The psychology of negotiating a property sale and key tactics

Be forward

According to Malcolm Gunning, President of the Real Estate Institute of New South Wales, don’t be afraid of going in aggressively if you are confident the property is the one you want.

“If you are at auction, start your bid high – it blows the bargain-hunters away. If you think it is a good home and worth say $1 million, then go straight in at $900,000 or $950,000. You are better off going in with a strong bid and getting into the serious part of the negotiation,” he says. “Starting low and making $1,000 increases just creates theatre – make a solid offer, but one that is based on research so you know what you should be paying.”

Setting your bidding limit – based on what you can afford to pay and what you believe the property is worth – is very important. If the bidding surpasses this figure, you need to walk away.

When it comes to a private treaty sale, Gunning says you need to be equally forward, but again, base your offer on your own market research and have your finance pre-approved.

“You need to be quick and go in with confidence and strength to be taken seriously. Say ‘I’m interested, I’m taking the contract for my solicitor to look at, my finance is approved and I have the ability to exchange’,”he says.

Richard Harvey, property law specialist and Law Society of New South Wales representative, recommends that buyers obtain pre-approval for any finance before they even start looking at properties.

“In a seller’s market, it is important that the buyer is able to move quickly, but at the same time the buyer needs to be satisfied that they have obtained legal advice, unconditional finance and any inspections – such as strata report, building or pest inspections – before contracts are exchanged,” he says.

“It sounds simple enough, but sellers and buyers should not sign anything until their solicitor has checked it first.”

Be sensible

Both buyers and sellers  are constantly told that they need to take the emotion out of their property purchase or sale, but we all know this is easier said than done.

“If you’re a buyer, in your mind you have to believe that this isn’t the only property out there for you,” says Christine Bagley-Jones, Principal Psychologist at the Counselling and Wellbeing Centre Qld. “A lot of people get FOMO [Fear of Missing Out] – they get to a point in negotiations where they desperately want the property. All the discussions with their partner and all the planning goes out the window. You need to safeguard against that.”

Similarly, Bagley-Jones recommends that sellers do a personal inventory of the pros and cons of putting their property on the market.

“Are you going to feel good about it in six months, two years or five years? Try to plan and make sure it is not an impulsive whim, like temporary financial struggles or envying a friend’s suburb. It needs to fit with your value system and future goals.

“It costs a lot of money to buy and sell, so you want to make sure it is for the best possible reasons and for your wellbeing.”

Be ready

As discussed, you need to be emotionally and financially ready.

Do your market research, and review the properties and sale prices in your desired area or where you are selling. Know why you are buying or selling, and what you want from the transaction.

If selling, make sure your property is well presented and marketed appropriately to your target audience. Obtain legal advice to ensure your vendor disclosure requirements are in order. If buying, obtain financial pre-approval and make sure you have appropriate legal advice on hand.

Be transparent

“The most difficult thing at auction is underquoting. It is so disappointing, because you don’t know the vendor’s expectations. You can’t complain if you have an indication of the vendor’s expectations and you are prepared to meet them but are beaten by the competition,” says Gunning. “But if you are bidding and your best price is below the vendor’s expectations, you’ve wasted your time and money.”

According to Gunning, underquoting and overquoting does happen in the market, and that is why it is particularly important that buyers undertake their own due diligence in terms of researching market and price, and that sellers work with an agent who takes a transparent approach.

“While you should never forget the agent is paid by the vendor, the best outcome is that everyone is happy. Providing you have a transparent negotiation or auction, no one should be disappointed,” says Gunning. You want to go with an agent who takes a transparent approach and shows empathy for both parties and the negotiation.”

Bagley-Jones agrees that there can be game-playing in the industry, and she also recommends embracing an honest strategy – but without conveying too much information or communicating that you are emotionally caught up in the process.

“Be fairly forthcoming about what you are looking for and what you’re willing to pay. In your mind, you might have another figure that you are willing to go up to – just like if you are selling you might have a figure that you could go down to. You don’t necessarily share these figures, but don’t come in way too high or way too low just to see if you can get away with it,” she says.

“Don’t over-disclose, just give enough information to help with the purchase or sale.”

Be polite

When viewing properties for sale, remember that you are most likely walking through someone’s home, so if you don’t like their choice of artwork, furniture or colour scheme, zip it. Putting the owner or their agent offside (who, unbeknown to you, may be present) will seriously put you on the back foot in negotiations if you are interested in the property.

This is also where a good agent comes in. Buyer offers that are far too low or seller expectations that are far too high can put either party’s nose out of joint. An empathic agent will manage emotions and expectations, and buffer the negotiations from unnecessary angst.

“The moment you feel either side of the negotiation is waning – that is, you feel the engagement has gone – you should question the agent and say ‘I think the deal is going cold, why do you think that is?’. The agent will sense it first,” says Gunning.

Be united

If you are buying or selling with a partner, it is crucial that you are on the same page about the decision to buy or sell and at what price. Things can go awry in your relationship if you don’t share a sense of ownership about the significant financial commitment you are making.

“A discrepancy could lead to a major fracture in your relationship and be brought up years down the track,” says Bagley-Jones. “Don’t go ahead with the sale if you can’t reach a mutual agreement with your partner.”

Good, open communication will help you get there. And while some compromise is important, your relationship should come first.

“Don’t compromise your relationship no matter how beautiful the house or however important it may seem to sell – the best thing to do is to communicate or get some counselling. You may be able to proceed with your plans or modify them. Some people see needing a third party as a sign of weakness, but it is a sign of intelligence. It’s one of the biggest decisions you will make in your life, and you want it to be a very fulfilling experience rather than one that causes years of regret,” says Bagley-Jones.