How To Negotiate A Discount

Have you ever noticed how some people are able to get great discounts on their investment property while others pay the asking price?

What’s their secret?

There’s really no secret – they’ve just learned how to negotiate well.

Of course the market will dictate how much of a discount you can expect – if the market cycle is at the bottom then you’ve got a great chance of getting a discount – more so than when it’s strong.

So let’s say you’ve found an investment property which could deliver a great return if the price is right and the vendor is really motivated.

One way to negotiate a discount is through the property’s condition. Using a checklist, deliver your offer to the agent categorising the repairs or issues with the investment property and attach a cost to each item deducting them from the asking price.

Be sure to include a buffer for each item to cover any price errors.

Use the following checklist for reference when creating your own. To streamline your negotiating efforts create a template which is generic enough to use on every deal, which you can tweak as needed:

Knowledge is key

Strong due diligence efforts are a key component of a successful negotiation strategy. You should know the market – and the property – inside and out before submitting your offer.

As part of your due diligence strategy contact other local agents in the area and discuss the investment property you’re considering. For example, you can call up Agent A and tell him, “I’ve put in an expression of interest with Agent B on the house at 125 Proffitt Street. Can you tell me anything about it or the area?”

It’s simply human nature. Chances are you’ll hear all of the “dirty secrets” about it, such as it’s always flooding, has termites or high crime. Depending upon what you hear you can then use this information as leverage when negotiating a discount with the vendor.

This strategy works much better than simply asking for a discount “because”. After all, if you saw these problems chances are good that another potential buyer would too, giving the vendor a legitimate reason for dropping his price.

Even if your conversation with Agent A doesn’t provide anything you can use for negotiation, that doesn’t mean you’ve wasted your time. It’s very possible that Agent A will discover, upon questioning you on the type of property you need, that he has similar – or even better – properties available.

In short, it pays to maintain a good relationship with a number of agents in the locations you’re interested in as you may have agents contacting you with deals that come across their desks – even before they hit the market!

Finally, “play nice”. Be fair and reasonable and it’s likely that the other party(ies) will cooperate and consider your needs as well. If possible, find any common ground (e.g. heritage, interests, etc) you may share to help strengthen your connections.

If you are interested in discussing similar matters with like-minded property investor people and professional coaches, feel free to join us at our next FREE Investor Property Night near you!