Property transactions can be stressful at the best of times. But finding the right home to buy or negotiating a fair price for your house when selling is fraught with difficulty. Perhaps one of the most intimidating aspects of the whole process is the negotiation itself. Delving into the finer price details can seem positively daunting.
However, when equipped with the proper knowledge on property valuations, a clear sense of your own limitations on price flexibility, and the right attitude going into the negotiation, brokering an agreeable price becomes more than feasible.
Know the market
Knowing the property market in the area you are buying or selling in is absolutely fundamental to negotiate the fairest price. Conducting thorough research should be the first step before you even begin the process of buying or listing your home.
Evaluate recent sale prices of comparable properties to determine the realistic value range for homes similar to yours in the same locality. Be sure to compare details like square footage, number of bedrooms and bathrooms, the age of construction and any notable amenities that impact the desirability and values of different properties.
Let the data and expert insights educate you on fair pricing ranges for both buyers and sellers. Knowing your market is power when deliberating deals, giving you the confidence to stand by your price while also determining when to compromise, makes good business sense as well.
Set your price range
The next step is defining your own pricing thresholds for either your target purchase amount or list price as necessary. If selling, your market research should guide your list price, falling somewhere within the middle range of what comparable homes sold for recently.
Be sure to set your minimum acceptable amount to leave room for negotiation. As one leading estate agent explains, “Buyers generally offer a maximum of three times on a property before they walk away, so your agent needs to encourage their first bid to be as high as possible to improve the chances of agreeing a sale”.
If you’re buying, consider your maximum budget and what mortgage amounts you have been preapproved for when setting your upper limit. Remember to be realistic about essential upgrade or repair costs that may be necessary over the first few years of ownership as well. You don’t want to overextend your finances, so set your maximum offer price accordingly while allowing for these other expenses.
Make the first offer
The question of whether a buyer or seller should make the opening offer in price negotiations has been debated extensively. Conventional wisdom often suggests that the party making the first offer may anchor the price, while the other party holds the advantageous position of responding more strategically and framing things in their favour.
However, more recent thinking suggests that in today’s market, sellers should list their property close to, if not right at, fair market value based on thorough research. This essentially acts as the first offer, giving prospective buyers a realistic starting point to work with. Buyers then can choose to accept this sensible launch price or make a slightly lower counter, based on variables for that specific property or prices recently paid for similar homes.
Negotiate concessions
Buyers and sellers should remember that concessions can also be useful bargaining chips. Negotiating closing costs, inclusion of appliances or furniture, home warranty plans or repairs and upgrades can provide additional avenues for compromise without necessarily impacting the final sale price itself.
For example, a buyer hoping for a lower price due to necessary roof repairs could instead request that the seller just cover the roof replacement cost before closing. This allows the seller to maintain their hoped-for sale price while the buyer gets savings by not having to foot the future bill for a new roof. Similarly, sellers could offer to include certain appliances or furnishings to sweeten the deal for buyers if unwilling to come down much on price.
Getting pre-approvals on what negotiating points mortgage lenders allow, and input from conveyancers on common concessions, can help both buyers and sellers brainstorm ideas beyond just the headline sale figure that still make deals work for both parties.
Know when to walk away
Perhaps one of the most difficult aspects of negotiations is knowing when further compromise is no longer prudent and walking away becomes the sensible recourse. Both buyers and sellers will likely need to bend somewhat on initial ideal prices and terms, during the back-and-forth talks, to reach an agreeable middle ground. But occasionally things reach an impasse where flexibility has hit its endpoint for one or both parties.
Recognising when you have genuinely reached the limits of what you can agree to, either emotionally or financially, is an important self-check during fraught negotiations. As a buyer, even if you adore the property itself, assessing whether the highest offer you can responsibly make will be accepted is key. Similarly, sellers being asked to come down significantly lower than expectations need to evaluate if holding out longer for a better deal is the wiser move, even if it means some extra months carrying two mortgages.
Knowing when enough is enough comes down to the prep work done before negotiations around determining upper and lower bounds. If challenged offers still fall outside what those limits allow for either buyer or seller, it then becomes time to politely walk away despite natural instincts to want to force a deal.
The key for buyers is doing due diligence around affordability, making offers grounded in legitimate market conditions, and openness for reasonable concessions that still work financially. Savvy sellers should price fairly from the outset based on recent sales in their local area and focus negotiations on aspects beyond solely the sale figure itself.
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