Hi all,
I recently put in an offer on a property, made it quite clear to the agent that it was not negotiable, as I offered my top $ straight up (some may ask why). The property was originally listed for $250K and dropped to offers of $210 – 230K, incidentally I offered $210K with 30day settlement from finance approval (already approved, but signed subject to finance).
As it turns out the vendor (property investor) had taken out fixed rate loan and now has penalties to pay to get out of loan. They supposedly need cash to put back in to a business venture.
We are at a stalemate, they have asked agent to negotiate more, but I refuse to budge. The property is currently tennanted @$265pw, with current tennants prepared to stay long term. Although property will need some attention in next couple of years, my intention is to buy and hold long term, with good capital growth prospects.
What can I do?
I know vendor, so could I approach vendor independantly? Is this ethical? Could they remove from agents hands and we deal direct?
This is my first property, so forgive my ignorance.
Regards
Stephen M
Hello Stephen,
Not always such a good idea to approach the vendor independantly. I’m not 100% sure of the circumstances, but looks like a negotiation issue. Best thing to do is get all 3 parties, yourself, the vendor and the agent in the same room / online conference to sort it out. This is primarily the agents job in a situation like this to resolve the matter. As you are the buyer, you hold the cards. If the offer is not accepted by the vendor, it will have no impact on your finance, so there is no problem there.The fact that the vendor has penalties to pay due to changing his loan is not part of the equation and is no concern of yours. The vendor shouldn’t be trying to tie that issue in with the sale of this particular property.
Hope that helps!
Regards
Propsa
http://www.strobagroup.comStephen
What was the final wash up of your negotiations?
You could raise the offer something stupid like $1235 or something along those lines, it may sound stupid but i used to get this done when i was an agent and it works well with a vendor who wants to have the last say. Sometimes people just want to win the negotiation so by giving something even if it small you will still walk away the winner.
In regards to talking to the seller direct, its ethical from your point of view because you have no obligation to the agent and i would do it because the only one that is going to look after you in this matter is you and its going to be your investment property not anyone elses.
The problem lies if the seller decides to deal with you direct when (not if) they find out its been sold commissions will still need to be paid
Hope it helps
Regards
LocymacTony, the agent has been very vague, but has simply said that the vendor has asked them to re-negotiate, but as I stated to agent my offer is final. The frustrating thing is property was advertised $210K – $230K, yet the vendor is wanting more (why advertise it at this if not acceptable).
There was supposedly another offer at the same time and this also hasnt been accepted yet.
Regards
Stephen M
Could you offer a long settlement with a deposit? Once unconditional the seller can access the deposit to help their business venture and the long settlement can avoid breaking the fixed term (depends when this expires though I suppose)
Stephen M
Firstly I agree with you on the advertised price range issue.
A couple of things you need to work through and ask yourself.1. How bad do you want this property, are you prepared to walk away if the vendor does'nt accept your price.
2. Has the vendor given you a counter offer of any sort and waht is the difference between your offer and theirs?
3. The vendor is simply trying to get as much out of the market to clear his debt and may not be a position to drop any further.Here again I would step back away from the deal. Let me share a recent transaction with you.
My 20 year old son recently went shopping for a new car, he had a figure in mind of $34,000 on a particular car, the dealer was set at $39,000, he wanted it and simply wanted to close the deal there and than. I advised him to leave the offer on the table and walk away and not make any further contact with the dealer. He couldnt understand the reasoning until he got the call some 3 hours later, the deal was done at $34,000.
You need to clear up items 1-3, put you best and final offer forward, than walk away. Show them that you have no further interest in the deal. You can not force me to sell to you, and I can not force you to buy my offering.
I hope this helps..
I did the same as you 4 years ago – my first offer was my final offer. I can't be bothered with all the stuffing around and game playing with negotiations.
On a sale price "range" of $410,000 – $430,000 I offered $380,000. Vendor was outraged, and I got all these phone calls from the agent wanting me to "be reasonable" and that there were many other offers coming in. However I gave 24 hours for the contract to be signed on my terms or not at all, and turned my phone off. If the vendor refused I had back up properties to put offers on so it didn't worry me about the feelings or financial circumstances of the vendor. The key is not to get emotionally attached to the property.
I did get the property for $380K so the other offers must have been wishful thinking.
Hi everyone… forgive this rambling – I realise it's not logically structured at all!
The first house I ever bought was advertised as "Offers above 128K". Who offers above the 128K in a balanced or soft market??We offered 120K and got it for 122K.
This little situation of yours is interesting though. I believe it's always a great idea to approach the vendor directly. Have you ever played chinese whispers? That's with one phrase guys. How many more areas for miscommunication are there in a property deal? There is nothing unethical about it from either perspective, unless the vendor tries to get out of paying the agent's commission, and it was the agent's advertising that lead you to the property in the first place. If it's not an exclusive listing, and you knew this was on the market because you knew the vendor, then why use an agent in the first place?
