- You don’t always have to pay the asking price, but whether a low offer works depends heavily on market conditions, competition and the property itself.
- A home’s listed price isn’t always its true market value, so doing your own research - or getting a valuation - can help you decide what to offer with confidence.
- Preparation matters when negotiating, from understanding comparable sales and the seller’s position to having finance pre-approval ready.
To some people a home is priceless, but the cold, black heart of the market doesn’t care about that. Every property has a 'market value' - the price negotiated between a buyer and a seller.
Should you make an offer below the asking price?
While making a lowball offer on a house is a tactic some people employ, it can backfire if:
- The market is particularly hot
- The home is desirable
- The home is rare or unique
- Other bids have already been made
On the other hand, you might want to consider making a lowball offer if:
- The property is poorly presented with little to no advertising
- The home has structural issues that haven’t been noted
- No one shows up to auctions/inspections
- The property market is falling
While you can make an offer that’s any amount below the asking price, the lower you go the higher the chance the seller will reject your offer. It’s generally recommended that you stay within 5% to 10% of the asking price.
Savings.com.au’s two cents
You don’t always have to offer the asking price, or more, though you might want to if you really want the house. But buying a house is a huge investment, and it’s often worth trying to shave off some thousands from the final price.
This is especially true when you consider that the more you pay for a house the more you pay in interest. By knocking a few thousand off the purchase price of a home you can save tens of thousands over the life of your home loan, and it also means your deposit counts for more.
Is the listed price actually what the home is worth?
David Hyne, director of national valuations firm Herron Todd White, told Savings.com.au that some people might not be aware of the factors influencing a property’s value.
“A property is valued based upon direct comparison with sales of similar properties that have sold within a similar time frame or market as the valuation date. The role of the valuer is to interpret the market in accordance with the local market evidence that indicates what an informed buyer or seller would be prepared to pay or sell for in the current market,” he said.
“An informed buyer or seller that has educated themselves in the happenings of the local market should be aware of most factors.
“However, it can not be underestimated that the varying markets across Australia have their own unique drivers and preferences that have a proven history and performance that makes them unique in that market.”
The listed price seen on real estate websites or quoted by an agent is not necessarily the same thing as the home’s market value.
“There are varying reasons why a property is listed for a certain price. Not always is this pricing arrived at by prudent evidence,” Mr Hyne said.
“Vendors can have unrealistic expectations due to their own personal bias or emotional attachment to the property. Sometimes vendors can become more realistic as they are conditioned from market and buyer feedback.
“Alternatively, a low price may be quoted on a particular property in the lead up to an auction, which some may say is the result of a marketing agent encouraging interest in the property, alternatively this ‘low price’ may also be the result of market feedback on open houses etc which intending buyers are providing.”
So there are sometimes discrepancies between what a home is listed for and what’s it’s truly worth. But how can you find that out?
How to decide what to offer on a house
An offer can be lower or even higher than the listed asking price. If you back your own judgement, make an offer of whatever value you see fit. But if you aren’t confident in your own ability to accurately judge the value of a property you may enlist the help of a property valuer.
What’s a property valuer?
Property valuers are responsible for carrying out inspections of properties to determine their current market value. Property valuers need to have a ‘certified practising valuer’ accreditation and superior market knowledge, so any old schmuck can’t become one overnight.
Mr Hyne (who is a certified valuer himself) says there are benefits for both sellers and buyers to using a property valuer.
“If you are an investment or owner occupier buyer entering into a market that you have little knowledge - I highly recommend the services of a valuer with suitable local knowledge,” Mr Hyne said.
“I have witnessed first hand the losses that buyers have made into some of the more highly volatile markets, on the basis of advice that has only benefited the person giving the advice. It is not a particularly good feeling reporting back to a buyer now at a stage of looking to sell that they can expect 30% less than what they paid when it was avoidable in the first instance.
“It can be life-changing for people. Unfortunately, market commentary on the property market is very general in nature and can be easily misinterpreted.”
How to negotiate a house price
There’s often merit to making a lowball offer and by employing hard negotiating tactics. Research from the Harvard Business Review found ‘nice’ communication styles yielded worse results than ‘tough and firm’ language. According to the research, warm and friendly negotiators ended up paying 15% more for the same item compared to tough and firm negotiators.
However, it would be naive to assume this is an infallible 'hack' to snapping up a house for a cheap price. Experts advise buyers to seek out meaningful conversations with agents or sellers. Be genuine, present a realistic offer, and know the market you're buying in.
Some other tips for negotiating an offer below the asking price include:
- Bring up recent comparable sales
If similar houses in the area have sold for less, come armed with this knowledge when making an offer. - Find some negatives
No one likes a negative Nancy, but you’re not here to be nice, you’re here to buy a house. if you spot negatives that aren’t listed by the agent (like noise pollution, leaky pipes, or a poor paint job), mention them when explaining why your offer is lower. If you really want to play tough, mention them when other prospective buyers are around. - Find out why it’s being sold
As an example, if the homeowner is in a hurry to sell because they’re moving away, they might be more willing to accept a lower offer just to get it out of the way. - Be prepared to walk away
Don’t let your emotions get the better of you. If a property is too expensive, walk away. There'll always be another. - Be ready to buy
Being confident and prepared gives the impression you’re serious about your offer, which might make a seller more likely to consider you, rather than view you as a window shopper.
If you don’t want to do all of this yourself, a buyer’s agent can do the negotiating on your behalf.
What is a buyer’s agent and how can they help?
A buyer’s agent is to the buyer what the real estate agent is to the seller. They can find a suitable property and help negotiate a sale on your behalf. Aside from your solicitor, a good buyer’s agent is typically the only person in your corner when you're purchasing a property.
Like a property valuer, buyer’s agents are required to undergo specialised training and must be licensed in the state or territory in which they work.
Making an offer on a house
One of the most common ways of making an offer on a house is via private treaty. That’s where you make an offer in writing to the seller.
Another common way is through a property auction, where, after formally registering as a bidder, you can bid among other interested parties for a price that either matches or exceeds the reserve price.
You also should consider getting either pre-approval or full finance approval prior to making an offer and definitely before bidding at auction.
Getting pre-approved for a home loan can help
Being pre-approved for a home loan gives you a good idea of your upper limit and can help you when making an offer for a home, as you know when to walk away. It’s also possible that a seller will take you more seriously as a buyer if you have pre-approval since you’ve already spoken to a lender.
Looking for a competitive home loan? Check out some of the lowest variable rates available now:
Lender Home Loan Interest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees Max LVR Lump Sum Repayment Extra Repayments Split Loan Option Tags Features Link Compare Promoted Product Disclosure
Promoted
Disclosure
Promoted
Disclosure
Promoted
Disclosure
Disclosure
