Do you want to buy a house in 2024 but need to figure out how to negotiate the house price with a real estate agent? In this guide, we will give you negotiation tips for buying a property, and the best part is that everything here applies to buying a house in 2024. You don’t need to worry about reading out-of-date stuff.
If you use these tips, you might save up to 5% to 10% on the price of your next property purchase.
Here at Hunter Galloway, we have helped over 1700 customers negotiate 5-10% off their first home purchase price and arranged awesome home loans for them! If you want to know what’s possible when you learn negotiation tactics from the right tactics, then this article is for you.
Let’s dive in!
Watch: How To Negotiate Buying A House The Right Way
How To Negotiate The House Price With A Real Estate Agent
1. Negotiation Fundamentals
As former FBI Hostage Negotiator Chris Voss says, our life is a series of negotiations.
You negotiate with your kids when you’re trying to convince them it’s bedtime and, no, they can’t stay up and watch another episode of Bluey. You negotiate with your employer when trying to get a pay rise.
Whether you know it or not, you already have a lot of negotiation experience.
Making an offer on a house is just another negotiation—except it’s bigger.
If you’re new to buying a house, the resources below will help you get the basics down before we dive into the advanced strategies later in this guide.
How negotiation works
Negotiation is about finding a meeting point between the price 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?
Chris Voss covers a range of negotiation techniques in his book Never Split the Difference.
The one we find works best for us when you want to negotiate the house price with a real estate agent is mirroring. Mirroring is repeating the keywords used by the Real Estate agent. This shows that you are actively listening, which builds rapport and helps you get more information from the agent.
2. Know Your Budget
Before you even start negotiating, you need to be crystal clear about your budget. There are 2 steps to do that:
First, consider your maximum borrowing capacity and expected repayments. This will help you choose a figure you would be comfortable spending. That’s your initial budget.
Next, determine the absolute maximum you’d ever want to spend. That’s your ‘walk-away price’. Basically, if the house costs more than your walk-away price, walk away and move on to the next property.
The difference between your initial budget and the walk-away price is your wriggle room during negotiations. Of course, you can always go lower than your initial budget, but avoid going higher than your walk-away price.
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. Get Your Pre-approval In Order
Are pre-approvals still important in 2024? Absolutely! In fact, over 90% of the homebuyers we helped in the last 12 months secured their first home after getting a pre-approval.
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. It is a basic loan approval but is usually subject to further conditions, like the bank double-checking your payslips, receiving a satisfactory valuation, and credit approval.
When you start negotiating the house price, you want complete confidence in your home loan and finances. You want to know the maximum amount you can afford.
What makes pre-approval reliable (or not)?
Not all banks are the same when it comes to assessing a pre-approval home loan. Some lenders only do a credit check and say you are pre-approved without looking at information like your payslips, bank statements or savings history. These on-the-spot pre-approvals can increase your likelihood of being declined after pre-approval.
Here at Hunter Galloway, we can help you with reliable pre-approvals. Get in touch with us. Once your pre-approval is in place, you can move on to the next stage.
4. House Price Research
House price research is a crucial part of the negotiation process. You can’t negotiate effectively without knowing how much the property is actually worth. You’ll do this by comparing recent sales within the area. Such comparisons provide valuable Market insights, allowing you to commence negotiations with a clear understanding of what the property is worth.
You want to head on over to either real estate.com.au or domain and search by recent sales in the area. Be sure to only look at properties that are comparable to the property you’re interested in buying. This method gives you an idea of the asking prices for properties that are similar to yours.
But how do you work out what a property is actually worth? How do you make sure you are getting the BEST deal on this house? You have to know the market trends, which we cover in the next section.
5. Know The Current Market Trends
Your next step is to find out what market you’re in, and you’ll do this by heading over to Heron Tod White’s property clock. While this might not provide specific insights into the particular suburb you’re eyeing, it’ll offer a general understanding of the prevailing trends in your market area. By coupling this with regular visits to various open homes and becoming well-versed in the suburb you’re interested in, you’ll get a comprehensive perspective on the current dynamics and trends.
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 sold on the market do not have a hard and fast set price like a loaf of bread in a supermarket.
So, recognising that the advertised price is NOT the final sale price will help you negotiate the house price with a real estate agent. A useful figure you can use here is something called ‘vendor discounting.’ Vendor discounting is the difference between what a property is originally listed at and how much it sells for. It is usually listed as a percentage. For example, if a property was listed for $500,000 but eventually sold for $450,000, the vendor discount is 9%.
Look at vendor discounting in your area. If people are giving bigger discounts, you can save 10% off the bat and offer a lot lower than the list price. If people are giving fewer discounts, it means it’s quite a brisk market, and you might need to offer exactly what they want.
