Price vs Terms

[JamesGG]

Once upon a time, I took a short break from the accounting industry to play the real estate game, working for a couple of local agents. Whilst I’d never, ever go back to it, the experience was certainly an enlightening one and a hell of a lot of fun while it lasted.


One of the many things that I learned during this time was how to negotiate. And that, auctions aside, the highest price does not always win.
Let me elaborate on that last point.


When making an offer, there are a number of things that make up the detail of the contract. In particular, the following are all key points that can be negotiated;

• price
• deposit
• settlement date
• treatment of existing tenants
• treatment of existing fixtures and fittings
• finance and valuation clauses
• expiry date for acceptance
• other clauses; such as building and pest inspections, vendor finance, access before settlement, etc.

I remember one particular property that I didn’t sell, not long after I started the game and still fairly green. I was dealing with a first home buyer, cashed up, and they offered well over asking price. Their offer was something like $360,000 on a ninety day settlement; subject to finance approval, building inspection, and vacant possession with access before settlement to start painting the walls.


The other agent in the office pulled in an offer on the same property at about the same time, and the listing agent took both to the vendor. Up until this point, I had no idea what the other agent had in the envelope. Turns out, they were offering $40k less than mine, but completely unconditional with a thirty day settlement.


Price versus terms. The vendor accepted the unconditional offer because it was fast money, and much less risk of something going wrong.


So, it pays as a buyer – and an agent! – to find out what the vendor is looking for. Are they in a fixed timeframe to sell or settle? Do you really need a building or pest inspection done? Is your finance already preapproved and do you already know that the valuation should be ok? Are you happy to keep the existing tenants or would you rather find your own?


As we all know, money isn’t the be all and end all in life. Nor is it the only key point in the negotiation of a potential purchase. So, be creative!

[Brendan]

I agree James, price is not always the deciding factor!

On the last property I purchased, I found that the vendor had wanted a quick sale, they had some bad tenants prior, they were currently living over seas and the property market was starting to feel some pain from the GFC.

So I offered much below asking price, short settlement and even offered to rent the place off him prior to settlement (I needed somewhere to live at that stage!)

The offer was accepted, and we were both happy, he had the house off his hands, I had a great property and somewhere to live.

The property has now appreciated almost 20% in less than 12 months.

As I always say, knowledge is power in negotiations, find out why the Vendor is selling, what it is that could motivate them and work on that.

[MyCashFlow]

lovely post..thanks!