Three tips that will help buy a home for less

You can almost say it’s a “piece of cake” to negotiate down when dealing with a greedy real estate agent. The agent that has their self-interest at heart and not their vendor’s.

These are simple negotiation tips, yet they are very effective and have worked well for clients, my family members and myself.

Number one: Preselect properties

The number one tip is to pre-select the property or properties in the area that you want to invest in, by doing research on the property listing portals. What you are looking for are the following features in the add-campaigns, which are run by the real estate agents;

Look for the badly presented properties, properties with bad photos, such as:

• Badly maintained front and rear yards,
  
  
• Cluttered rooms,
  
  
• Untidy kitchens and
  
  
• Dirty bathrooms

The quality of photos can also be a giveaway. The properties may be clean and look tidy. However, the selected agent isn’t familiar with nor believes in:

• Utilising professional equipment,
  
  
• Implementing marketing strategies to make the greatest return on investment for their client, and
  
  
• Outsourcing or adopting professional teams to assist with the marketing, use of photos (quality) and video.
  
  
• In the add campaign, run your eye over the headings and even the copy written for the listing advertisement. I’m not the best copy writer but I would certainly not use; “Cheap as Chips” nor “Desperate Sale” as the heading. You may laugh, but they are out there. In this case, they are out there for your advantage!

The marketing campaign tells you one of two things; the real estate agent cares or doesn’t care at all. It also represents to the general public that the vendors themselves care or don’t care.

Now that you have selected your targets, move to tip number two.

Number two: Make a very low offer

The second tip, is to make a low ball offer. I will simplify it as much as I can. Here in Sydney, Australia real estate agents would like to believe they are on top of the regulations. Therefore, they believe that An offer and particularly a written offer, must be presented to the vendor no matter what.

Well, the above is not entirely true. In short, if the vendor has given the agent clear instructions and in writing as to what offers he/she will accept, then the agent is not required to pass on any offers below this value. In other words, a firm strategy is in place between agent and vendor.

How do we use the above to fool the greedy real estate agent?

Simple, make An offer and make it in writing. As a matter of fact, I take a step further and ask for the contract.

I place the offer with terms and further conditions attached, along with what we call a 0.25% deposit to exchange. This, of course is a low ball offer, An offer 15 to 20 per cent below asking price. The offer is made dependent on the current market conditions and the ratios will vary. I give this offer to the agent with a cheque for the deposit and signed contract. Ready, willing and able. There are however, my own conditions;

• Ask for a 10 day cooling off period. Heck, if you can get away with it ask for more.

In some countries this is called a “due diligence” period. In Sydney the contract comes with a five day cooling off period. A period to do all the checks and final bank valuation to obtain finance.

• Request access to conduct a thorough pest and building inspection. Thorough, is the key word. Make sure furniture is moved around and the building inspector even lifts rugs.
  
  
• Your aim is to keep the property off the market for as long as possible.  

It will be very clear who the greedy agents are when your initial offer is accepted, and when they take the contract and present it to the vendor. In fact you are helping the greedy agent to work his/her magic, in convincing the vendor to sell low. You are equipping the agent with the ammunition they need to work in your favour.

You are on your way, this is what you want. The agent believes their final job is to convince the vendor to accept your offer and to “condition” the vendor to come down in price. This leads to tip number three.

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Number three: Play the trump card

Tip number three is where the deal is locked in and when we play the trump card. Simple and effective.

We are working on the motivation of the greedy real estate agent. You made the offer, there was a counter offer and you were prepared to accept the counter offer, because it is already below market.

Now you strike and you strike hard at the core of greed. On what I call the eleventh hour, pull the offer off the table. In other words, be prepared to rescind the contract.

Keep in mind contracts have exchanged, the most you will lose if you do walk away is the 0.25% deposit. However, what you are really doing is testing the agent’s, and most of all, the vendor’s position.

I can assure you, in most cases, the agent has not advised the vendor to obtain a pest and building report prior to placing the property on the market. Why should they? It’s not their job and besides, it takes time and effort. They’re not getting paid for this, their job is to sell the home and sell the “vendor paid advertising” package only, isn’t it? The rest is just too much work.

Therefore the agent, nor the vendor, know what lays behind the walls, under the home or in the roof cavity. Your P&B Report tells you what possible damage there could be or the damage that exists.

It startles me to note how many agencies are actually taking homes to “auction campaigns” without assisting the vendors and instructing their vendors to obtain P&B reports. This itself makes for another story on another day.

Make it hurt, exaggerate the repair bill and cost, ask for a discount off the negotiated price. You may be puzzled by this? Yes, you can renegotiate a contract even after it has been signed and not have gone beyond the cooling off period or the DD period.

The agent doesn’t want to lose the opportunity to close the deal as soon as possible, because they have already spent their commission from the ‘sure sale’ 10 times over. Agents don’t want to place the property back on the market because of time and work this will require. They are lazy and it creates concerns in the minds of other buyers.

Most of the time, the lazy and greedy real estate agents will see it as less work to convince their vendor to reduce the price and take the re-negotiated offer. Come on! did you really believe the greedy agent wants to work that little extra to favour the vendor? Do the math, the extra $5,000 at 2% commission is not a lot. Happy buying and negotiating.

In closing:

These are only a few of the tips and secrets real estate agents don’t want you to know. The three points I have shared are a lot more complicated than what you have read, but as you do adopt these in your property investing journey, you will learn how to use these principles and hone in on your skills.

Every property purchase has its own dimension, form of purchase and negotiation tactics. I take a bold approach due to my background in the building industry and I can gauge costs of repairs and possible faults in the building, quickly and at times on the day. You may simply engage a builder to attend the inspection as a friend to guide you. Whatever strategy you implement be satisfied you did what knew best at the time. Simply have a go and don’t be surprised if you walk away with a bargain and a real estate agent as a new friend.

If you’re an agent, I hope you to have read the article and it may have assisted you to be better prepared. Who knows one day I may just come to your open home in search of a bargain for one of my clients. Let’s hope not.

EDWIN ALMEIDA is licensee in charge of Just Think Real Estate.

He is also the creator of Oz Real Estate.TV and a presenter for propertyinvestingvault.com.