How to negotiate the best property deals in the current market.
In a previous post we talked about why now is a great time to build a property portfolio.
Which has left many of our followers asking how they can negotiate the best property deals in the current market.
Using fear to your advantage.
It’s no secret that sellers and real estate agents are fearful at the moment.
Which is fair enough. After all, there are markets in Sydney where prices have dropped by as much as 25%.
This means the ball is now in the buyer’s court – and there’s no better way to win the game than by using some good old-fashioned sales tactics against the selling agent.
Head of Binvested Nathan Birch says now that the market has turned, it’s no longer a me against you type of scenario.
“Agents are desperate to do deals so they can feed their family,” he says.
“Sellers are scared of everything they are seeing on the media.”
He says by understanding the market, you can position yourself to be the “knight in shining armour” when securing a deal.
And to be the hero of the day, you need to first establish the recession as the fire-breathing dragon.
Breaking it down.
When it comes to securing a deal, there are a few things you need to keep in mind.
Any good salesman will begin by identifying the value of the product they are selling and assessing the needs of their customer.
Then it is all about linking the two together in a deal that the customer can’t resist.
Nathan says he conditions real estate agents by referring to the recession. He uses the media hype surrounding falling prices and economic uncertainty as a “jimmy bar” in order to “break into their pricing.”
“In my conversation, I’ve taken all the other buyers out of the marketplace and it’s just me there,” he says.
By painting a bleak picture of the market and establishing himself as the only serious buyer, Nathan is able to negotiate some pretty amazing property deals.
Bargain in some favourable terms and conditions.
But price is not the only thing he looks at, he also secures property deals with other terms and conditions attached, such as delayed settlements.
“When negotiating, be firm but fair and look for what sort of terms you can negotiate as well,” he says.
He says in this market he is securing deals with terms attached that would have seriously insulted real estate agents two years ago.
“The other day I got a five-year settlement,” he says.
“If I can take a property from today’s market and settle on it in five years’ time, I’m going to be settling in a whole different market. The market is going to be much more fruitful than it is today.”
“This is a time to entertain offers that you wouldn’t have been able to do for almost the last ten years.”
RE agents want to do deals.
Despite the downturn, all those real estate agents out there still need to earn a living.
And at the moment there aren’t as many people who are prepared to buy property.
Real estate agents are optimistic – they want to do deals. So, if you are willing to make a transaction happen at xyz amount, they are likely to show interest in the terms you are offering.
Thanks to being able to leverage the media and the current market, Nathan has been able to secure deals in Sydney for up to $100,000 less than market value.
Choose your market carefully.
Not all markets in Australia have dropped in recent times. There have been variations across the country and within the different capital cities.
This is why you need to pick your market carefully. It still needs to have good growth prospects and renter demand. It also needs to show signs of weak buyer activity and falling prices for you to get a good deal.
Nathan still favours the metropolitan markets of greater Sydney as well the Gold Coast and Brisbane.
Choose your property carefully.
Nathan says that during the peak of the market, if a property had termites or a building issue, it would still be difficult to negotiate a cheaper price. Nowadays, the sellers of these properties are in serious trouble because buyers won’t go near them.
Which makes them ideal targets for investors who want to buy for cheap. If the problem is fixable, then you should factor in the cost of doing so and still aim to come out on top.
Nathan recently bought a property for a client in the Central Coast of NSW for $235,000. In the meantime, others on the street were selling for $450,000. He said, with a $50,000-$100,000 renovation, the property could be worth $100,000-$150,000 more than what they paid for it.
“Who would have thought that in 2019 you could find a two-bedroom apartment in Penrith for $263,000? I bought one last week for a client that is settling in a couple of weeks,” says Nathan.
He describes the current market as “exciting” and has been going to town buying up when properties are on sale.
He says most people out there either aren’t prepared to take advantage of this or are simply too fearful to get involved.
“I think a lot of people are going to miss this because they are too caught up in the news, fear and emotion.”
The winners in this market will once again be the ones who can see past their emotions in order to grab some bargains while they last.