This guide will help you learn how to negotiate the house price with a real estate agent.
The best part?
Everything here applies to buying a house in 2018.
(In other words: you don’t need to worry about reading out of date stuff)
So without further ado, let’s get started…
About the Author
I’m Jayden Vecchio.
I remember when I tried to learn how to negotiate my first home with a real estate agent.
It was REALLY frustrating.
And technique after technique that didn’t work.
Fast forward to today, and we have helped over 100 customers with techniques to negotiate 5-10% off their first home purchase price as well as arranged awesome home loans for them!
I’m not showing you all of this to brag.
It’s to show you what’s possible when you learn negotiation tactics from the right sources.
Speaking of, that’s what this guide is all about.
It’s a collection of hand-picked resources to help you master negotiation tactics and learn how to negotiate a house price with a real estate agent.
How to Negotiate the House Price with a Real Estate Agent
- 1. Negotiation Fundamentals
- 2. House Price Research
- 3. Know the Sellers Motivations
- 4. Get your ducks in a row
- 5. Amazing Contract Terms
- 6. Prepare your counter offer
- 7. Negotiating house price after building inspection 🔥
- 8. Be ready to walk away
- Bonus #1: Common Negotiation Mistakes
- Bonus #2: Get insurance right away
1. Negotiation Fundamentals
This chapter is all about teaching you the basics of negotiating a house price.
So if you’re new to buying a house, the resources below are a must-read!
They’ll help you get the basics down before we dive into the advanced strategies later in this guide.
How Negotiation Works
As former FBI Hostage Negotiator Chris Voss says, our life is a series of negotiation.
We negotiate every day in our lives, negotiate with our kids to go to sleep early, to negotiating for a better salary all the way to negotiating to buy a house.
Negotiation is about finding a meeting point between what the sellers want for their property and what you want to spend as the buyer.
When you are buying a house, everything is negotiable…
What are the best Negotiation Techniques?
If you want to go beyond property negotiation and look at basic negotiation techniques, this is a very helpful starting point.
Chris Voss covers a range of negotiation techniques from his book Never Split the Difference.
I find I use mirroring when dealing with real estate agents…
This is just repeating what the Real Estate agent said to you, helping you get more information from them
2. House Price Research
House price research is THE first step in buying a property.
Unfortunately, it’s one of the most confusing steps too.
To start with:
How do you actually work out what a property is worth?
Or even more important:
How do you make sure you are getting the BEST deal on this house?
If you’ve ever asked yourself these questions, this chapter has you covered.
You could save 8-10% off the advertised price
When buying a house there is no hard and fast way of determining the value of a property.
The price is what the market is willing to pay.
Therefore all properties that are being sold on the market do not have a hard and fast set price like you would have when going to the supermarket to buy a loaf of bread.
So the first step in negotiating a house price is recognising that the advertised price is NOT the final sale price.
This is where a term called vendor discounting comes in – this is is the discount between the originally advertised price and the final sale price.
And in Brisbane, it’s common for the final sale price to be 8-10% BELOW the originally advertised price.
In other words, and as an example the figures show a home in Milton being advertised for sale at $1,000,000 is on average discounted by 9.80% – almost 10%…
And will most likely sell closer to $902,000!
So just realise that the price your future home is being advertised for isn’t necessarily the price you will need to pay!
Distance to Brisbane (KM)
Median House Price ($)
Average Vendor Discounting (%)
Read More: The Complete First Home Buyers Guide
Property Market Research: The Definitive Guide
This guide is designed to show you everything there is to know about property market research, from determining what property is perfect for you to working out what you should pay for it.
It will help you understand what you should be paying for your home.
Advanced Property Market Research Tutorial (4 step blueprint)
This short video will show you how to put the concepts you learned so far into practice.
Specifically, you’ll see real life, 4-step property research process in action.
Action: Work out your maximum price
Before you even submit your offer and start negotiating, you need to know what your upper spending limit is.
Your research will help you determine what the property is worth, but you should also speak with your mortgage broker to determine your borrowing limit…
This is the maximum a lender will be willing to lend based on your income and will help you determine the upper range of what you can afford to spend.
3. Know the Sellers Motivations
This chapter will show you how to understand the seller’s motivations the right way in 2018.
Specifically, you’ll see exactly how to use advanced strategies to understand how to make the best offer.
Let’s dive right in.
Know the seller’s motivations
Knowledge is power when you negotiate.
