is it’s so scary putting that first offering but knowing that you’ve got that first one where you can come in low and you can come in where you feel comfortable you straightaway get some feedback from them and from the seller of where they see value you know where you felt comfortable and then you can kind of start to make a decision okay can i come up to where they see value or do i only see value at this point and then obviously that do to continue the negotiation or you could be happy to pay what they come back with at the very start and it’s just a matter of trying to you know make $10,000 in one afternoon

Ryan 5:18
so do you want to give an example maybe of a negotiation where in the past without a process you would have really struggled to negotiate but now with that two simple three step process even though the negotiation was difficult for one reason or another that you’re able to get a good deal

Adam 5:37
yeah so i guess the ones that that would really challenge me is it’s you see a lot they get listed now that a price on price on negotiation or or price on inspection and these sort of things and you call up the agent and you’re like okay so what price do they want we don’t have a price yet where we’re looking for to see the market and they give you nothing to work with like for me and i know the market so it’s not an issue when they say that to me

Ryan 6:02
yeah no

Adam 6:03
i was on the outside i would hear that and go well where do i start and then what am i like i’m going around and trying to get advice from other people or even the real estate agent who’s working on the behalf of the seller like it’s just not a place to be so i guess we yeah let’s

Ryan 6:18
talk about that one because that’s obviously a very difficult situation for someone to be in where they don’t know what the asking price of the property is because the real estate agent refuses to tell them or sometimes

Adam 6:29
they don’t know which is which is fair but they’ve generally still got something in mind which is frustrating but yeah sometimes they don’t know so give them a little bit of

Ryan 6:38
so how do we implement this process in that difficult situation

Adam 6:42
so what we do is during the inspection process negotiation process the inspection process we ask certain key questions to make sure we try and get the best idea of where the seller is like i guess mindset is that so have they purchased somewhere else where are they moving to why are they selling like what did they purchase the property for in the first place how long ago was that these sort of questions help position you to understand where their headspace might be at and even like overarching one which is great is what are their price expectations yeah that one question alone can pay dividends for you because you actually get some feedback from the agent but it’s just got to be timed right like you don’t want to be just caught up in ages being like what do they want

Ryan 7:28
yeah so i think too obvious i think man simon did a video on this on inspecting your property and talking to an agent which i’ll find and link up down below man basically you go through and you do the inspection first you know on the way and building a bit of rapport with the agent you go ahead and do your inspection continue the conversation and then it’s at the end of the inspection once you build a bit of rapport that you can then you present yourself as a serious buyer and then ask quite it’s quite casual like what okay what are their expectations around this property whereas if you just go in guns blazing what are the expectations yeah then the real estate agent will get their backup and not tell you much so it’s just about yeah being conversational around it exactly do you find what in those situations where it’s open to negotiation once you do the inspection you’ll get a price guide or do you still have situations where they still don’t give you one there’s still situations where they don’t

Adam 8:21
give you one but it is surprisingly effective at least giving you something or some sort of guideline to work off and once you’ve got that then you can go okay well that’s what that’s where they’re telling me does that make sense to me does that make sense to the other properties i’ve seen in the market you jump on realestate.com see what’s sold in the area look at the like what’s as comparable as you can from looking at the listings and then that gives you a bit of an idea and you can start to have some confidence in the knowledge you have and then the beauty of throwing out that first low offer to see how negotiable is it it doesn’t matter if it’s spot on like a big thing for me was analysis paralysis and i dive deeper and deeper and deeper into trying to understand every single aspect of the market the property the suburb every single little part just to be able to put an initial offering i don’t i might not even get this property expectations might be well above my budget like it’s it’s going through that process then you get the actual information you want to know that you can start to make a smart decision about these things so

Ryan 9:22
let’s say that we inspect the property and that we get a guideline around what the seller is expecting or if we don’t then we’ve done enough market research and you shouldn’t have done this anyway but done enough market research to understand roughly what that property is worth so look at what’s previously sold in the area similar properties that have sold in the area over the last 12 months yeah looking at that and you should have an idea in your mind of okay i actually think this is market value of the property whether the buyer or whether the seller wants more than that or not you should understand market value before making an offer on a property then getting a guideline of okay what’s this a seller expecting it’s also helpful to so when we know that how do we know what to make for that first offer that first lowball offer it’s it’s exactly what

Adam 10:09
we’ve touched on you just throw one out you feel comfortable with the the one thing you like i don’t want to complicate it by saying this but you don’t want to go too low that it’s not attractive to the seller right or to the agent even want to present it so you’re trying to get a gauge of what they’re going to still allow you to present so like you can do that by doing putting it in and just telling the agent look i’ve got a starting offer this is where i’m at let me know your feedback before i actually started definitely not you literally just go on and just be like i’ve got an offer for you to present to your seller can you present please present this and discuss that with them and let me know their feedback so

