Navigating negotiations

Selling property requires good preparation. That’s been the focus of my weekly columns over the last few months as I’ve reviewed each step in detail. So, with everything now said and done, you’ve finally received an offer. What now?

IT’S time to negotiate and achieve the best market price possible. This is where your due diligence in selecting the right real estate agent that fits your expectations will pay dividends. Not only are they adept at the art of negotiating, they also have the backing of extensive local market knowledge and a keen insight into a buyer’s motivations to purchase. Prospective buyers will generally also have a list of questions before making an offer. Because it’s very time consuming, expertise and patience is required.

Another asset your real estate agent will bring to any negotiation is the necessary skill and emotional intelligence to deal with interested parties. This is critical in a real estate negotiation as buyers and sellers are prone to becoming emotionally invested and can lose objectivity. An experienced and effective real estate agent can maintain a professional perspective and understand and manage their own emotions as well as those around them.

As with any offer received, your initial step is to assess it together with your agent. They’ll help unpack the various components, what conditions and variables are attached along with how the offer was determined. With this in mind, the following are just a few of the matters you’ll need to take into consideration.

Cash Sale vs. Financing

Some buyers will be in a position to present a full cash offer thus eliminating the need to make the offer subject to finance. Such offers can be highly attractive because they eliminate delays, particularly those related to financing applications and approvals. However, an allcash buyer also has a distinct advantage (and they know it), submitting a lower offer in exchange for a condition-free contract over a shorter settlement. In some cases, it can be worthwhile to accept a lower sale price for a faster settlement. Always discuss what’s in your best interests with your real estate agent in circumstances such as this.

Pest & Building Inspections

It’s common for an offer to be subject to a pest and building inspection. Buyers usually want to check that the building is structurally sound and confirm there are no pest infestation problems or other issues that may be material and expensive to rectify. If the contract does contain a pest and building inspection clause, make sure you understand the rights that both yourself and the buyer have under the relevant condition. In some cases, the buyer may have a right to terminate the contract depending on the issues or defects that are uncovered during the inspection!

If you want to avoid the stress and time delays associated with this process, you may wish to consider arranging your own pest and building inspection to identify any issues that may be identified. This enables you to rectify any potential issues and/or better manage the process. In cases where a pest and building inspection report isn’t favourable, it doesn’t have to spell the end of the contract. As an alternative, you may negotiate a new price for the property that takes into account repairs and rectification works. Your real estate agent will be able to guide you through the process and help you competently navigate the steps.

Special Conditions

Some offers may be contingent on what’s known as special conditions. These may include the requirement that a buyer sells their own property before they can purchase yours, the need to acquire approved financing, the inclusion of certain furnishings or the need to move in right away. These conditions can all be negotiated but be sure to discuss these thoroughly with your real estate agent. In such cases, you may want to consider retaining the right to continue to market the property and invite offers to ensure that a ‘back up’ plan exists. Negotiating such conditions can be complex and your real estate agent’s guidance will be critically important.

Deposit

In Queensland, a deposit is not a legal requirement and there’s no set fee or percentage of sale price amount. As a general rule however, a deposit should be no greater than 10% of the total purchase to avoid certain risks that can be triggered by exceeding this. It’s prudent to seek a deposit immediately or shortly after entering into a contract. The payment of a deposit is an act of good faith by the buyer that they’re committed to the purchase and intend to be bound by the contract. A deposit is also good potential security for you in the event of a breach of contract.

Handling an Offer

If you receive an offer that’s not favourable, don’t panic. It’s a starting point. You can make a counter offer. When you do so, it shows you’re interested and acting in good faith. A counter offer may include variations to the price or include/exclude further terms and conditions before you agree to a sale. It can also buy you more time, allowing you to consider other offers and keep the door open to further negotiation. It’s important to remember that counter offers amount to rejections of the initial offer. You should therefore be sure that you are prepared to reject the offer made to you.

Importantly, when it comes to achieving the property price you’ve set with your real estate agent, it’s advisable to set your limit as well when it comes to any sale negotiations. If you establish a limit and are clear on what your bottom line is, you have to be willing to walk away, and to demonstrate that. Of course this is easier said than done.

Finally, once you have negotiated an offer your content to accept, it’s then you can finalise the contract of sale. This is where your real estate agent will play a critical role. Real estate agents will facilitate pest and building inspection and assist with ensuring that other contractual conditions and requirements are complied with on time. In fact, using a real estate agent throughout the sales process can actually save you money and even help you make some too. They’re trained and skilled to achieve the best price possible and negotiate any conditions of sale so it’s better to view your real estate agent as an investment for achieving the best outcome for you.