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Negotiating the Price:
an Owner-Seller's Perspective
by Graeme Daniel |
| Fortunately for Australians in the business of buying and selling property, the process of negotiating a fair price is generally a low-key affair, ideally achieved through amicable discussion between vendors and buyers over a cup of tea and a biscuit, or possibly several cold beers and a bag of chips. However, although some people seem to have a gift for negotiation, it doesn't come naturally to all of us - indeed, in our culture, some people are inclined to pay the asking price in order to avoid the possible conflicts involved in arguing for a better deal. In these cases, some token to-ing and fro-ing may be acceptable by way of demonstrating that we aren't absolute pushovers, but serious haggling doesn't seem to be worth the risk of revealing our inadequate negotiating skills.
It is this common aversion to serious negotiation that third party agents exploit in their bid to sell services and expertise; their promises to negotiate the best price for sellers from a steady stream of cashed-up buyers can be very tempting. Unfortunately their primary interest lies in achieving a quick sale in the interests of turnover, rather than in optimising the seller's price at sale.
Agents do not need to be good at negotiation, and many aren't.
However we feel about doing our own negotiating, there are many good reasons for giving it a go - most of them may be measured in dollars.
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The Stakeholders: Vendors, Agents and Buyers.
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| AGENTS. |
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As we don't intend to involve agents in our dealings, there's not much point in spending much time here; however, it's always handy to be able to answer the "Why not...?" question.
There are a few different sorts of agents:
Real Estate Agents are authorised by owners to present property to the market with a view to achieving a sale - they may claim negotiating expertise, but cannot realistically fulfill promises to get the best available price, and are not obliged to work with this as a primary objective.
| | Buyer's Agents, who usually work for a fee as confidential finder/negotiators on the buyer's behalf, but also take a share of the listing agent's commission. |  |
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Dual Agents are also legal in some places, including Australia - insofar as they represent both seller and buyer in a given transaction, there's a real conflict of interest here, and ethical considerations are tricky. This not a preferred option. |
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* Points against the use of agents:
Agents present themselves as indispensible to the process of buying and selling property - this isn't true.
They may claim that buyers don't like face-to-face dealings with owners - an illfounded generalisation.
They tend to push vendors to take less, in order to accelerate their turnover rate.
They cost a lot of money. |
| BUYERS. |
If they have the choice, buyers often prefer to deal directly with vendors because it's quicker and less complicated.
* Best offers often come from:
the first buyers to inspect.
buyers who want to live in the house (as opposed to bargainhunting investors, who are not as interested in a property's details, or as committed to outcomes, and will negotiate hard for the lowest possible price, or withdraw).
buyers desperate to buy - this may be linked to the state of the market, personal circumstances, or even just an irrational desire to win.
buyers who show little initial interest, but come back for another look. |
| OWNER-SELLERS. |
As a vendor taking the 'For Sale by Owner' option, you enjoy these advantages:
You have an intimate knowledge of the property for sale.
You are directly accessible to potential buyers, and can easily maintain communication throughout dealings with them.
You have total control over what information buyers receive (motives for selling and other personal issues are sensitive items over which you may wish to exercise discretion).
You are focused on getting the best outcome in just one transaction.
You are in control of the negotiating process, and ultimately responsible for outcomes.
You are in the best position to advance your own best interests.
You avoid the stressful conflicts and hostilities which often develop during the course of a vendor-agent relationship.
You feel better at the end of the day, because you did it your way.
You save the costs of agents' commission and promotional services.
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| However, there are also downsides not easily ignored; at the most basic level, the owner-seller is at an emotional disadvantage - after all, the idea of selling the family home probably entails some emotional baggage, which should not be allowed to inflate pricing expectations or colour judgment in negotiation. |
And then there's the process of negotiation itself - you may feel that you've had no prior experience in this, though in reality past daily experiences and observations have already provided plenty of real-life examples to draw upon. Maybe some of these ideas just need clarification and a little order to pull them into gear.It can be useful to look at the negotiating process in terms of:
Power Factors - developing strong negotiating positions.
Preparation - things to do before negotiation.
Pricing - the asking price; the role of price in negotiation.
Terms and Conditions - beyond the price.
Knowing the Buyer.
Communication - no negotiation can survive without it.
Questions - to ask the buyer, and some to expect in return.
Strategy - a few plans for action.
Tactical considerations - dealing with the ups-and-downs.
Concessions - may be necessary for a successful conclusion.
Implementation - offers and contracts.
Patience - widely held to be a virtue, but... |
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