Buying guide
How to negotiate when buying a house
Get a better price for property
When buying a property you’ll have an ideal price in mind and the seller will too. Negotiating is the art of bridging the gap between those two prices to meet somewhere in the middle – do it well and you could save tens of thousands of dollars (or more).
To help you get it right we’ve put together a guide covering how to negotiate when buying a house.
Show your interest right away
You’ve got to be in it to win it. So, if you like the look of a property, ask the agent or vendor right away to let you know if another offer has been made. That way, the property won’t sell without your knowledge, and if an offer is made you’ll get the chance to sit at the table and negotiate.
Do your homework
They say knowledge is power, but when it comes to buying a house, knowledge is cash. So learn as much as you possibly can before you make an offer:
Research what’s going on in the market through industry news, statistics and talking to real estate agents.
Take a close look at what comparable properties are selling for on Homes.co.nz by Trade Me Property.
Ask questions about why the seller is selling, how long the property has been on the market, and whether there have been any other offers. Sellers who need to sell may be willing to accept a lower price – and tailoring your offer to suit them will make it more appealing.
It’s also worth asking the real estate agent about the minimum selling price the vendor would accept. They shouldn’t tell you, but some might. If they won’t share an exact figure you may be able to get a price indication by asking what price feedback has been from other interested parties.
Remember the agent’s working for the seller
Good agents are great with people. They might be very convincing, but remember – the vendor is paying them and they’re working in the vendor’s interests, not yours. Keep this in mind and don’t rely on the agent for all your information. Get independent advice from professionals you can trust.
Get ready in advance
Sometimes, getting a good deal on a property isn’t about negotiating, it’s about making the first offer. So, before you start house hunting get all your ducks in a row. Speak to a mortgage broker to get finance pre approval, line up a property lawyer to help you make an offer and speak to a building inspector so that they’re ready to go.
If you’re able to act quickly you may be able to make an offer before other buyers do. Being the only offer puts you in a stronger position to negotiate, as you won’t be competing against other buyers.
Make your offer strategically
Limit your conditions
Generally speaking, vendors and real estate agents prefer ‘clean offers’. In other words if you can make a cash unconditional offer they’ll much prefer that to the same offer that’s conditional on you selling your home, finance and building inspection. They may even accept an offer at a lower level if it has fewer conditions.
With all that said, it’s important to be careful. Always do your due diligence and seek advice from your mortgage broker, insurance company, building inspectors and other professionals before you make an unconditional offer (and don’t do it if you’re not sure!).
Be flexible
If you’re unable to make an unconditional offer it could help to simply ask what the vendor wants. They may value a longer settlement, or a larger deposit and if you can give them what they’re after they may be more likely to accept your offer.
Think about your offer amount carefully
Your first offer is the starting point for negotiation so think carefully before you make it. You don’t want to offer too little and insult or annoy the vendor, and you certainly don’t want to go too high and risk overpaying.
A better idea is to make your offer $40,000 to $50,000 under the maximum you’d be willing to pay for the property. If the seller is in a rush to sell, or the property has been on the market for a while, you could try going even lower.
Back your offer up with facts
It helps if vendors and agents don’t think that you’ve plucked a number out of thin air. So back your offer up with relevant facts. For example, you could send it with a list of recent comparable sales and explain how you think the property compares to them. You could also explain that fixing X, Y and Z problems with the home will cost, which has been reflected in your offer amount.
Go up in small increments
In an ideal world, your first offer would be accepted, but it’s more likely that the vendor will come back with a counter offer. After they make this counter they’ll be expecting you to increase your offer – but whether you do or not is completely up to you. In these situations, it’s often best to go up in small increments of, say, $5,000, for example.
At this stage, it’s worth explaining your financial position, particularly if you can’t afford a higher offer. If the vendor thinks you’re at your limit they may accept your offer to avoid scaring you off.
Tailor your offer to the situation
If the vendor has multiple offers already you won’t be in a strong position to negotiate, so it’s usually best to put your best offer forward first. If the vendor has no offers, you might have a little wiggle room, allowing you to come in a little lower and negotiate.
Read more about negotiating during multi-offer situations.
There's an art to negotiating - mastering it could save you thousands.
Get a little personal
It’s important to remember that the vendor is a human being. While money is usually a person’s main motivation when selling a home, they might also care about your story and what their property is going to be used for in future. They may consider your offer more seriously if you share a little bit about yourself (especially if they’ve been living there a long time, or it’s a family home). For example, if you're a young family buying their first home to raise your little one, that may sway a vendor.
Be willing to walk away
It’s easier said than done, but it’s important not to get emotional when negotiating to buy a property. Look at the facts to determine what the property is worth, and set a maximum amount you’d be willing to pay, then don’t exceed that amount under any circumstances. You need to be willing to walk away if you can’t achieve a price you’re happy with – this gives you power in negotiation (and helps you avoid overpaying). Remember, even though the property you’re looking at may seem ideal, there will be others.
DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute an advice service. The article is only intended to provide general information about negotiating to buy a house in New Zealand. Nothing in this article constitutes a recommendation that any type of property is suitable for any specific person. We cannot assess anything about your personal circumstances, your finances, or your goals and objectives, all of which are unique to you. Before making decisions about property, we highly recommend you seek professional advice.
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