Whether you’re a first-time home buyer looking to make your homeownership dreams come true, or a property investor looking to add another property to your portfolio, knowing how you can place yourself in the best position for house price negotiation is a very advantageous skill!
Let’s dive in to discover what this process really entails.
Are house prices negotiable?
In many cases the answer is yes, house prices can be negotiable! Nonetheless, before you start exploring the market and placing offers to secure the property of your dreams, there are a few items you need to take care of.
- having a look at budgets, pre-approvals, house pricing and the market
- gathering valuable information and conducting research
- assessing contract terms and finally…
- locking in the price!
Ready? Let’s break these down into greater detail!
1. What house price can I afford?
As a potential buyer, the first thing you should want to find out is how much you can afford to buy a house for.
Although you may know what your current deposit is, you will also want to know what your budget is. In other words, how much your home loan, investment loan or construction loan (if you are considering renovating/upgrading) will enable you to borrow; this is referred to as your borrowing capacity.
Knowing your borrowing capacity can help you know what maximum house price you can afford, which will help you understand your limits and get a clearer picture of what your repayments could look like to ensure they won’t place too much financial stress on your disposable income.
With interest rates prone to change at any time, it is very important you still allow a buffer in case they increase. This will protect you financially and ensure you know which opportunities are worth pursuing long-term.
So, how do you find out what your borrowing capacity is?
2. Getting pre-approval!
Working with your dedicated broker as you get your pre-approval can help answer these questions so you can enter the market with confidence.
Your Rise High broker can work with you to collect some information about your income, liabilities, and living expenses, to provide you with insights into what your borrowing capacity would be, what banks are willing to offer based on your financial circumstances, and consequently, what you could comfortably afford to offer at a house price negotiation.
Once you have clarity on these aspects, it is time to head to the market and start researching your options!
3. Research the house price
Once you have a property in mind your next step will be to perform market research and dig deep into the reports!
As brokers, we can help you look into the specific details of a property you are interested in and provide you with a free property report.
These reports provide an estimate of what the price range could be, showing low, medium and high totals the property may be valued at, to give you confidence and help you understand how much room for house price negotiation there may be based on what the agent is asking for.
Looking into other property sales in the area and gauging whether the house price is within the right range can also come in handy. Signing up to real estate agent databases to receive their exclusive listings straight to your email, would also be advisable. This can also help you find other suitable properties within your budget before they are advertised on more popular domains.
4. Know the market
Whether that’s listening to podcasts, performing online research through trend reports and market reports, or listening to economists about the direction house prices may have, knowing the market can give you hints on how much negotiating power you may have.
Knowing whether it’s a seller’s or buyer’s market can also help you get a rough idea of how competitive the market may be and increase your odds of being successful in your house price negotiation endeavours.
What is the average house price in Australia?
Average house price values can change a lot depending on the area and state you are looking to buy. To stay updated with these, we recommend that you have a look into sites such as the Australian Bureau of Statistics, or reach out to a Rise High broker. As your trusted professionals, we have access to industry data that can be tailored to your unique needs and interests, helping you gather a better understanding of the market and the average house price you can expect.
Where in Australia are house prices falling?
Although it may be tempting to pinpoint locations where house prices are falling, we would recommend looking into areas that have great development potential and asking where your property is more likely to increase in value instead. Historically, house prices rise over time, which makes it wise to get into the market as soon as possible.
Your dedicated mortgage broker can also provide insight into areas that fit your budget, long-term goals and needs, so relying on the advice of our experts can help you get the insights you need to make confident decisions.
5. Gather information about leverage points for your house price negotiation
In our own experience, gaining a good rapport with the real estate agent is crucial. As humans, building a good connection can help them guide you through the buying process and even provide some insight into the vendor’s motivations to sell.
Asking open questions such as why the property is being sold or if the vendors are looking to settle quickly or slowly can help you get a clearer picture of the situation.
Knowing what motivates the vendors to sell can help you place an offer that caters for their needs and is at a greater competitive advantage than others. This brings us to tip number…
6. Offer value through contract terms
Assuming you followed tip #2 and already have a pre-approval underway, you can also negotiate a better house price by offering faster settlement times or shorter finance clauses. The perfect fit for vendors who are looking to sell as fast as possible!
Sometimes, it is not really about achieving the highest sale price, but instead, making sure the terms of the contract are beneficial to the vendor’s needs. This is where those conversations with the agent can come in handy, giving you the great advantage of offering the right contract terms for house price negotiation.
7. The aftermath
Once your offer is accepted and you have successfully negotiated house prices, it is not over yet!
At this stage, there’s a couple of things you will want to keep in mind:
- The date you need to provide the agent with formal approval for your application and
- settlement date
At this stage it would be a great idea to get your mortgage broker involved and a conveyancer too. Your conveyancer can help look over the contract and forms, ensuring the terms and conditions of your contract are fair. Although house price negotiation skills are key, making sure you have the right team to support you in your home-buying process is also essential!
Making sure you have the right building insurance on the property before and after you settle is also vital. At Rise High, we understand that taking care of so many details and moving pieces can feel overwhelming! As your trusted mortgage brokers, we are also here to hold your hand throughout the process and assist with anything you may need.
Our Bonus Tip: Engage the services of a buyer’s agent!
If you still feel like negotiating house prices is not your forte, engaging the services of a buyer’s agent can be a great option. Buyer’s agents have a lot of experience in the negotiation process, can help you find a suitable property, and potentially even lower your offer to a sharper purchase price.
Buyer’s agents do charge a fee, so if you are looking to make sure you are in the right hands, our award-winning team can also get you in touch with great professionals we have worked with closely in the past.
How do you negotiate house prices with an agent?
Our 7 tips for a successful house price negotiation are:
- Understand how much you can borrow
- Get a pre-approval
- Research the house price of the property you are after
- Know the market
- Gather information about potential leverage points
- Offer value through contract terms
- Seamlessly navigate the aftermath
Our Rise High team is always happy to help and support you through this exciting journey! Whether you are just getting started and looking to build a plan to homeownership, or looking to improve your knowledge as you grow your property portfolio, our experienced brokers welcome any questions you may have and would love to work with you. Simply, get in touch today!