Tips For Buying Luxury Property: Be Informed, Negotiate Better
Originally published on Kizzis Luxury Properties.
With the property market across Australia booming, and competition for those prime pieces of real estate tougher than ever, getting that dream home has never been more challenging. Despite the boom, however, it’s not necessarily money that’s the issue for the seller.
Whether you outsource the negotiations to a skilled expert (it’s a good idea to find the right person to do this: I have been able to save my clients anything from $25,000 – $750,000 below their target price, for example), or undertake them yourself, there are a couple of key things to keep in mind throughout the process.
Hit the right price point
Firstly, no skilled negotiator goes in with a deliberately low offer. The first offer is an information-gathering exercise as much as anything else, and a low offer risks a flat rejection, without getting the kind of real time feedback that you need to understand the interests and motivations of the seller.
That first offer needs to be a real one, and do some very heavy lifting. Ideally, you’ll want the negotiations to be a one or two-punch process. The first offer establishes the perception of your limit, and the second offer is the final should it be required at all.
So, say for example that you are bidding for a property worth $6.7 million. Rather than start at $6.1 million, which will be rejected, use a number like $6.460 million, which is closer to real market value, but still a good saving. By presenting an unusual number like $6.460 million, it indicates you have put a lot of thought into the number and that it’s a serious, genuine upper limit to the offer.
Getting granular like this also means that you avoid negotiating in larger blocks of numbers, which, in the event of a longer negotiation process, can result in the property jumping up in price quickly. By putting a very specific number on the bid, you may be able to slow down or stop big price increases in the counter-offer.
Don’t overlook the other sources of information that you have at your fingertips, either. When searching for a luxury home, develop a laser-sharp focus on one or two suburbs, and really understand the context behind property availability and price there:
Research the current and recent sales on property websites, and make a list of the agents who have listed or sold similar properties.
- Email the full list of local agents weekly to stay top of mind.
- Actively define the 5-7 must haves for the property, and keep that as a mantra. Even the most experienced buyers can be pressured into compromising.
- Over a four to eight week period, inspect as many similar properties as possible. These might not be the ones you’re ultimately interested in, but the information is critical context.
Keep an eye out
If you play your cards right, then the information you gather will bear fruit and you may well find yourself looking at pre-listing and off-market properties.
Up to 40 per cent of properties are sold “off market” (often a higher percentage with luxury homes), and being able secure a property this way, before the competition gets a proper look at it, is the best way to both save money and make sure that negotiations aren’t undermined by a rival bid.
Buyers tend to have more control in these one-on-one negotiations, and sellers appreciate the opportunity to shave off marketing costs, avoid the publicity of having their luxury properties placed on the open market. Luxury home owners are often intensely private people, and place real value on maintaining that privacy.
Finally, sometimes the seller simply wants to move on, and wants the security of a quick deal to facilitate those plans. Approaching the market with the proper strategy is the only way you’re going to identify these opportunities.
When it comes to buying luxury property, success hinges on information – the more aware and informed you are, the better the opportunities and the stronger your negotiation position will be.