And finding out why the vendor is selling can give you powerful information to better position your offer.
For example, if the seller has bought another house and is pushed for time you could use a shorter settlement period as a sweetener on a discounted price.
Looking at shorter settlement terms, or other finance conditions can save you thousands.
Ask open-ended “What?” And “How?” questions
Chris Voss recommends using calibrated questions when negotiating…
These are approachable and non-threatening questions leading with “What” and “How”.
An advanced technique is to ask the same question three different ways:
- ✅ What are the sellers doing after they move out?
- ✅ What are the vendors plans once they sell?
- ✅ How soon are the vendors looking to sell?
This method gives the Real Estate agent time to think, and possibly let slip some information that can help your negotiations.
- 1. What are the vendors reasons for selling the property?
- 2. How long has the property been for sale?
- 3. What was the original asking price?
- 4. How negotiable are the sellers on price?
- 5. What do you think the lower price they are willing to accept?
Consider the Real Estate Agents Motivations
A good real estate agent will work hard for the seller to get the best possible price.
So you need to remember that the Real Estate agent, while helpful isn’t working for you.
In other words, you need to consider the Real Estate Agent’s Motivations.
- ✅ 1. They want to be able to sell the property at the best price
- ✅ 2. They want to be able to sell the property in the shortest timeframe possible. Ideally even before the property hits the market, that way they don’t even need to do an open inspection!
Thinking about there real estate agents motivations can help you better position your offer, and remember when dealing with Real Estate agents try to use open “how and “what” questions.
Read More: How to deal with real estate agents
4. Get your ducks in a row
Are pre-approvals still important in 2018?
In fact, over 90% of the homebuyers we helped in the last 12 months secured their first home after getting a pre-approval.
Question is: How reliable is your pre-approval?
This chapter will show you the ropes.
What is a pre-approval?
A pre-approval is an indication from a bank that they are willing to consider approving your home loan once you find a property you want to buy.
Pre-approvals is a basic loan approval but is usually subject to further conditions like the bank double checking your payslips, receiving a satisfactory valuation and final credit approval.
Pre-approvals are different from formal, or unconditional approval which are also called final approvals because the bank approves your loan without any further terms or conditions.
What makes pre-approval reliable (or not)?
Not all banks are the same when it comes to assessing a pre-approval home loan, also known as a conditional approval, indicative approval, approval in principle or home seeker depending on the bank you use.
In most cases a pre-approval is just an indication that the bank is ok to consider approving your loan, they may just complete a credit check and not check any of or your documents and wait until you lodge a full mortgage application to do this.
Action: Questions to ask your Mortgage Broker
Read More: How Reliable is your pre-approval?
Have confidence with your finances
When you start to negotiate the house price, you want to have complete confidence in your home loan and finances.
You want to know the maximum amount you can afford.
Get a Building & Pest Report moving
A building and pest report is what I would consider one of the non-negotiable aspects of buying a house.
These report cost between $400-600 and have literally saved me over 5 times from buying complete lemons of properties.
The building & pest report can take between 7-8 days to arrange and get back so its best to start looking for someone to help with this sooner rather than later.
5. Amazing Contract Terms
Don’t sleep on property contract terms.
If you don’t put forward strong contract terms in today’s market, you could cost yourself THOUSANDS.
Fortunately, you don’t need to be a Property Mogul to master amazing contract terms.
In fact, the resources here will show you specific steps you can use to master contract terms.
(No law degree required)
How to make an offer on a house?
You might be surprised to know you do not need to sign a contract of sale to make an offer on a property.
I have had offers accepted on a house in writing via an email (before taking the time to fill out the contract).
In most cases, the Real Estate agent will come back and complete the contract of sale for you.
The most important information you need is:
- Purchasing Entity: I.e. your full legal name, including middle names.
- Deposit (remember the deposit is split into 2 parts)
- Finance and building and pest terms
- Settlement Dates
- Lawyer details
What are the best terms to make my contract competitive?
Really it is going to depend on the seller’s situation as to what makes the contract more competitive.
BUT in Brisbane, we find fewer days for finance, building and pest AND settlement…
The more competitive your offer is going to be!
Most first home buyers will put 21 days for finance, 21 days for building & pest and 45 days for settlement.
If you want to make your offer stick out, consider putting 7, or 14 days for finance and 30 days for settlement.
