The below story happened to me around February 2006 – from memory and previous emails hopefully I have all the details correct (even if the details aren’t all correct – I’m sure it will be interesting reading anyway).
Back in February 2006, I found a 2 bedroom unit near Macquarie Uni in Sydney. The view wasn’t great (the view was of the carpark!) but overall the place was OK. With my parents advice I decided to buy it if the price was right.
Negotiation for the unit
Note that there was usually about 2 days between each phone call (i.e . usually after the real estate agent said ‘no’ I said “I’ll think about it” before submitting next offer 2 days later so that he thought all my offers were serious and gave me time to think of next step)
List Price: The unit was listed for sale for $315k (which means the seller probably wanted $300k as real estate agents usually increase the listing price as buyers like to feel they are getting a discount on the list price)
Offer 1: I think I offered $275k first (something ridiculously low – as what is the harm!), agent takes it to the sellers and comes back and says no.
Offer 2: I probably offered $280k, same process as offer 1, calls back and says No (in the call from the real estate he probably said something like “the sellers want a lot higher price than what you are offering” without mentioning a price -because if he said the “sellers want $300k” then I know they might accept less than $300k).
The Serious Offer – Offer 3: I go back few days later and offer $285k – I also state that this is my final offer (you can get burnt doing this but now it is up to the seller to counter offer if they are interested). I had a good feeling I was the only one in negotiation for the unit which is why I was also happy to say it was my final offer.
Counter Offer 1: Real Estate agent calls and says they want $300k but that the Seller will counter offer $290k (this is where you finally know you are getting somewhere – this means the seller knows the counter offer is the MAXIMUM they are going to get and they have accepted this)
Offer 4: Offer $287,500 – halfway between my last offer of $285k and sellers counter of $290k. Seller accepts this.
Keys to negotiation
1. Be happy to walk away (I had to keep telling myself that!)
2. Be the only one negotiating – If there were buyers who offered to pay $300k then seller wouldn’t have agreed to negotiate. A good real estate agent will make you feel like there are other people bidding (whether or not there are is anyones guess! – one trick is you say to real estate agent to bring you the top price and I’ll beat it. – then you don’t beat it you match it).
3. Investment of time can work to your advantage – because I had been in negotiations with the seller for about one and a half weeks at this stage – I might not have needed to increase my counter offer from $285k to $287.5k. They might have accepted $285 rather than say no and start the process all over again (they might have been buying another place at the same time, wanted to sell quickly etc.)
4. You can meet in the middle (After the counter offer I could have stuck to my final offer – but I decided to meet them halfway – so that they feel they have negotiated me up). In a Bryce Courtney book ‘The Potato Factory’ they mention ‘leaving a little salt on the bread’. Leave something in the deal so that the seller feels they aren’t getting ripped off, etc.
Postscript – I DIDN’T END UP BUYING THE UNIT!
After all that effort and all those phone calls…..I didn’t end up buying the unit!
I’ll tell you what happened in the next part of the story in a couple of days.