Poker, pace and patience all in the negotiation mix

Negotiating the best purchase price for a property is part studiousness, part guesswork and a healthy dash of poker acumen.

The wrangling subtleties may vary between a heated market, like that dominating the national property landscape at the moment, and a buyer’s market like the one most capital cities have emerged from over the past 12 months or so. 

Most elements, however, remain constant. Revealing your price limit early is one way to ensure the seller pushes the sale price as close to that limit as possible, when playing your cards close to your chest might have meant picking up the property at the seller’s lower expectation. 

Research is important but it’s also notable that in a heated market like today’s, the published median suburb prices are essentially an historical figure. With many suburbs rising two or three per cent per month, it’s worth noting that your expected price may require some adjustment to meet the reality of current demand levels.

Despite the present market buoyancy – it being too early to call ‘boom’ - properties are still more affordable now than they have been for a while, being driven by owner occupiers who see good value in the market, rather than by investors who are returning to the market more slowly.

Jeremy Fox, director of prestige real estate business RT Edgar in Melbourne, said it was important to time the market and act accordingly.

“In a market like that in Australia’s capital cities now, stock is limited and demand strong,” Mr Fox said.

“You need to be honest with your agent and move quickly, and try to take it off the market and avoid bargaining against wider competition.”

“There’s a lot of luck involved too, so it pays to be patient and not get despondent if low supply is making it difficult to get a look-in.

“It may be wiser to time your run – in Melbourne there is always more stock entering the market as spring approaches, so this might be a good time for buyers to enter the fray.”

An increase in listings may happen even sooner than spring, with RateMyAgent co-founder Mark Armstrong saying the sales prices being achieved now would drive a significant lift in the number of properties available for sale in the next few months.

A leading indicator of future price growth is housing finance approvals, and at the end of last year there was a major upswing in lending – up 40 per cent to the end of the year from the very low levels. 

And while prices are broadly expected to rise up to ten per cent this year, local factors have to be taken into consideration. 

So, with many forecasting double-digit price growth in 2021, Angus Raine, Executive Chairman of Raine & Horne Group, warned that predicting what buyers will pay for individual properties is fraught.

“Many are suggesting that low-interest rates, an improving economy and government stimulus will play a role in driving up values, however, predicting the market value of a property is an inexact science, and depends squarely on what a specific purchaser will pay,” Mr Raine said.

There are various factors influencing market value and pricing, with scarcity at the top of the list.

“Whether the scarcity relates to the house or land size, the type of property, construction quality, unique view or location, making price predictions is challenging,” Mr Raine said.

Sudden changes can also influence pricing.

“For example, the rezoning from a single dwelling area to higher density can cause market values to rise or fall suddenly,” Mr Raine said.

The right price can be determined by a range of factors including scarcity, as well as the amount of cash at the buyer’s disposal, a property’s proximity to a buyer’s extended family, and the perceptions of the suburb or town, Mr Raine noted.

“On the flip side, a vendor might have an urgent desire for cash rather than seeking full price value.

“When some of these factors, including scarcity, come into play, the value put on a property by a buyer can be affected by anything from 10% to 40%.”

A heated market can also see 50 or more bidders competing for a property, and that can lead to outlier bids that do not necessarily reflect the market value of the property.

Buyers need to avoid letting emotion draw them into an unseemly bidding war, as well as being aware of such transactions when doing their market research.

Attending home opens and keeping an eye on auction clearance rates can help determine whether it’s a sellers’ or buyers’ market in your area.

Knowing your opponent is always important too.

Buyers wanting a long settlement date may in order to remain in their property may be willing to shave several thousand dollars from the purchase price as they stay on looking for alternative living arrangements. 

If you know they are facing the prospect of moving their belongings twice in a short timeframe as they await finalisation of their own settlement, this can be factored into negotiations.