Negotiation advise

[sonnic]

Hi,

Apologies if this kind of situation has been covered before.

I am hoping to get some advice on our current potential PPOR purchase.

Background:
- House has been on the market quite a long time, is vacant and needs renovation
- Price has been reduced a few times since we first saw it on re.com
- Current price range is 780k - 820k
- We made an offer at 700k and then 4 days later received a counter at 770k
- The next day we made a final offer of 725k with conditions (building, pest and finance). Two days later we were told the vendor took this to their solicitor
- Five days later (after chasing up with the agent again) the agent advised today that the vendor's bottom price is $750k

This whole process has taken nearly two weeks. We have to continually chase the agent. It feels as if the agent doesn't want to sell. When I have offered to sign the section 32 they agent says they don't want me to.

We have purchased other properties in the past and have reached the contract signing stage much faster than this.

The vendors are interstate and we wonder if this is the cause of delayed response.

We are open to any suggestions/tips on what we can/should do to get this moving.

 

[The Y-man]

This whole process has taken nearly two weeks. We have to continually chase the agent. It feels as if the agent doesn't want to sell. When I have offered to sign the section 32 they agent says they don't want me to.

Not good - either

• The vendor has instructed no sell
• agent knows you really want it - going to get every $ out of you

I'd bet on the second.

Go silent.
Never chase the agent.
They will call you.
Tell them you are now looking at another propoerty as you are at the limit of what you can offer.

Then again, it's a PPOR - and if it's right for you, pay $750k and enjoy.

The Y-man

 

[sonnic]

Thank-you Y-man.

Ah, yes makes sense. We agree with the second point.

We have a few IPs and have been able to negotiate without emotions in the past. Being a PPOR purchase has certainly blurred things for us.

We have reached our limit, as the reno will cost $$$.

 

[Jake Milne]

I recently entered negotiations for another somersoftian who was experiencing the same delays in purchasing.

The house in question is in Coburg and it passed in at auction. Post auction negotiations failed and for more than two weeks there was no deal in sight.

I came on board to help last Friday and did the following:

1. Establish the vendor's situation:

Why are they selling?
How many parties have interest in the property?
Have they bought another property yet?
Is the property currently tenanted, vacant or owner occupied?
What settlement are they looking for?
What price do they expect to sell for?
​

After understanding the situation a purchaser can make a list of the items they wish to negotiate on or comply with. The more terms you give to the vendor the more attractive the offer will be so it's best to prioritize your wants and negotiate from the least important up.

For example in the above case the vendor wanted a 90 day settlement, where my purchaser wanted 30 days. The vendor wanted $660,000; the purchaser wanted $615,000. The vendor wanted an unconditional offer (no building or finance clauses), our purchaser wanted to get in to do renovations.

2. Make an offer

After establishing what the vendor wants make your offer. Start off with an offer you believe to be fair, with some compromises but leave yourself a nice buffer on each item so they can be leveraged later. You can get verbal agreeance from the REA before offering if you want but most often documenting a contract with a deposit cheque attached is much more powerful.​

3. Push for a response

Show interest, get a counter offer or an indication from the agent as to what's going on. Don't be surprised if they take a while to respond as they'll use your offer to shop around the other buyers. The way you minimize this is to put tight deadlines on your offer such as a 4 hour window.

Make sure you're confident and very firm with the agent. Use lines such as "This is my first, best and last offer. I need you to come back to me by xxxxx with an answer. I'm interested in another property and want to put an offer on that one but I like this one a little bit more, however I can't afford to muck around with time and if I don't have an answer by xxxx we won't be doing business.​

4. Walk away

If you don't get a response or they're mucking you about on price call the agent and let them know "out of respect I want you to know that because your vendor has not given a response or a clear indication of where we can do business I will now be pursuing the alternate property. Please do not call me unless the vendor is prepared to sell.​

5. Be Cool

Leave it for a day or two.​

6. Go back in and negotiate.

Once again, be strong, tell the agent that you want a deal but need the vendor to show that their willing to get there. Get them down in price or terms.​