Provided your mortgage broker has arranged pre-approval these terms will be very achievable.
Signed a Contract of Sale on a Home?
In some cases, the Real Estate agent will ask you to sign the contract of sale to show the sellers you are serious about your offer.
This doesn’t mean they have accepted the offer but is usually the second step in the negotiation after you’ve made your initial offer by email.
If you need some help in filling out the contract of sale, check out our guide here.
Read More: Signed a Contract of Sale… What’s next?
6. Prepare your counter offer
This is the point where lots of first home buyers get disheartened…
The Real Estate agent will call you, say that the seller has reviewed the offer and not accepted it – but given you a counter!
This is great news!
Your initial offer should have been below the asking price (and below your own target price).
Now, this point is where we use something called the Ackerman Bargaining Technique (another one from our friendly FBI negotiator Chris Voss).
Follow the steps below, and you’ll come out on top.
…And one last tip for the final step (non-monetary items).
Consider something like reducing the days for finance approval from 7, to 6 days to show you are willing to negotiate.
7. Negotiating house price after building inspection 🏚
As I have mentioned before, Building & Pest reports are the single most important thing you can do when buying a house.
And when you are buying an older property, like a Queenslander in Brisbane its common for there to be small problems around the property.
- 🏚 Cracked glass, broken windows
- 🏚 Wet rot to cabinets in bathroom and kitchen sink
- 🏚 Insufficient drainage
Provided the problems aren’t structural you can use these to negotiate a lower house price EVEN AFTER you’ve signed a contract of sale.
Let’s look at this example…
While it might look like these are scary problems, after talking with a builder the owner found out it would only cost between $2,000 to $3,000 to fix.
They used this to go back to the real estate agent and negotiate a further $10,000 off the price!
8. Be ready to walk away
As Benjamin Franklin said, by preparing to fail you are preparing to fail.
Although it might take you weeks to research and prepare to make your offer on a property, it could be rejected and over in a matter of minutes.
You still need to spend time preparing your figures and hope for the best that the vendor is willing to negotiate – but also be prepared to miss out if they are being unreasonable on price.
Ultimately you need to stick with your walk-away price, after all, you’ve done your homework and you know what that particular property is worth to you.
As the saying goes in Real Estate, ‘The Money is Made when you Buy, Not When You Sell’ in other words, the price you pay for the property is the main factor to determine how much profit you make later on.
Bonus #1: Common Negotiation Mistakes
I think we have covered most of the mistakes above, but to summarise –
- ✅ Remember most homes in Brisbane are discounted 5-10% off the advertised price to get to the final sale price.
- ✅ Take time to complete property market research to make sure you don’t overpay
- ✅ Work with an experienced Mortgage Broker who can help you get finance approved faster, and let you set amazing contract terms.
- ✅ Use the Building & Pest report to negotiate further discounts (even after you’ve signed the contract of sale)!
These 4 tips alone will save you thousands.
Bonus #2: Get insurance right away
A lot of people aren’t aware but it’s really important that you arrange Building Insurance (also called Home & Contents Insurance) as soon as you purchase a property – that is from the date you sign the Contract of Sale!
There are a few reasons to get insurance right away including the fact that the seller’s insurance policy may no longer be valid that the property has been sold, or the seller may not have insurance and also in Queensland it is common for the Contract of Sale to specific insurance is the purchaser’s responsibility.
So in Queensland, you need to get insurance from 5 pm the next business day after signing a contract of sale (unless it’s a strata apartment in which case the Owners Corporation might have insured the building). Not having home insurance is very risky, as it covers you for any loss or damage to the building.
Your bank or lender will want proof the property has insurance on it, so it’s best to get it right away because you are going to need it eventually.
Next steps and arranging a pre-approval
Our team here at Hunter Galloway is here to help you buy a home in Brisbane. Nathan & Joshua Vecchio are Senior Mortgage brokers who specialise in making your home journey easy.
Unlike other mortgage brokers who are just one person operators, we have an entire team of experts to help make your home loan journey as simple as possible.
If you want to get started, please get in touch here and we can book a time that suits you – either a phone call information session or a face to face meeting (which doesn’t cost anything for you).
Further reading for Home Buyers…
- For our comprehensive guide for First Home Buyers, check out this page here.
- Looking at getting a loan, check out our Complete First Home Buyers guide.
- 11 Rules for Buying at Auction
- And don’t forget the costs of buying which we covered in detail here.