If you’re in a seller’s market, it’s wise to be realistic from the start since sellers often have various options at their disposal. However, if you’re in a buyer’s market, you’re in the driver’s seat and may consider starting your negotiations 10 to 15% below the perceived market value.
In Brisbane, vendor discounting is currently at -3.0%, which means there is very little wriggle room in the prices.
So, realise that the price your future home is being advertised for isn’t necessarily the price you will need to pay!
6. Know The Seller's Motivations
Knowledge is power when you negotiate the house price with a real estate agent. Every seller has a distinct reason for putting their property on the market. It’s essential to recognise that the motivations behind each will vary. By understanding why the vendor is selling, you can tailor our approach and negotiate more effectively.
Find out if the seller has been caught up in any of the three Ds of property—death, divorce, or desire to move. This will also help you in your negotiation.
- Death. If there was a death in the seller’s family, they might want to move quickly. This means you may have a chance to offer under the list price. You may also put in some competitive terms, like a shorter settlement period, enabling you to secure the property for a lower price.
- Divorce. Sometimes, when people get divorced and have to share the assets, they may opt to sell the property quickly and split the proceeds. But sometimes divorces can be messy, and bitterness can slow down the process. So, bear that in mind when negotiating.
- Desire to move. If, for example, the seller has bought another house and is pushed for time because they are trying to juggle debt, you could use a shorter settlement period as a sweetener to 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, non-threatening questions that lead with “What” and “How. “
An advanced technique is to ask the same question in three different ways:
- What are the sellers doing after they move out?
- What are the vendor’s 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 about the seller’s motivation that can help your negotiations.
Questions to ask the Real Estate Agent:
- What are the vendor’s reasons for selling the property?
- How long has the property been for sale?
- What was the original asking price?
- How negotiable are the sellers on price?
- What do you think is the lower price they are willing to accept?
Consider the real estate agent's motivations.
A good real estate agent will work hard for the seller to get the best possible price. So, you must 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:
- Do they want to be able to sell the property at the best price?
- Do they want to be able to sell the property in the shortest time frame possible?
- Do they want to sell the property before it hits the market so that they don’t even need to do an open inspection?
Knowing the real estate agent’s motivations can help you better position your offer.
Remember, when dealing with Real Estate agents, use open “how” and “what” questions.
7. Do Your Due Diligence
We would consider a building and pest report a non-negotiable aspect of buying a house.
“These reports cost between $400 and $600 and have literally saved me over 5 times from buying complete lemons of properties. When I was buying my home, three houses came back with issues regarding the building and pest report, and I didn’t go ahead with any of them.” Jayden Vecchio, a mortgage broker with Hunter Galloway.
Don’t underestimate how important the building and pest report is. It can be a complete deal breaker.
When you buy an older property, like a Queenslander in Brisbane, it’s common for small problems to exist around it:
- Cracked glass, broken windows
- Wet rot on cabinets in the bathroom and kitchen sink
- Insufficient drainage
However, if the issues are non-structural, like a downpipe with a hole in it, the balcony needs a small fix, or the balustrades need to be reinforced, you can use this to negotiate tens of thousands off the price of the property.
Let’s look at this example…
While it might seem like these are scary problems, after talking with a builder, the buyer found out they would only cost between $2,000 and $3,000 to fix. They used this to negotiate the house price with a real estate agent down by $10,000!
The building & pest report can take 7-8 days to arrange and get back, so it’s best to start looking for someone to help with this sooner rather than later.
What other things should I look for?
Also, consider things like flight paths, school catchments, or ongoing disputes with neighbours, as they will impact your negotiation.
Again, do your due diligence…
Read More: Best suburbs in Brisbane
8. Test The Waters
If you’re in a seller’s market, you’ll likely skip this step; otherwise, consider making an informal offer. It’s best to do this by email, thus ensuring you receive a response.
You might email the agent asking whether or not the seller would entertain a lowball offer with terms that you believe may be appealing to the seller. This approach is more about gauging the seller’s receptiveness. The primary objective here is to begin a dialogue, so be sure your offer isn’t completely unrealistic. The general rule of thumb is to be within 10 to 15% of the market value.
9. Offer Amazing 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. This section will show you specific steps you can use to master contract terms. No law degree is required!
Your contract includes terms around finance, settlement building and pest. Sharpening your contract terms as much as possible will ensure that you are not just competing on price. In Brisbane, we find the fewer days for finance, building and pest and settlement, the more competitive your offer will be!
- Finance. Most people are putting in anywhere from 14 to 21 days for finance. However, if you’re competing with other people or putting down similar offers, change that to 7 days. But before you do that, ensure you’ve got your pre-approval in place and that you’re working with a broker that can deliver. Changing finance to 7 days will mean you might get that property at a slightly lower market value than putting down 14 to 21 days. Our experience is that even if you put 5 days to finance and need a day’s extension, a lot of vendors aren’t going to rip up your contract and say no. They’ll extend you for an extra day.