Ryan 10:48
do you present offers through email on the phone

Adam 10:51
preferably on writing and would even like it on a contract yeah so in queensland have

Ryan 10:57
to do it on a contract

Adam 10:58
for it to become a formal offer that’s what it needs to be but people you’d still see it’s quite common in the market to use offer forms or other ways that they might kind of do in the in between which makes the job for the agent a little bit easier on the paperwork side of things but from our perspective there’s nothing like sitting down with a client putting a contract in front of them running through the terms the price we’ve offered they take it a lot more serious so as part of the negotiation it’s not just a matter of being like oh well i know i’m low balling here i probably it’s not going to get accepted so i’ll just give the agent a call first and keep it easy for everyone no you do the follow the process you put it on contract you make it a formal offer so then that least know you’re serious you just don’t know where to start yeah and then it becomes a negotiation and you can start following a strategy from there

Ryan 11:46
and then ben talked about in the previous videos like if they come down $1 below the asking price then you know they’re willing to negotiate on that property and i also asked him well what happens if they don’t respond to that first offer or if they don’t counteroffer or they just reject your offer outright and that’s the thing when negotiation process is that the second step is exactly the same if they negotiate with you then you know that they’re open for negotiation which is a great step if they reject that lowball offer and don’t renegotiate you still present your second offer which is not your final one but closer to what your final one is with good terms yep

Adam 12:22
and you tell the agent that you’re this is okay i’ve increased the best i can do i understand that the first offer wasn’t an appealing enough for the seller to want to counteroffer this is the best that i’ve got let me know how you go with that and we’ll go from there and they’ll tend to take that one a little bit more serious because from a seller’s perspective you’ve increased your offer you may have made your terms a little bit better you’ve worked hard to try and please them to purchase this property so whether or not they like the price they do like that you’re trying to buy the property

Ryan 12:51
yeah and this is something that i’ve had to learn because in negotiation in the past i’m just a very blunt and straightforward person so just be like okay i want to like here’s here’s my turn so here’s what i want and then but people love negotiating yeah and so i’ve had to learn okay you’ve got to lowball and then because they want to negotiate if you just put your best offer up upfront if they accept that they’re gonna have like buyer’s or seller’s remorse exactly because you didn’t they’re expecting a negotiation so you got to give them what they’re expecting and so just going in with your best offer is gonna make it hard even though it might be better than what they would get if they negotiate exactly you know people want to negotiate and

Adam 13:33
it’s also think about it this way as well from a seller’s perspective that paid an agent a selling agent a bit of money for them to do a service for them which is get them the best possible price yeah if they walk in the door after advertising and go here’s here’s the best offer you’re gonna get it’s fantastic offer you’re still sitting there being like do i trust this like is it the best offer i’m going to get maybe now i’m going to hold out and wait and the agents like no trust me like i know the market this is the best offer you will get these people very serious and then now we’ll wait and try and get a little bit more for so try and do this so by following a process the seller can clearly see whether or not it’s us deciding to do these things but it is actually how you’re thinking about it but it provides the seller the snapshot point of each of your thoughts along the way and it shows that the agent is working for them trying to get that higher price

Ryan 14:20
and something that you don’t think about in negotiation is that the real estate agent who’s working on the behalf of the seller does actually need to convince the seller to actually sell at that price exactly so oftentimes they need to take an offer to the seller the seller is not sure whether or not they should take it and then it’s up to the agent to then convince them whether or not they should take it and so by low balling first and then by presenting your second offer and by following this process you’re effectively making it easier for the agent to convince the seller that okay you should actually do this deal with this person you’re doing their job for them

Adam 14:58
slightly and to be honest it’s like Something I talked about with my brother it’s because he’s recently purchased a property and it’s it’s it was against an agent who just didn’t want to work. Like when we walked out of the property and they’re just cruzi ages so crews he just did not give a shit it just didn’t get his his response when I walked out of the property after inspecting It was so you’re gonna buy it that that was his conversation. He

Ryan 15:24
sounds like a used car sell the car, what are you gonna buy this one? You haven’t even

Adam 15:30
asked me what I want. Nothing. It was it was kind of jokingly but it was still like an like, Yeah, I was just a random person off the street. And I just immediately thought, mate, like, come on. You can do better than this. And then it may. And then we followed through at the negotiation process with that the three stage process and it worked perfectly. Because although he didn’t want to do the things we’re asking him to do. We put it on contract when he didn’t want to put it on contract, we asked him to he told us that it wasn’t a good enough offer. We asked him to present to the sellers still. And he did Yeah, he then come back, he was able to give us a count. And we were able to follow the process. And like, I’m really happy with the price we ended up with on that one. And it’s just this was a guy who wasn’t really giving us much to work with and I didn’t have confidence he was going to close them on the deal. But following the process allowed that to happen still.

