Good day. My name’s Ben Everingham and I’m the director here at Pumped on Property. And in today’s video, I’m gonna talk about how to negotiate a discount on your purchase price after your offer’s been accepted. So this is an idea that my team and I use as professional buyer’s agents to get our clients a reduction after we’ve actually bought the property. And for some of you that might be a different concept.
But it’s something that has been very effective. In fact, we’ve used it with success 80% of the time over the last $120,000,000.00 worth of property we’ve bought, this particular strategy or tip has worked. So that means four out of every five times this strategy is effective with agents and owners in your marketplace.
So we’re gonna talk a little bit about the psychology of this and who’s got the power, whether that’s the power exists with the agent, the seller or the buyer at different times of the cycle. We’re also gonna talk about how to use that building and pest inspection to negotiate a significant discount.
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So in terms of this power struggle that is always happening between owners, agents and the sellers, realistically the power balance depends on how motivated the owner is, or how motivated the sales agent is to actually sell the property at any point in time. So generally during the listing period before they make a sale, the power resides with the agent and the owner, because they’re the ones that control whether you buy the property and at what price you buy it for. But, as soon as they’ve got a contract in place and they believe that sale has been made, the power shifts from the owner and the seller’s agent to the person buying the property.
And what I mean then is after a contract has been put in place, the owner is now emotionally attached to the outcome as is the agent, which means that they’re more susceptible to negotiate on different things that they would not have been prepared to negotiate before. And the reason they do that is because they wanna keep the sale alive.
So one very, very specific tip or trick to do this effectively is if you’re buying an existing property, obviously with brand new property, it’s a completely different kettle of fish, but when buying an existing property, I’ve found that when you order your building and pest inspection, and again I know there’s different states in Australia with different rules around when you get the building and pest inspection done, and if that can be a standard clause in a contract, but you get that building and pest inspection clause. Maybe you give yourself 7 or 14 days in the contract terms to do your due diligence or to do your building and pest clause.
So what you do is you organise the building and pest inspection, and then you spend some time reviewing the building and pest inspection report. And you jot down a list of the things that need to be fixed up on the property if you’re taking ownership and if you’re a more active owner like me who wants the properties that they own to be well managed and well maintained.
So you write down a list of all the things that were picked up in the building and pest inspection that were wrong. And again, this is a strategy for a property you wanna buy. Sometimes when you do a building and pest inspection you find that the property’s too much work and you let it go. But this is for a property you wanna buy. And so you create this full list of things, and then you try to get a rough idea of what you think the cost of those things to actually fix would be.
So let’s say you bought a $500,000.00 home and you identify $10,000.00 worth of issues in the property that need to be rectified at some point in the future. And then what you do is you send an email to your solicitor with a screenshot of all of those things directly out of the building and pest report, and you ask them to talk to the person who’s selling the property’s solicitor. So the solicitor is the one negotiating here, not you. Because agents can get very touchy about this obviously because they have set the expectations of the client, that they’re getting them a certain price, and then you’re asking for a reduction, so it can create a lot of friction. But again, they’re more emotionally invested in selling the property at this time, so more susceptible to make a concession for you here.
So the first thing you do is you either give them the option of fixing the items in the list, which means you pick up the property in great condition. And so if they commit to fixing the items in the list, happy days. It means you don’t have to fork out money after you’ve bought the property. And what you wanna do is check that all that work is being done to an appropriate and licensed standard.
The second option if they’re not prepared to fix the items is the list, is to negotiate a reduction. So on that $500,000.00 example, you ask for a $10,000.00 reduction. It’s always better to ask for more, because it leaves you negotiating room to go back up. But be careful about asking for too much that’s unrealistic, because sometimes it can crash the sale.
So what you wanna do is ask for a price reduction, and generally most people don’t wanna fix the items that are wrong with their home. In their mind, they’ve already sold it, so they’re happy to just give you that reduction or some sort of reduction in price after you’ve actually agreed on what price you wanted to buy it for, or they might give you a combination of both. They might fix some items. Legally, they don’t have any reason to do any of this. But for some reason as humans, we like to please others, and therefore a lot of people are happy to give us a concession here.
So I think this is probably the most undervalued thing in your life. Just think about how hard you have to work to make $10,000.00, and how easy it is to send one email and spend an hour of your time doing this to make that $10,000.00. So negotiating is really powerful. It’s where most of the money’s made in the property industry.
I hope this tip has been valuable for you. In a nutshell, it’s really simple. Get a good building and pest inspection done. Review it. Create a list. Create an email for your solicitor. And ask them to either get the items on the list fixed or to negotiate a price discount, and then leave it in their hands and let them keep you updated. But put a bit of pressure on them. Push back. And good luck shopping. I hope everything’s going well for your portfolio at the moment.