While buyers are calling the shots in today’s market, agents have an opportunity to showcase their skills and expertise to still achieve high prices. Here is how to negotiate strategically.
As buyers gain greater power in the market, agents who can create competition, manage expectations, and negotiate strategically have a key opportunity to protect sale prices and demonstrate their value.
Currently, buyers have been negotiating hard, with new data showing vendor discounting rates surging and sellers beginning to respond to buyers’ pricing concerns.
Cotality’s latest Monthly Housing Chart Pack showed, in the three months to June, the median vendor discount across the combined capitals rose to 3.6 per cent, from 3.0 per cent in the March quarter.
OBrien Real Estate sales agent, Brent Bennett, said to minimise the risk of discounts, agents needed to hold firm on the reserve price and to make clear to buyers the seller wouldn’t accept offers below.
“It’s simply just letting them know that the owner’s made it pretty clear that the offers we are looking for are inside the marketing price that we have advised them,” he told REB.
“There’s a lot of buyers trying to give us an offer $10,000 or $20,000 under, so if we can get that first initial offer inside that price range, they can forget where their starting point is.”
Bennet said he also tried to lift the buyer’s offer a little bit higher from the very beginning to bridge the pricing gap, even if by a small amount.
“If they’re going to give us $650,000, then we kind of say, ‘look, can you go in at $660,000 instead? Maybe that’s a better place to start’.”
While the firm strategy works great with motivated buyers, Bennet said it dwindles as time goes on.
He warned that the length of the campaign would make or break negotiations: the longer properties remained on the market, the lower the selling price.
“A lot of buyers are probably going to be looking at the property in the first two to three weeks, and that’s the timeframe you should sell, to get as much money as you can.”
“When you hit that market, you’ve got to be ready to go, ‘this is what we’re willing to take. But let’s not lose a buyer that’s there because it only gets worse the longer we are on the market.”
Additionally, Bennett stressed the importance of creating a sense of competition and urgency.
“If you have two properties in the same area, agents should encourage buyers to inspect both to be able to create that competition factor. Competition will raise the price naturally, and that’s going to limit the discount.”
“It’s a matter of putting that fear of loss in the buyer – if they don’t put their best foot forward early, there’s potential that they will miss out on this one.”
Similarly, he said many buyers have been seeking practicality and move-in ready homes, with agents having an opportunity to boost value through presentation and staging.
“Buyers currently don’t have money left over to do any of the maintenance or renovations. So if the property is presented right, less work is required, the vendors don’t have to discount much on their price.”
In the current market, Bennett said more buyers were also demanding extra conditions, such as professional cleaning or maintenance, and ensuring there were finance and building clauses in the contracts.
“If the buyer’s terms and conditions aren’t a big issue to your vendor, then it will give you a leeway to be able to try and get the best price possible.”
According to Cotality’s head of research, Gerard Burg, the discounting data reflected the decline in housing demand over the past few quarters as a result of various affordability pressures.
He said that, as a result of a decrease in sales volumes and an increase in stock available, buyers had more power when negotiating with sellers.
“Right now it is a buyer’s market (for the buyers that remain), with plenty of choice of properties and limited competition,” he told REB.
“They are able to take longer to consider their options and have time to negotiate with vendors to secure a better deal, meaning the discounting rate has been moving up,” he told REB.
Burg said there could be potential further hikes in the discount rate in the coming months, but it would depend on how the near-term supply response transpired.
“If we start to see vendors pull properties off the market in larger numbers, this would see another shift in the supply-demand balance. If this happens on a large enough scale, this could reduce some of the discounting pressure.”
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