7. Push, push, push

Keep pushing and negotiating. Stay on the agents heels and explain that you're being pushy as the other property you like is going to auction or has another offer on it. Don't be emotional about it and make it seem like you are happy to walk away. Agree on price, time and terms.​

8. Do the deal

Get your signed 32, or agreeance from the agent and then finish documenting.​

Long story short. After two-three weeks of the agent faffing around directly with my purchaser. I entered in and made an offer for this property in Coburg on Saturday morning. We agreed on a price and the vendor had dropped by $36,000 and we'd gone up $9,000. Settlement date was met in the middle and we included some conditions so the buyer could get quotes beforehand. By Monday night 10:30pm the deal was done.

 

[nicson]

Hi sonic,

I agree with the Y-man.

If there is another buyer the agent will call and try to get you bidding against each other. Play it cool and wait the vendor down. I think 25k is a lot to go up as a buyer but not a lot to go down as a vendor on a prop that has been sitting on the market for years.

Cheers,
nicson.

Ps. Oh, and be good to your Husband...he loves you...

 

[thepeoplesagent]

I’m not going to offer any constructive advice here, so please feel free to skip this post now.

But I just to have a little giggle sometimes. Every time a buyer comes here with their story, everyone gangs up on the vendor and agent. The general consensus between members is to walk away from the sale. Alternatively, the buyer’s agents start circling like a vulture around a dying buffalo.

Meanwhile, in a parallel universe, the vendor in this potential transaction has posted in this forum their side of the story. “Mr & Mrs buyer is offering $25,000 less than our bottom figure, we have already come down $20,000 from our original price, the agent is pressuring us to take the offer”.

Members are up in arms! “The agent doesn’t care what you get, wait for a higher price, stick to your minimum figure, get a different agent, tell the agent to reduce their fee, tell the buyer to go away, you’ll find someone who will pay more, etc.

You know I am right. And if you don’t, you know you’re lying to yourself.

Sonic, if you have read this far, this post was in no way a criticism of your actions. I do wish you the best in your endeavours. But some people are stubborn and being a vendor does not exclude you from this characteristic. Not all offers are accepted, even the good ones.

 

[Jen_PFR]

I have been following this thread with interest, particularly as we're currently negotiating to buy another property ourselves. We've had similar issues with having to chase the agent, etc etc.

The vendors' situation is an interesting one. Two vendors who aren't communicating - at a guess I'd say it's a relationship that's broken down. One of the vendors has been easy for the agent to catch and discuss stuff with; the other one hasn't. The second vendor, in addition, has a number of family and friends 'in their ear' about what they should or shouldn't do or accept in relation to selling.

I do agree with this statement:

But some people are stubborn and being a vendor does not exclude you from this characteristic. Not all offers are accepted, even the good ones.

However sometimes circumstances can force people's hands. For example in our situation, the property was originally advertised for about $20K above the market price. As a result, it's sat on the market, gathering dust, and putting people off from even having a look. I noticed it myself when it first came on the market - I checked it out online, laughed at the price, and noticed it still sitting there every so often when I checked out the area.

The asking price dropped a couple of weeks ago. Funnily enough, it was only a couple of days after I said to my other half that given the time it had been on the market, and that the price was obviously a deterrent, we should go in with a lowball offer. Anyhow, the price dropped and we decided to go along and check out the home open. By this point it had been on the market for over two months. Not a long time, but given the way correctly priced stock has been moving in the area, it was definitely 'old stock' by this point.

Also, the property has been untenanted the entire time. Great for viewings/home opens, not so good for paying the mortgage.

So yes, we have been moving back and forth with the agent and it looks like we may come to a deal. As much as anything, because the vendors want and need to either get some income from it, or to offload it and cut their losses. We put an offer in slightly under the reduced asking price, with other 'subject to' conditions such as access to paint after finance approval, etc. as well as the usual building/pest etc. We haven't increased the offer despite ongoing discussions with the agent, and at this stage we won't. If it falls through, so be it. There are other properties!