- Settlement. The most common settlement period is 30 days. But know what settlement period works for your seller. Some sellers want a quick settlement. Others are looking for an extended settlement to give them more time to find a new home or avoid temporary accommodation while looking for the next property to buy. If you know the seller’s time motivations, you can adapt your offer to fit their requirements. You might also be able to get a slightly lower price and still get the offer accepted.
- Building and pest. You can reduce your building and pest to 7 days, and it might actually help your offer stand out. If you’re thinking of including a building and pest clause, aim to expedite this process. While many opt for a 7 or even 14-day period, consider shortening this to 2 or 3 days. This just gives a seller one less thing to worry about.
So remember to put concrete terms in your contract that will see you win that property and get it at a good price.
10. Make An Offer
When you’re ready, make your offer in writing. A verbal offer may be accepted, but there’s no guarantee the seller will honour it. Making an offer in writing is a sign that you’re serious. Keep your offer short and to the point.
You might be surprised to know you do not need to sign a contract of sale to make an offer on a property. We have had offers accepted on a house in writing via 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 to make an offer is:
- Purchasing Entity: Your full legal name, including middle names.
- Price.
- Deposit (remember, the deposit is split into 2 parts.)
- Finance and building and pest terms.
- Settlement Dates.
- Lawyer details.
When making your offer, use precise non-round numbers. For example, an offer of $553,500 is better than an offer of $550,000. Opting for uneven numbers can give the impression that you’ve stretched your budget to its limits and gives a seller reason to pause before replying to your offer. This is because most people think in round numbers, and a slightly higher offer gives the number more credibility and weight, which might win you the deal.
What to do in a multiple-offer situation?
You might find yourself in a situation with multiple offers on the property. It can feel a bit stressful, but there’s nothing to worry about.
Stick to your plan.
Knowing that other people are making offers on the property might put you under pressure. Avoid getting too wrapped up in what the real estate agent tells you. Trust your plan and stick to it.
If you are unsure, ask the real estate agent how they’ll deal with the multiple offers. Also, ask the agent if the other offers are enough to buy the property. They will definitely not disclose the other offers on the table, but they might tell you if any other currently available offers are acceptable to the seller.
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 it is usually the second step in the negotiation after you’ve made your initial offer by email.
If you need help filling out the contract of sale, check out our guide here.
Read more: Signed a contract of sale – 5 simple steps to settlement.
10. Prepare Your Counteroffer
This is the point where lots of first-home buyers get disheartened…
The Real Estate agent will call you and say that the seller has reviewed the offer and not accepted it – but has given you a counter.
In reality, you should have been thinking about your counteroffer strategy before making an initial offer. There is always a good chance that the real estate agent will come back to you with a counteroffer from the seller, and if you’re not ready to react quickly, you might miss out on the window of opportunity to give your counteroffer.
If you don’t get the counteroffer, you might be slightly disappointed, but it’s actually good news. It means that the seller might be interested in your offer, which, in turn, means you’re in with a chance to win the property.
So, what do you do when you get a counteroffer?
Now, this is the point where you can use something called the Ackerman Bargaining Technique—another one from our friendly FBI negotiator, Chris Voss. Basically, your initial offer should have been below the asking price and below your target price.
If the counteroffer is slightly higher than your original offer but still well below your walk-away price, just accept it. Remember, you’re here to buy a house, not to get the rock-bottom price.
If the counteroffer is much higher than you’re comfortable with, you can also give a counteroffer. For example, you might offer to split the difference between your original offer and the counter from the seller. If they still don’t accept this, you can increase your offer or throw in a non-monetary item like offering to decrease or increase the settlement time, finance and, building and pest.
Remember to try and make it a win-win for all parties involved. The best outcome of a negotiation is not when one party completely dominates the other and comes out on top. The best outcome is when both sides of the table feel like they’ve won.
There is a long time period between once the contract is accepted and when you get the keys. So, if you force the seller to accept a lower offer than they wanted, they have plenty of ways to get back at you with their frustration. Don’t get caught up in your ego’s need to dominate the other party. If this is the right house for you, does it really matter in the grand scheme of things if you pay an extra $5,000 for it?
12. Be Ready To Walk Away
It’s essential to approach property negotiations with realistic expectations. Understand that you might not succeed on your first, second, or even third attempt. It might take you some time before finding a winner. Therefore, it’s critical to understand when it’s time to step back and potentially walk away from a deal if the negotiation is not going your way.
It might have taken you weeks of hard work to reach this point, and if your offer is rejected, you might be tempted to go above your walkway price because of all the work you have put in – Don’t.
