By Cam McLellan
Today I want to talk to you about negotiating like a pro. The fact of the matter is you will probably buy a primary place of residence three or four times during your life. Most people buy one every seven to 10 years. There are a few different ways you can buy, so I’ll touch on auctions and cover the other main way: the closed envelope offer or expressions of interest (EOI) by set date, which can be really annoying for a buyer.
In different markets around the country at different times, we have seen a range of strategies being employed by sellers, to try and get the best price for their vendor. In a booming market, like Melbourne right now, every sales person should be putting houses to auction because 50 people turn up, it’s a heated environment, with competitive bidding, people get emotional and the price goes up.
An EOI campaign asks for offers by a set date; so what they will say is, “we have this property on the market and we need all offers submitted by September 12, at 5.30, in our office. We will review them and the highest bidder will win the property”.
This is a lie because what they really do is ring the top five and say, “you’re pretty close, are you sure you can’t do a bit more?”
In a freezing cold market they usually go, “look, there’s been a lot of interest in this, maybe put an offer forward and I’ll take it to the vendor and see if I can get yours across the line”.
They play the buddy system but really there’s an agent working over there, with someone else, pretending to be their buddy and trying to basically get anything on the table. They are trying to get in any offer and then work someone up from there.
There is also the old, ‘off market’ campaign. So, as developer we’re actively trying to be buy it off market, which means we’re approaching vendors by strategically pin pointing areas. We’re knocking on doors, sending letters and we’re talking to them directly before a property hits the market, to decrease the competition.
Some agents have been emailing me their whole database lately saying, “exclusive off market campaign,” but their board is out the front of the site; it is not off market.
So there’s off market, where you knock on someone’s door and say, “can I buy your property?”
There’s a pre-market, where as a developer, you get a lot of agents going, “look, I’m about to list this one, it’s not on the internet yet, I haven’t talked to any other developers, do you want to put in an offer?”
On market is basically emailing everyone, a property is on the internet, boards are up and there are marketing dollars behind it.
Going back to closed envelope sales: there are a couple of ways to approach these. As a potential purchaser, if the offer’s closing at 5 o’clock, my only strategy is basically to see if I can drag any sort of information out of the agent about what sort of money and terms they’re looking for, to get it across the line. If it’s closing at 5, be at the vendor’s house or agent’s office at 5 and submit your offer at the last minute.
My business partner Al Lewison and I learnt early on that there are listing agents and non-listing agents working for every local agency. The listing agent wants to sell the property himself but if you are dealing with a non-listing agent, you need to be creative. The reason you need to turn up at the end of the day and sign the envelope is so that the listing agent doesn’t have an opportunity to go back to another purchaser and say, “jack your offer up or you will miss out”.
If the listing agent sells the property himself, he gets the listing, the property, plus the buyer and he gets 100 per cent of the commission. If a non-listing agent gets in on the deal, he takes some of the commission. So as a potential purchaser, leave offers until the last minute and try to deal with the listing agent.
If you are the vendor and you want to sell by closed envelope, you will want to get the price up. You should be telling the agent to get on the phone to the top three, five or 10 potential buyers and make sure they understand that they’re close but no one is quite there. You will probably have a few rounds of this. An even scarier scenario is, getting the three potential purchasers in three of the agent’s offices and basically doing a silent auction.
The sad thing is if you’re the potential buyer and you’re stuck there doing that, you’re thinking someone else is bidding against you but really you have no idea if there are any other offers at all.
You need to work out your strategy for getting the best price if you are selling. Remember to choose the best market time and your target audience and make the agents work hard for you.