To give him his due, the agent has done his damndest to get a good outcome for the vendors. Last night he came back to us to ask if we would pay rent from when we had early access! We said no and reminded him that it's currently untenanted now, so it's no skin off the vendors' noses if we get in early and paint it.

Anyhow, will be interesting to see how it all falls out. But yes, in a situation like this, the purchasers definitely have the capacity to hold out. Money (or lack thereof) can make a huge difference in terms of the pressure vendors can be under.

Herein endeth the lesson..... props to anyone for reading this far!!

 

[sonnic]

Hi all,

Thanks for all the very good replies. One of the best things about this forum is the various open/honest points of view.

Also, the property has been untenanted the entire time. Great for viewings/home opens, not so good for paying the mortgage.

The property we are considering is also vacant and has been for a long time.

You can get verbal agreeance from the REA before offering if you want but most often documenting a contract with a deposit cheque attached is much more powerful.

The agent won't even accept us putting in a written offer. This has perplexed us.

Members are up in arms! “The agent doesn’t care what you get, wait for a higher price, stick to your minimum figure, get a different agent, tell the agent to reduce their fee, tell the buyer to go away, you’ll find someone who will pay more, etc.

You know I am right. And if you don’t, you know you’re lying to yourself.

Sonic, if you have read this far, this post was in no way a criticism of your actions. I do wish you the best in your endeavours. But some people are stubborn and being a vendor does not exclude you from this characteristic. Not all offers are accepted, even the good ones.

Agree that there is two sides to the story and we can empathise with the vendors. There will be other properties, so for now we are going to wait this out.

 

[Jake Milne]

The agent won't even accept us putting in a written offer. This has perplexed us.

The law states that all offers must be taken to the vendor. So document an offer and if the agent doesn't take it to the vendor then he's broken the law

 

[thepeoplesagent]

The law states that all offers must be taken to the vendor. So document an offer and if the agent doesn't take it to the vendor then he's broken the law

This is true, but not under all circumstances.

A vendor can put in writing that they don’t wish to hear about offers below a certain amount.

I’m going to take a guess here- Apologizes if I am wrong. But I’m thinking the agent suggested “there is no point putting your offer in writing”. That doesn’t mean your offer was not submitted.

I can honestly tell you that I have only had 3 or 4 offers submitted to me in writing in the past decade. It doesn’t make a different to a vendor. If your $20k below the vendors minimum price it doesn’t matter what your write (unless you write it on a page made out of gold).

 

[The Y-man]

I must say when we were selling, the magic word - even if the offer was 10%+ under our minimum asking - was "unconditional"

The Y-man

 

[sonnic]

Hi,

We surprisingly got a call from the agent today, wanting to know our final position as they want to close things today.

Suddenly there are four bidders. The agent said that when a property has been available for a while often bidders all come out at the same time.

So I told him our top price is $725k but we are happy to negotiate on conditions.

He told me that he is writting up paperwork as he feels one of the offers will definately be accepted today. He then said that if for some reason the offer doesn't go through he'll call me back.

On a side note, he told my husband a few weeks back that they had a live offer that looked like being accepted.

So after Christmas we'll start looking at other houses. There is one that we have been watching on the internet - nicer house, better land but a bit futher than we wanted.

 

[Jake Milne]

In other words:

Agent: I have another offer that is better than yours but I am shopping it around to get more money.

You: I have no more money.

Agent: Okay the only way you'll get this deal is if the other person pulls out.


By the way... good decision with looking for other houses, probably the best thing in this scenario

 

[DaveM]

I’m not going to offer any constructive advice here, so please feel free to skip this post now.

Some buyers play games and some agents play games, thats the nature of the property market.

This is not a personal go at you as you appear to be a good agent, however the games and tactics that many representatives of a certain blue logo'd star spangled agency play in western sydney means that I (and other investors here I know) wont even bother going to opens or look at listings by that agency.

