How to: Put Yourself In An Amazing Negotiating Position
When it’s time to put in an offer as a real estate buyer, you’ll want to be in the strongest possible negotiating position in order to sway the outcome of the transaction as much as you can in your favour. There are a number of areas that are commonly up for contention in terms of negotiation points, the more obvious ones being price, closing date, deal inclusions/ exclusions, and buyer conditions such as securing of financing and home inspection clauses.
If you are hoping to get as low a price as possible in a real estate deal (a common goal, not surprisingly!), then one thing to consider is that you are essentially “buying” all of your other conditions. But what does this mean?
When we refer to buying your conditions, we are simply acknowledging the fact that you will have to generally pay a higher purchase price for a property if you want to ensure you get your way on other points of the deal. If you’re uncomfortable proceeding without a condition on approved mortgage financing from your lender, let’s say, then you can expect an offer including this condition to be less attractive overall to a seller. This means that – all other things being equal – you will have to offer a higher price to compete with other buyers (real or imagined) in the market. It’s similar for adding a home inspection clause. If you want to inspect the home before the deal is firm, the seller is obviously going to be more inclined to do a deal with another buyer who does not require this condition – they want the deal firm now, without any potential escape clauses for you, the buyer.
With that understanding, the value of a buyer preparing in advance for the submission of an offer in the best way possible becomes clear. In order to put yourself in the strongest negotiating position you can, which will allow you to pay a lower price and win in competition with other buyers, you should:
- Get pre-approved for financing from a proper conventional lender. This way, you can feel more comfortable about waiving your financing condition if you so chose later. Without any prior mortgage approval, it would be highly inadvisable to do so.
- Get to know the area you’re shopping in. If I’m working with a buyer in the Beaches or Leslieville, I know that termites can be a major problem, which would make me less inclined to advise the waiving of a home inspection clause. Conversely, when buying a condo, the home inspection is usually the very first casualty of a multiple buyer offer situation, since there are generally fewer problems with individual condo units.
- Put your offer in… now. Buyers consistently underestimate the necessity for immediate action. When you see a property you love at an unbelievable price, you’d better buy it, because I can assure you that someone else will be along who is prepared in very short order. Many times buyers like to “think it over,” and by the time they’ve decided to make an offer the property is already sold, or they are in competition with another party and will invariably wind up paying a higher purchase price. I’m not suggesting you jump into an offer hastily – far from it – but if you’ve got your financing approved, have researched the area, and know that this is ‘the one,’ then being prepared to make an offer immediately puts the negotiating power in your hands.
- Use a short irrevocable. After having read my Real Estate Terms You Should Know article, you’ll now recognize the ‘irrevocable’ as the amount of time that one party to a negotiation (in this case – the buyer) allows the other to make a decision on their offer. If you make the irrevocable a short period of time, then it does not allow the seller or the seller’s agent to go out and drum-up other offers from people who’ve seen the property – effectively putting you in multiple offer competition, which always benefits the seller.
Avoiding multiple offers and using some justifiable time pressure is a great start towards geting the price and conditions you want in your deal. Keep these steps in mind and treat them as a checklist when in preparation to buy your next property. Have any questions? Email me – shaun@shaunnilsson.com. I answer all of my emails personally.
Until next time,
Shaun Nilsson
For more great info like this, click here to subscribe to my Monday Morning Memo – Toronto’s Premier Weekly Real Estate Newsletter.
You must be logged in to post a comment.
Hot Daily Properties- An error has occurred; the feed is probably down. Try again later.
-
Recent Blog Posts
-
