The majority of buyers are scared off by high asking prices.
They assume that the seller is not serious or is simply looking for a buyer who doesn’t know what they are doing.
And sometimes sellers get lucky and a buyer does come along and pay completely the wrong price for what are often decidedly average properties. I see this almost every week.
So, what should you do when you find a property that you like but it has been mispriced – do you just wait and watch hoping that sanity will prevail?
Well, that is certainly one option but buyers default to this far too early. Wouldn’t it be better to negotiate in a vacuum while other buyers ignore the property & wait for the websites to tell them about a price reduction? Why wait for competition?
So, the first thing you absolutely have to do is work out fair value and then what the property is worth to you. Unfortunately, you will then be tempted to use this in the wrong way:
Once you have established the maximum that you would be willing to pay, you will probably put forward an offer based on all the comparators you have assembled. This will show the sellers and their agent “the facts” which you hope will make them agree to your offer. After all, it is clearly well thought out and rational.
Unfortunately, this logical approach is likely to end in failure almost every time. Why? Because you have waded into the negotiation without establishing:
1. Why is the property so overvalued in the first place?
2. Was it the agent or seller who overvalued it?
3. What are the reasons for selling?
4. What are the sellers’ emotions and views on the sale of the property?
The chances are that you are not going to find out this information from just one or two cursory calls. It is essential that you dig much deeper over several calls and even visits to the property to establish exactly what are the key mental obstacles you need the seller to overcome.
Please note, that you will also learn a lot during the negotiations so it is essential that you ask lots of questions and really listen to the answers – not just the words – but the emotions behind the answers to get a full understanding of the other side.
Now, you may think that this all sounds airy-fairy and pointless. Indeed, you may be asking: how can this approach work if the sellers are going to ignore the comparators?
Well, the problem is that if they have made an illogical decision to reach the guide price, why do you think logic is going to solve the issue? Would it be unfair to say that something else is at play?
I have lost count of the number of people who contact me saying that they have found multiple properties they like but can’t reach an agreement with the sellers. They always assume it is entirely the sellers’ fault. But it takes two sides to negotiate.
If you don’t use tested and proven negotiation strategies and just rely on “facts” you will almost always fail to reach any agreement and certainly won’t achieve the lowest price possible.
Alternatively, you can use a more sophisticated approach that factors in psychology and neuroscience.
I admit, there isn’t a “golden” strategy or tactic that works every time. Indeed, anyone who tells you they win every negotiation is clearly deluded and unaware of quite how many blunders they have made.
I certainly advise clients to walk away from properties because I can’t agree terms that work for us – but you will be more successful and achieve lower prices if you use a less “logical” approach.
And, in case you are wondering, no I don’t issue ultimatum after ultimatum as a way of scaring people into accepting our offers. While they can be effective in limited situations, most of the time they are not the best approach.
So, if you would like to know more about negotiation techniques that are working in the current market, do make contact.
