Once you’ve found your ideal home, it’s time to make an offer on the property. This is rarely a simple process, and usually involves negotiating a house price that both parties are happy with. But how do you negotiate so the odds are in your favour?

The first step is to fill out an Offer and Acceptance form (O&A). This specifies the price you’re offering and the terms of the transaction, so make sure you fill the O&A out carefully! Treat your O&A as if it will be a binding contract, because if the seller accepts your offer straight away, it will be.

Most of the time however, the seller will contact you with a counter-offer (often slightly lower than their asking price), and the process of negotiating a house price will begin.

This can be an emotional time, and there’s always the risk that another buyer will make a better offer during your negotiations – but it’s important to keep a level head. Giving into pressure and offering more than you can afford is not worth the financial pressure later.

Here’s my advice for negotiating a house price:

1. Make a reasonable first offer.

While you won’t get a lower price if you don’t ask for it, an offer that’s too low will only annoy the seller and make them averse to dealing with you. Hostility does not make for a productive negotiation. Instead, make a reasonable offer. If it’s lower than the asking price, justify your offer with market information (see point 3) or honestly point out the flaws that make you reluctant to offer more.

2. Be a reliable buyer.

Make sure the seller knows you’re serious about buying and that you can be trusted. A great way to make yourself reliable in the eyes of the seller is to get your home loan pre-approved. This will assure the seller that a deal with you is less likely to fall through. As a result, the seller may look at your offer more favourably – they may even choose your offer over a higher offer from a less reliable buyer.

3. Research.

Know what similar properties in the area are selling for (see online property listings and REIWA’s suburb profiles), so you’re confident about how much particular properties are worth.

Also, chat to the seller’s agent to find out as much as possible about the seller’s position. Is the seller looking for a quick sale? Has the property been on the market long? Both of these may suggest that the seller is likely to consider lower offers. Because the agent’s client wants to negotiate the best house price possible, it may be hard to get a lot of information from them – but you can at least try to get a feel for the seller’s position.

4. Know your maximum.

Ideally you already have a good idea of what kind of house you’re looking for and how much you are prepared to spend. To negotiate effectively, you now need to make a definite decision about how much you’re willing to offer, and stick to it – being certain about what you want will always lead to a more satisfying purchase.

5. Keep your cards close.

You need to know what your maximum is, but the seller and their agent doesn’t. Don’t give away too much about what you’re prepared to spend, or just how much you adore the house – the seller will use this knowledge to their advantage.

6. Don’t be pressured.

Agents may try to get a quicker sale by telling you about another, higher, offer. Stay true to your maximum price. Making a snap decision due to pressure from the seller’s agent may lead to regret later, so be sensitive to the market – if there’s a lot of listings around (what’s called a ‘buyer’s market’), you can afford to take your time. If there’s a lot of buyer competition, move faster but don’t forget your maximum and your market research.

In summary, your most important tool is knowledge. Know the market and know your own price limit, and you’ll be well prepared to negotiate the right house price.

Have you had to enter into negotiations to get the property you wanted? What was your experience?

Image courtesy of Mark Anderson – the home pictured is listed at nedlandspropertynews.com.au.

Image by Images_Of_Money

Is it time to invest yet?

The jury is still out over whether or not prices will rise steadily. If they do history will show 2012 was a great time to invest. However, unforeseen global events could have a big impact on our still-recovering property market. A major default by a large European country, for example, would put upward pressure on interest rates here. For our property market to remain steady, we’ll need stability out of Europe.

Current Australian house prices are “comfortably explained by fundamental economic factors”.

Some are also concerned that the Australian property market is overvalued by somewhere between 10 and 50 percent, which suggests a significant price correction is on the horizon. However, financial economist Christopher Joye makes a convincing argument that such assertions are misleading. By measuring changes in disposable household income and mortgage rates, Christopher finds that current Australian house prices are “comfortably explained by fundamental economic factors”.

All in all, there seems to be a consensus that the market is bottoming out. REIWA’s David Airey has said the outlook for this year is “steady” – so we may have to wait for 2013 for a bumper year in property.

Perth is in the midst of a resources boom led by “…China’s stockpiling of commodities and…the Gorgon LNG project” the report claimed. And although Perth’s rental vacancy factor is higher than other capital cities there are signs that it is “tightening”. That’s good news for investors.

Driven by buoyant job prospects the population in WA is expected to surge. As it does, demand for accommodation will put upward pressure on rents making investment in the West more attractive.

The report went on to recommend that the best property types to buy in Perth was “middle-ring beachside suburbs, and the inner south and west adjacent to the CBD.” Just why Wakelin’s chose these property types was not made clear.

But how times have changed. Less than 18 months later the market has once again surged.

It’s back in the black with plenty predicting more good news to come.

Compared to the rest of Australia – and despite a massive resources boom – WA is an under-performer. That’s if you can call an annual growth of 14.3% under-performing. Some expect the combination of higher interest rates and lower first home buyer grants to slow the market.

But others are more upbeat pointing to strong population growth and improving employment prospects as potential market drivers.

What are are your thoughts? Which way is the Western Australian property market heading in 2010?

REIWA’s preliminary data for the December quarter shows median house prices up 14.3 per cent from December 08 to $480,000.

Mr Bourke attributed strong property growth to a change in the market from first-home buyers to trade-up buyers.

“2009, as a result of the First Home Owner Boost, saw 42 per cent of all sales being first-home buyers and of course they buy in the under $500,000 market so the median price moved down.

“As they’ve slowly left the market and the next wave of buyers, the trade up buyers, have moved in, buying in the segment between $600,000 and $1 million, the median price has moved up to reflect that they are now the most predominant buyer in the market.

“2010 is going to be the year of the trade-up buyer.”

Mr Bourke claimed that one of the key drivers of price growth has been the ongoing shortage of land, which increases demand for existing accommodation.

Posted via web from Residential Settlements

PERTH is a city with increased optimism about the resources industry and is following the general trend across the country with residential buyers upgrading to higher price brackets.

New data from the Real Estate Institute of Western Australia shows a continued swing away from first-home buyer activity towards a stronger trade-up market.

REIWA deputy president David Airey said in a statement in mid-January that while first-home buyers had remained strong, Perth’s median house price had held up and was increasing due to renewed activity by trade-up buyers.

“REIWA data shows that for the last six months it was sales of homes valued at between $500,000 and $600,000 which dominated the market.

“But for the December quarter alone we saw sales in the $600,000 to $750,000 range jump significantly from about 10 per cent in September to just over 14 per cent in December,” Mr Airey said.

The renewed market activity has seen days on market drop from 64 to 54.

Despite this optimism the West still lags most of the nation in growth. According to RP Data year-to-date growth in Perth is the second lowest of all the capital cities at just 6.5%.

Posted via web from peterfletcher’s posterous

Posted via web from peterfletcher’s posterous