Remember that famous Jerry Maguire line “you had me at hello”? Well this actually has a lot to do with the art of negotiating and I explore why in this video…
Hi and welcome in this week’s Bush Bite!
We continue our special series on the art and science of negotiation, given the critical importance of your ability to negotiate, especially in the current rapidly rising and hotly contested seller’s market.
Over the last few weeks, we’ve discussed how you need to change your outlook to build rapport by using mirroring and labelling techniques, and to beware of your perceived power position, which you may feel is tipped against you. I also talked about why cash is king. This week we will cover the importance of research and focussing on the right metrics, along with the recognition that negotiation starts at hello.
So based on our previous segments, I now assume that you have the right mindset, that you’ve stacked as much as you can in your favour, including your finances. The next step is to ensure that you research and know the driving negotiation metrics of the area that you’re actually looking to buy into. There are two important metrics that you need to focus on. You need to know what the average days on market are, and what the average vendor discount is in the particular area that you’re looking to buy a property. This is all about determining if prevailing conditions create an environment that’s a buyer’s market, a seller’s market or balanced market. Again, this is about understanding the perceived power position. If there are more sellers and buyers, then it’s a buyer’s market and you have much more leverage and power in the negotiation. If it’s a balanced market, then there’s an equal spread of buyers and sellers. And if it’s a seller’s market where there are few sellers and many buyers competing for a property, you need to work much harder, faster and smarter and potentially have to pay more for the property.
This is exactly the situation that the most popular parts of Australia are in right now. So how do you use these two metrics? If properties have been on the market for a long time, as recorded in days on market, you know you’ve got good leverage in the negotiation. If you can see the market is moving quickly, meaning the days on market are short, you understand it’s a seller’s market and so the negotiating position isn’t with you as the buyer. A confirming indicator can be found by looking up the vendor discount rates. If you can see that they’re taking large vendor discounts, the power’s with the buyer. However, if there is little vendor discounting and it’s a strong market, then you probably won’t be grabbing a discount on the property price. In fact, the property could sell for more than the advertised price, which is exactly what’s currently happening in lots of areas around the country right now. By doing this, you’re able to see the strong and healthy markets, and it gives you an idea of exactly what sort of market conditions you’re actually negotiating in because it’s about being prepared and realistic. And where can you find these metrics were? CoreLogic provides reports that you can pay for that give you weekly updates on these and other key metrics. Alternatively, you may be able to access them free if you’re using a finance broker that has access to them. Like our KnowHow Property Finance business and many property strategist websites and buyers agents can also assist you with the same. Now remember the old Tom Cruise movie Jerry Maguire, where the heroine responded with “you had me at hello”? Well, in a similar fashion, the next key thing to be aware of in a negotiation is that negotiation starts at hello. As soon as you say hello to a real estate agent, the negotiation’s begun.
Now experienced buyers know this and they know what to reveal and what to conceal. Remember, that agents are expert negotiators who do this every day of the week. So as soon as they’ve seen you or started talking to you, they are sizing you up and they’re asking you qualifying questions, even when it seems like they’re just chatting casually about you and the family. Sales reps want to work out if you’re a serious buyer first, and then they want to find out as much information as they can to craft a negotiation when it comes to that time. And don’t be surprised if they suggest that you and your partner walk through and have a look at the property so they can then spend time chatting to your kids. Your kids don’t know what’s going on, and so it’s not uncommon for a seasoned sales campaigner to ask your kids lots of leading questions. For example, are you thinking you’re moving or moving schools? And the kids are quite willing to give all the information, and the agent is banking on this for that later negotiation stage. The next thing to keep in mind is that when it comes to property, along with most other negotiations, smart is dumb and dumb is smart. This is a version of the old saying that “when strong, act weak and when weak, act strong.” What I mean by this is you don’t want to come across too smart or too clever when it comes to dealing with the selling agent or the owner because nobody ever wants to help a know-it-all. However, if a person comes across as warm, friendly, humble down to earth and curious, most of us are happy to help them and give them more information.
So when it comes to negotiating, you want to come across as dumb and friendly, which is probably something that I tick the box on, because the agent will feel more inclined to give you more information. Then if you’re smart about hearing what they have to say, you might be able to get some key intel which is going to help you to craft your offer. So in negotiations, keep your ego out of it. Remember, you’ve got two years and one mouth, and you should use them in that proportion when you’re negotiating. This means twice as much listening as talking. Wise people talk when they’ve got something to say, but fools talk because they have to say something.
So to summarise the key points from today’s session on researching the right metrics and reinforcing that negotiation starts with hello. Remember that there are two key metrics that buyers need to know when negotiating firstly, days on market, and secondly, the average vendor discount. And these tell you if you’re in a buyers, sellers or balanced market. And as the old movie said, “you had me at hello” reminds us that negotiation starts as soon as you start talking with the real estate agent. So be careful what you and your family reveal. And finally, you need to act dumb to be smart.
In next week’s negotiation special Bush Bite, I will reveal how a knockout offer via an aggressive move, might actually gazump the competition in a seller’s market, along with an awareness that property negotiation is not just about price.
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