Ryan 16:16
Yeah, so I think following a process can really help with that sense of overwhelm and understand that your lowball offer is highly unlikely to get accepted. I think Ben said, I don’t know they’ve ever had an initial lowball offer, accepted,

Adam 16:31
don’t think ever,

Ryan 16:32
is I eventually we have gone and got a second offer. And then because of the building and pest inspection, being able to negotiate down, but he’s like, generally speaking, you’re not going to get that lowball offer accepted, which should take a weight off your shoulders regardless that your first offer is not going to get accepted. But that’s part of the negotiating process. Exactly. So part of this process. And this framework is initially starting with understanding what you think the market value for that property is, and what you’re willing to pay for that property to make it a good investment. So it needs to do like any sort of fit into your cash flow. And you need to have done that analysis before even starting this process. So before you’re even going into negotiation, you know, your lowball offer, you know, your second offer, and you know, your final offer. So it’s not actually like back and forth negotiation that you really have like it is and if you can get it for cheaper than your final offer great, but you have set what you’re willing to pay and you know what you’re going to offer each time you may adjust that slightly if the agents more or less willing to negotiate, but you have it set and then if they’re not willing to go for that final offer, then you can move on to the next property

Adam 17:44
Exactly. And doing that research and having that information beforehand and being like armed coming into those conversations allows you to confidently walk away so it’s like you follow this process there is no fifth offer that comes in it’s like you go through I know my third was the best that I felt comfortable with this property when you put

Ryan 18:02
the time pressure on them with a third as well to say you need to close this in a hot market it can be in under 24 hours in a cooler market you know up to two days sort of thing

Adam 18:10
Yeah, then when that time lapses and they’re not happy with it, you know the offer has expired and you can then move on to the next one Exactly. And you don’t like not not to put this out there too much you don’t need to then say I’m not gonna ever revisit that property again. They might come back around two weeks ago look like we really appreciate your offers the sellers have changed their mind or their expectations have come down based on recent inspections or whatever else we’d love to accept your offer if it’s if you’re still looking for a property might not be as straightforward as straightforward but it allows you to like emotionally detach from that property is that looking at it at something else and treating everything a lot more logically. And yeah, I guess ending up in that that end point where you get the result you want but it’s just you’re not sitting there stressing out your headspace isn’t being affected you’re not at the end the call of whatever this agent tells you you don’t want them to have that position of power over you so it’s just doing a couple those little things to make sure you don’t lose that and having

Ryan 19:06
that tight yeah having that time pressure on the agent Yeah, again, as you said closes the window for you as well is so emotionally you can move on and definitely definitely definitely don’t burn bridges on the way out. No, you don’t want to be swearing at the agent saying well if you then I’m never gonna work with you. Like that’s not no like we’ve made an offer we’ve negotiated as civil people as humans who respect each other and then the time have elapsed we couldn’t come to an agreement Best of luck wish you the best of luck you know things change let me know so they know that you’re still there but you don’t have like an active offer sitting there so you don’t feel like you can go out into the market looking at something else because your offer might get accepted in a week or two weeks and you didn’t expect that

Adam 19:49
and you also don’t want the agents sitting there telling the sellers are we still got that other offer. I’m working on him I’m working on because yeah, then if it does come back around, they’re gonna feel like it’s it’s just all this bullshit that’s there and it’s like oh, we finally get it where as you can see that you’re walking away the seller there knows okay they’ve lost that they need to go out there and do work if they can’t get another offer that’s actually real to come back in because they know as is off the table yeah that’s gonna help the sellers expectations get set a bit better as well because they know there’s not some imaginary offer still getting negotiated when you know in fact you’ve gone to your best and final it’s a no there is no negotiation past this i’m walking away if you want to come back to the party you can reach out to me yeah then we start the negotiation process

Ryan 20:29
again so we hope that this has helped you when you go out to negotiate there is a process that you can follow again i’ll link up to the video i did with ben where we really went through that process and outlined it so if you want to follow that process you can but yeah it’s very simple process can take a lot of the emotion and difficulty out of negotiating a property and get you a good result even if the agent sending mixed messages even if they’re not really telling you a prize even if you have a lazy agent like your brother had it can really help you in so many different scenarios so we wish you the absolute best of luck out there and negotiating on your next investment property and until next time stay positive

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