Scott Aggett says having transparency with vendors, real estate agents and buyers agents is the first step towards effective negotiation when buying property.
For property investors and buyers, the best negotiation process begins with transparency.
That’s why professional property negotiator Scott Aggett and his Hello Haus team are dedicated to bringing transparency to a market that is “really murky, both on the buyer’s agent side and the real estate agent side”.
Scott explained to KnowHow founder Bushy Martin on the Get Invested podcast that he was steered into this pathway after noticing a significant lack of transparency while working as a property professional.
“What I’d noticed is that when we would list a property, the first people that we would call would be buyer’s agents, and they would literally pay what we told them to pay with a cherry on top. So there was no negotiation or very little negotiation, and I didn’t think there was much duty of care in terms of looking after their client. They were really focussed on just getting a deal done and they were only getting paid if they got a deal closed,” Scott said.
“And of course, it’s very easy to show a buyer that they’re paying the right price if it’s not on the open market. So if they could close it down off market or they could close it down in the first couple of days of it being on market, it was reasonably easy for them to convince a buyer that they were getting them the right deal and they weren’t overpaying for it, because they couldn’t see transparently auction conditions and where the rest of the market was.”
While many perceive negotiations as being all about price, Bushy and Scott believe this is actually the end of the journey. The start of the negotiation journey is developing an open relationship with the potential buyer and understanding what they’re trying to achieve.
“The first thing I want to establish is whether or not this is actually the property that you should buy. And I’m not trying to play God in that situation in terms of telling you ‘you should buy this or you should buy tha’t. But I really want to understand, is this the right property for you before you go headlong into making a massive financial commitment?” Scott said.
“So I get an understanding of what you’ve looked at before, what you’ve bid on and missed, and potentially how you arrived at this stage in front of me before we start negotiations on this particular property.”
Step two is to determine a buyer’s maximum price before they’ll walk away from a property.
“So what’s the target price that you want to set to purchase this property today? Now, a lot of buyers, I’d say the vast majority of them haven’t thought about that, and they’re either bound by two things. One is what they’re capped at in terms of their ability to repay a certain amount and what the banks or lenders will give them, or the second thing is they’ve actually have done their research on what they believe is fair market value for it. But mostly, it comes down to affordability,” he said.
“So I’ll try and gauge what they’re prepared to spend and then ascertain whether or not that’s going to be realistic on that property by then talking through comparable sales and doing some research.”
Scott achieves this by playing a game with the buyer which ultimately prepares them for quick decision making in the negotiation process.
“For example, if $900k is where you think you’re going to set your target price, I’ll say to you ‘okay, so if I could secure the property today at $910k and not a dollar less, would you buy the property?’ And then I shut up. And you might say ‘yeah look, we’ve been looking for months or weeks so yes sure if we could get it for $910k, we’d still do it’. Then I ask ‘okay, so if you could get the property today for $920k and not a dollar less, what will you do?’ And then I’ll just wait. You might go ‘oh I don’t know, we don’t really want to go to $920K, but I guess if we absolutely had to push and shove, we’d go the $920k’. ‘Okay, great’. And I just keep playing that game until it hits a point at which they go no we will walk away,” Scott explained.
“The reason I do that is to not move their target price. It’s because I don’t want the client trying to make an emotional decision like that when they’re under a blowtorch from the agent at the 11th hour. And that’s exactly what happens is they’re going to get to a point at some time in that process where they’re possibly going to make a very quick decision. And you don’t want them to lose a house over 10k or overpay by 20k or 30k in that instance.
“So they need to know what that drop-dead number is. When they do know that number and they get pushed all the way to it and then someone else offers more than that, then they can hand on heart walk away and go ‘you know what, we thought about this last week or three days ago, that’s our absolute max on that property. We’re happy to walk away’. There’s no buyer’s remorse and no regret.”
But it isn’t just about having transparency with the buyer. Scott revealed the next stage is to understand the seller’s motivations.
” I want to determine the seller’s motivation. I want to understand that the seller is ready to sell if we put an offer on the table that’s acceptable to them. Are they actually ready to trade today? Often that answer is no. They want to see more of the market for whatever reason – they’re not quite ready to sell today because they’ve got other interests or there’s more buyers that haven’t yet put their offer on the table,” Scott said.
“So I want to know all those things before I go out on a limb and put a number on the table that is potentially then used against my buyer to leverage another purchase up beyond that price point. So ask lots of questions around that to establish the vendor’s motivation and the timing of the sale.”
Following this, investigating the selling agent will determine their level of honesty and reliability within the negotiations.
“Then I ask very clear and concise questions of the selling agent. ‘What will buy the property today?’ And then I’ll shut up. And then you might hear them jump down your throat with an answer straight away, or have a long pause and really think about it and give you a proper answer, or hear them tell you what the last offer was and where the windows are currently. There’s a multitude of different answers in different directions that can go in, but it’s me asking that very direct question,” Scott said.
“Very often they’ll tell me the specific number I need to pay straight away, and then I can determine whether or not that’s fair market value. Or, very often I can also hear them flounder and bullshit to me. And that’s when I know that I’m not going to trust this agent from start to finish.
“Then I need to be really careful with how I apply that negotiation, because I’m not going to be able to trust anything that comes out of their mouth. So asking those hard questions upfront really sets the tone for me before I then build a negotiation strategy around what my client’s got in terms of their buying power and where I can position them to try and save them some money. “
Listen to the full interview here.
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