MAKING OFFERS: Closing the Gap

A case study:

In this case, the property was the right one, the buyers had considered the money they wanted to pay for the property and placed an offer. The offer was 'conditional' on the advice of their solicitor, “just get the offer in and make it subject to our legal inquiry”

This approach may work in slow markets but it is not good practice nor competitive. Firstly, you are showing your hand too soon and without proper due diligence. In essence, I suggest that it is a lazy legal approach. Importantly this jeopardizes a smarter approach. the lawyer still gets a fee even if you don't get the property.

The Problem:

Lazy legal approach

Poor process

Bad execution

No strategy

Agent and Vendor uncertainty

A flakey offer puts you on the side-line or in a lesser negotiation position

No risk mitigation in the contracts and property assessment

Unchecked approach

Unprofessional

Consider the alternative:

The buyer’s agent works through the contract and with the legal adviser to identify any risk areas, that can be mitigated or considered transactionally. Assuming the property inspections and reports are okay then a lawyer/conveyancer can potentially issue a 66W certificate – where you are happy to waive your cool-off rights. This is part of structuring a frictionless offer.

If there are no obstacles we proceed with a strategic offer. If there are too many problems... “next!” there will always be another opportunity

A buying strategy should be in place – this takes some work but pays handsomely in quality negotiations, value building, and saving money. What is the fair value of the property and what price will consider paying? What is the tolerance range for this value (+/-)?

As a GPS in a car, you must know the destination to plan the best route and then have alternate options when there are roadblocks.

The aim is to provide the Agent and Vendor with absolute comfort with your offer. It should be solid and present is no doubt, only consideration of the price. Doubters are kicked to the curb and bypassed often as ‘too hard. The saying “one in the hand is worth two in the bush” applies to many vendors. They want certainty and comfort the buyer can perform. A decisive and firm offer gives comfort.

Knowing the fair value of the property should be your benchmark to work against and not the agent’s price guides. Agent price guides are the window to the soul and what the sentiment of the vendor is and their ‘expectations’. Understanding if there is a ‘realistic’ vendor is critical.

A strategic negotiation identifies all the participants – Buyers, Seller(s), Advisers, Agents, and Vendors, their motivations and the market in which they operate. Once this is known a strategy should be outlined and fitted to the situation. Execution is where many buyers fall short and where a Buyers Agent can be invaluable.

Unconditional offers that are clearly outlined can be ‘frictionless’ giving the agent and vendor no doubt about your capability. This makes their decision process easier and about the price only none of the peripherals. The process is then to get engagement so negotiation can commence.

Find ways to close the price gap by asking good questions reframed in different ways. Closing the gap leads to a higher potential of closing the sale. Remember a sale only exists when “A buyer and seller meet”.

I specialize in identifying these components, defining Fair Value, and devising a strategy to maximize the chances of successfully acquiring the property. No people or property are the same. However, some basic understandings can set the foundation for effective negotiation. When there is no doubt in a selling agent’s mind about the capability of a buyer to perform you will get their attention and momentum will pick up.

Many Agents are perplexed when approached with a defined approach that works in stages. It is often about shifting the bias of control from the selling agent to an even playing field to get the buyer a good result.

This style of approach can provide the following results:

* The property is acquired – often in fast or difficult markets

* The client gets a solid return on investment (ROI) as they often don’t pay what they expected or know
they would have paid more if left to their own devices

* Difficult issues or roadblocks are negotiated by the buyer’s Agent to achieve a result suitable for the
client and Vendor to allow the deal to conclude.

* Property is purchased for Fair value versus paying over the market (negotiating against yourself)

* Getting the Selling Agent to the point where they work to close the deal (they want to be paid after
all)

* Legal advisers and conveyancers are comfortable with professional support (as their PI insurance is
at risk) and the deals are clearly defined for ease of their process.

Understanding the salesmanship and knowing what to offer and offer it and to what level – can save a buyer a lot of money and time...perhaps more importantly it will increase your chances of success.