As the saying goes in Real Estate, ‘Money is made when you buy, not when you sell. ‘ In other words, the price you pay for the property is the main factor in determining how much profit you make later. Walking away from a bad deal will put you in a much stronger position and help you avoid paying too much for the home.
Property hunting can be likened to sitting at a busy bus stop. Even if you miss an opportunity, there’s always one around the corner.
Read More: Real estate agents are not your friend.
Bonus: Get insurance right away
Many people aren’t aware, but you must arrange Home & Contents Insurance from the date you sign the Contract of Sale!
In Queensland, it is common for the Contract of Sale to specify that insurance is the purchaser’s responsibility. So, if you are buying property in Queensland, you need to get insurance from 5 pm the next business day after signing a contract of sale. However, if it’s a strata apartment, the Owners Corporation might have insured the building.
Your bank or lender will want proof that the property has insurance, so it’s best to get it immediately because you will need it eventually. Home insurance is important because it covers you for any loss or damage to the building.
Bonus: Jane's story - How To Deal With A Dodgy Real Estate Agent
Jane was in the process of buying a property in Queensland. We’d helped her get a pre-approval together. The agent informed her that she needed to submit her offer by 9 am on Sunday, which is pretty common at the moment.
Jane had only just gotten her pre-approval, was a little bit green, and didn’t understand how buying a property works. So, she thought she would go in and offer a bit lower than she should. When she made her offer, she was informed that another buyer was interested in the property, and the agent hinted at the other offer’s conditions and the price the other person had offered.
This initiated a bidding war, during which Jane increased her offer and tried to trim down some of her terms. So, she made her finance from 14 to 7 days and her building and pest from 14 to 7 days. Eventually, it got pretty stressful because it went back and forth, with the agent asking Jane to increase her offer. Later, the agent returned and said to go a little further, and it was back and forth all day that Sunday.
Jane was beginning to feel a bit pressured and flustered. Then she thought this was probably not right. Aren’t there meant to be multiple offer forms I’m supposed to sign? Ultimately, Jane confronted the agent and said she believed their behaviour was illegal.
The agent claimed they were merely following the seller’s instructions, but Jane argued that the instructions were illegal and that the agent should know better. Now, in Queensland, when there are multiple offers, a form needs to be signed beforehand.
We are seeing this across Australia, and in some markets like Perth, it’s even crazier. So, we will give you three tips to prevent what happened to Jane from happening to you.
Understand the market dynamics.
As we mentioned before, the market is fluid and changes a lot – even during a single year. You’ve got to understand whether you are in a buyer’s or seller’s market. In a buyer’s market, the sellers sell at a discount, and you can lowball your offer.
In Jane’s situation, she didn’t understand that even though we’d seen a 4% rise in the interest rates, she was actually in a seller’s market. She didn’t realise there was a lot of competition in the area for the specific property she was looking at, and therefore, she found herself in a bidding war. If you are struggling with your emotions and understanding the marketplace, this is where a buyer’s agent can be handy.
Understand the agent's role.
The agent’s job is to sell the property on behalf of the vendor or the seller for the highest amount possible. You need to understand when you’re dealing with an agent, you’re basically dealing with an enemy spy, so don’t give too much away. They’re not there to help you. They’re not there to hold your hand. Unfortunately, the agent is there to sell the property to whoever will give them the most money. They just want to get a sale and move on to the next commission check.
Jane should have asked the real estate agent questions like:
- Why is the vendor looking at selling?
- How long has the property been on the market?
Getting the agent talking is always good because sometimes they might let some crucial information slip.
Learn from experience.
The more you get out there, the more places you see, the more you’ll understand what you like and don’t like. It’s unlikely you’ll walk through the first open home inspection and that will be the home you’ll buy.
On average, it takes people 3 to 6 months from when they’ve got their pre-approvals to eventually find the right home. You might find the right home, but there could be issues with asbestos and building pests, and you have to cancel the contract and start the process all over again.
It can be pretty heartbreaking, and you can feel dejected, but, like many things in life, it’s all about the experience and getting out there again and again until you find the right property…
Key Takeaways
We have covered most of the mistakes to avoid in order to successfully negotiate the house price with a real estate agen, but to summarise:
- Remember, most homes are discounted, so the price you see advertised is not necessarily the final price you will pay.
- 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 approved for finance 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!
- Remember that patience is pivotal. Good negotiation requires time. Invest in building rapport with the agent upfront, even if it’s hard to do so at first.
- Stay objective. Emotions can cloud judgments, and if you sense your emotions are dominating your decisions, it’s wise to take a step back and regroup. While this is hard, it’ll ensure you get the best outcome.
These 6 tips alone will save you thousands.
Next Steps And Getting Your Home Loan.
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 at no cost to you.
Our team at Hunter Galloway is here to help you buy a home in Australia. 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.
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