I know you have your agency procedures and the expansion of the agency around Sydney shows that certain tactics do work, but things like some of my experiences below really turn people off

- "you have to sign the front page of the contract before we will take your offer to the vendor, if you dont sign and we will recommend to the vendor to take a lower offer even if yours is the highest"

- "we dont take offers to the vendor until we have 3 offers with contracts for them to choose from"

- open events where you have to put offers in envelopes on the day and the top 3-5 offers then get contacted before going to the vendor and have the opportunity to put their "best and final" offer forward and if accepted the contract has to be signed by COB that day leaving no time for legal review

- price ranges of $x - $y where the vendor wont accept anything under $y and the agents make it clear at opens that is the case

 

[railer]

The law states that all offers must be taken to the vendor. So document an offer and if the agent doesn't take it to the vendor then he's broken the law

Jake, which section of which Act states this? In all my searches in the past I have never been able to find this out.

 

[thepeoplesagent]

I know you have your agency procedures and the expansion of the agency around Sydney shows that certain tactics do work, but things like some of my experiences below really turn people off

- "you have to sign the front page of the contract before we will take your offer to the vendor, if you dont sign and we will recommend to the vendor to take a lower offer even if yours is the highest"

- "we dont take offers to the vendor until we have 3 offers with contracts for them to choose from"

- open events where you have to put offers in envelopes on the day and the top 3-5 offers then get contacted before going to the vendor and have the opportunity to put their "best and final" offer forward and if accepted the contract has to be signed by COB that day leaving no time for legal review

- price ranges of $x - $y where the vendor wont accept anything under $y and the agents make it clear at opens that is the case

David I have no idea what you’re talking about.
These tactics are never used in our office. If you have dealt with another franchise that has done this I’m sorry. But the only aspect offices have in common is the logo.

My style= wham bam thankyou ma’am. No mucking around or games. Any agent or vendor who plays these games usually loses buyers. Most genuine offers are accepted and negations don’t take longer than 24 hours. Again, if you want to play these games, you lose momentum. Give a buyer to a reason to buy something else, they probably will.

 

[DaveM]

David I have no idea what you’re talking about.
These tactics are never used in our office. If you have dealt with another franchise that has done this I’m sorry. But the only aspect offices have in common is the logo.

My style= wham bam thankyou ma’am. No mucking around or games. Any agent or vendor who plays these games usually loses buyers. Most genuine offers are accepted and negations don’t take longer than 24 hours. Again, if you want to play these games, you lose momentum. Give a buyer to a reason to buy something else, they probably will.

Thats good to know, I was not sure if this was an operating method across the whole group.

The agency/group in question does the tactics I mentioned at pretty much every encounter I have had with them, so I dont bother with them anymore.

 

[Jacque]

Jake, which section of which Act states this? In all my searches in the past I have never been able to find this out.

Hey Railer

It's actually an obligation on the selling agent (unless the vendor has instructed otherwise in writing for eg: "Don't tell me of any offers unless they're over $$$") under the Rules of Conduct as specified in the Property Stock and Business Agents Regulation 2003. This Regulation operates alongside the PSBAA 2002, which is probably the Act you're referring to. If you take a look at the Dept of Fair Trading site you will find these specific Rules of Conduct, which are specific to certain roles within the real estate industry ie: sales agents, property managers, strata managers, business agents etc.

The specific one you need to read is Rule 22 for Real Estate salespeople:

Rules 22 - 24
22. Principal to be informed of offer
The agent must, unless the principal has instructed to the contrary in writing, inform the principal of all offers of purchase as soon as practicable after receiving the offer up until exchange of contracts has taken place.
If the agent is not going to inform the principal of an offer, the agent must inform the person who made the offer that the offer will not be submitted to the principal.
The agent may inform the principal of an offer orally or in writing and must identify the party by whom the offer is made. If the principal is informed orally, the agent must confirm the information in writing.
This clause does not apply to bids made in the course of an auction.

I hope this helps.

 

[chilliblue]

Jake, which section of which Act states this? In all my searches in the past I have never been able to find this out.

Email the vendors solicitor a copy of the offer as they are definately required to pass on the information