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There’s a lot of money at stake when you buy a house, so you need to negotiate to make sure you get a good deal.
How to negotiate a good deal
1. Sign the contract first
But – and this is important – it must be a conditional contract. That means you can cancel the contract, but the seller can’t (at least not for a period of time, such as 14 days). This increases your bargaining power. It means you have the legal right to buy the property for an agreed price and the current owner can’t sell the property to someone else. Just make sure your contract has a Due Diligence or “Right to Cancel” clause so you can still get out of the contract. With this in place, it’s time to negotiate.
2. Ask for a price reduction
As the saying goes: If you don’t ask, you don’t get. But not to worry, you don’t have to call the agent and have a hard conversation. At this point, have the conversation through your lawyer. Say something like, “I am happy to go unconditional if I get a $X price reduction.” This makes the deal sound solid. The seller starts to think, “Maybe I should lower the price. That way, I get a sale. If I say no, I need to find another buyer again.”
3. Give your reasons
If you ask for a discount without any reason, they’ll probably say no. But if you have got a building report that says some things are wrong with the property, you can use that as a reason. You can also research what similar properties have sold for. If you see that similar properties sell for less, use this as evidence for your price reduction. Most of this data is available on Homes.co.nz and OneRoof.
4. Ask for other things
Even if you can’t negotiate a scorching-hot price, there may be other things that are valuable to you, like the seller leaving certain appliances or furniture, or a longer settlement timeline.
5. Be ready to walk away
Finally, you can’t negotiate unless you’re prepared to walk away. If you can’t walk away, you’ll constantly second-guess yourself. Remember, there will always be other deals!
Is now a good time to buy?
The property market continuously changes. Property prices fell 17.8 percent from their peak in November 2021 before they bottomed out in May 2023. That’s the largest fall since records began back in 1992! So you might have a lot of questions: Should I sell? Should I wait? Should I buy? Should I invest? The right decision will depend on your circumstances and what you’re trying to achieve. Here are some examples…
Should I sell?
Property prices have fallen and if you want to upgrade your home, it’s best to generally do it when prices are down.
For example: Sandra and Steve’s house is worth $500,000 and the house they want to buy is worth $1 million. So selling their house and buying their dream home currently costs an extra $500,000.
But what happens if they wait and house prices go up 20 percent over the next five years? Their house is then worth $600,000… but their dream home now costs $1.2 million, therefore upgrading their home now costs an extra $600,000.
That’s why it might make sense for Sandra and Steve to upgrade their home now rather than wait. However, if you want to downsize, it probably makes sense to wait until house prices recover.
Should I wait?
Jo is an investor who owns a property in Auckland. He’s seeing a lot of townhouses going up and he’s thinking about selling his house to a developer. Jo thought this would get him a premium price, but in this case, it makes sense to wait.
Why? Property prices have only just bottomed out and they will likely recover over the next few years. If he sells now, he’s probably selling near the bottom of the market.
On top of that, his target market is developers, but developers aren’t building like they were a few years ago. If Jo can wait for house prices and the construction industry to recover, he may get a better price.
Should I buy?
First-home buyers are making the most of the bottom of the market – they’re buying the highest proportion of houses they ever have.
According to property data provider CoreLogic, more than one in four houses are being purchased by first-home buyers. And in a quieter market, fewer sellers choose to go to auction, which tends to be good for first-home buyers who generally don’t like spending thousands on building inspections and legal fees before bidding.
Should I invest?
Interest rates are high. If you buy an investment property, the rent likely won’t cover all the costs, so you’ll need to top it up with your own money. Depending on what you buy, this can cost a few hundred dollars a week.
If you can afford the top-up, it could be a good time to invest.
For more investment tips, read our article on expert investing advice.
Andrew and Ed are the faces of Opes Partners and hosts of The Property Academy Podcast.
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