My Father and Grandfather always avoided speaking directly to the vendor, as they liked the agent to be the one to deal with the emotional seller. They didn't want to be around the person they were making the offer to, in case things got awkward (or worse!) I'm a little more thick skinned than that though.
Before you place all your trust in the agent, do a bit of research and find out just how difficult it is to become a real estate salesperson in your state these days. I asked one of my mates the other day who is an agent in his early thirties, and he told me the training was one week long and cost him around $700. Unless the agent has a great deal of experience, don't treat him as the expert – chances are he just isn't. How much negotiating training do you think they get in that week?
What could have happened here is that your vendor put down their asking range, got and offer, and THEN found out their payout figure. If he made the mistake of fixing his interest rate for 5 years late last year, he could have a $20 000 pre payment penalty that he didn't realise until after he set that price, which would explain that issue.
One thing to remember with the agent is that if it doesn't sell, he doesn't get paid. He will lean on whoever he thinks is most negotiable. You, as the first time investor, may appear to him to be that person.
In the end, it really comes down to two things. Firstly, whether or not you think you can get something better for the money if you have to offer another 5 grand. Don't throw away a good deal in the name of being stubborn just to seem strong. And two, do you really want to be the buyer who "screws over" the seller, who you've already said that you know?? Now, I know that you're not doign anything wrong by sticking to your price, and that all it is is an offer – but will said vendor see it that way if he eventually has to fold because it's the best offer on the table? Real Estate is still about people Stephen. Well, people and real estate agents! <br /
:-)” title=”>:-)” class=”bbcode_smiley” />Andrew
Hi Stephen.
Singer is right – don't get emotional. I hate to sound simplistic, however the key is to know what you want to pay after doing the numbers and before making an offer. If you have done your homework regarding local community amenities, land size, rental opportunity, proximity to infrastructure, building type and rental capacity in the area (vacancy and type needed (1 bed, 2 bed, etc)) – you are going to be pretty accurate about what it is worth. Set a walk away price and then set your target below that – go from that position. I am not the first to say this, but it's true, the deal is done on the way in so at the high point it's not worth it. Your homework on the property will tell you this number.
Finally, always alow for the cost of a refurb (if applicable) in the total as well as the closing costs – and you're set.
Hope this helps.
Hi All, thankyou all for your input. I have walked away, in fact the vendor has since changed the asking price, not once but twice in two days this week. Their original advertised price said $210k – $230k, and my offer was $210k (not accepted). The house was re-listed on Tuesday this week for $230K and then the following day changed to $220K+.
Sadly everything was right (after due diligence) with this property in every way, however am not emotional and know that there will be others!
Thanks again!
Stephen M
Congratulations
Re-read your first post. You said this was the maximum amount you were prepared to pay and who'se to say you still won't end up with it as it hasn't sold at this stage – You may even get it for less than you were prepared to pay!
I'm with Maree,
What you need to do is create a win-win situation.
The two issues that the vendor has is they need cash now for their business but if settlement occurs immediately they will be out of pocket for pentalty fees for the fixed rate loan.
Your issue is you dont want to pay more then $210K.
The agents issue is they want the commission from the sale.
If you find out what the amount of cash they need for the business and offer them that for the deposit. Set a settlement date when the fixed rate ends. The sale price is set at $210k. Benefit for vendor is they have cash now and pay lower fees breaking their loan. Benefit for you is you get the property at the price you want to pay for and by the time it settles you may have a capital gain. If it took a year to settle and a 4% growth it is worth $8k more at settlement which depending on your situation this could save costs on LMI if you have a high LVR.
Main thing is to find something that works for both parties. The price isn;t the only thing that can be negoiated.
Like it or not real estate is a game where people win and lose money. May I suggest a tactic, ask a mate or a relative of yours to put in an offer of about 185,000 ( in writing, so by law the agent must forward it on to the buyer) and when it gets rejected, have another person do the same. This will put a false market value in the vendors mind and when you come back with an offer of 200,000 and he is desperate to sell, he will probably come back to you with your original offer of 210,000. … just a thought!
The agent wants to do a deal, and usually doesn't care if it's at $210K or $230K as the difference in commission is small.
You could ask the agent to reduce their commission by $1K and you'll match it, thereby offering the vendor $2K. At least it's something for the agent to take to the vendor to keep the dialogue open, which is essential for agents to do their magic.
Could be good to put a 24 hour time limit on the offer too.
Costs nothing to play the card.
Good luck
Cheers
thecrestthecrest | Tony Neale - Statewide Motel Brokers
http://www.statewidemotelbrokers.com.au
Email Me | Phone Meselling motels in NSW
:-)” title=”>:-)” class=”bbcode_smiley” />
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