Henderson.

KNOW WHY: Leverage in a Negotiation

It’s often said that the person who needs to make the transaction happen the least will ultimately come out best.

One of the biggest mistakes homebuyers make is failing to understand the vendor and the reason they are wanting to sell.

As a buyer, one of the biggest advantages you can have is to find out as much information about the vendor and then use that knowledge as leverage when making an offer. In a seller’s market, this becomes even more important as buyers are often on the back foot especially in some of the hotter markets around the country.

However, there are multiple ways you can add additional leverage to a negotiation by focusing on not just the seller, but also the agent, the property and your own personal circumstances.

Know the Vendor

If a vendor has already purchased another property, they will be far more motivated to make a transaction happen. The seller might need the funds or at the very least, they could be using some sort of bridging loan, which often comes with very high interest rates attached.

A vendor who needs to make a sale happen might be willing to move on price, if you are able to offer a fast settlement. We see these types of sellers with upgraders or downsizers.

Downsizers might not even be looking to take out finance to purchase their next property, so selling up could be a big part of how they plan to buy.

On the flip side, a vendor who is simply testing the market is all about price. They are likely not under financial or time pressure and you will not be able to move them away from the price they want. They could perhaps be willing to accept a longer settlement term, which could be valuable particularly if you wanted to develop and needed to do your due diligence on the property. 

Know the Agent

Most property transactions occur with a sales agent being involved. Despite what they might tell you, agents are paid when a transaction occurs and as a result, knowing the agent you’re dealing with is very important.

The two extremes are the number one agent in a suburb and an agent who does very little volume.

An agent who sells a lot of properties in a suburb is likely not really under that much pressure to make a transaction happen and will probably work hard to get the very best offer for their client.

An agent who needs the commission is going to be far more prepared to work with lower offers. We might also see this from older agents who have been around a long time and lost some of their drive.

Understanding who the agent is and how badly they need to make a transaction happen is another way you can add leverage to the negotiation. 

Know the Property

While we have been focused on the human element of the property transaction it’s important to remember that you can also improve your position by understanding the property.

Taking a list of comparable sales to an agent to make your case on price is a smart thing to do as they will also be able to relay that information directly to the vendor. Remember, a sales agent want a transaction to happen and you’re helping them make that happen.

Similarly, you should also take into account any other factors that might give you an advantage. If a property is on a major road that is slightly less desirable than one set back a few streets, use that in the negotiation. 

A Holistic Approach

If you can take all of these elements and use them to your advantage you will find you are giving yourself the very best opportunity to buy well.

Identifying different leverage points is an important element of the negotiation process and done well you can potentially turn an average deal into a great one.