How to negotiate a home purchase

Settling into a home that’s yours is truly special. Once you’ve run a home loan comparison, secured loan pre-approval and made a successful offer on a property, you’ll no doubt be counting down until settlement day.

That said, buying a house is a big commitment. A home loan comparison can help you secure a competitive interest rate, but smart negotiating could help you shave thousands of dollars off the purchase price.

Is now the time to buy?

Many Australians will toy with the idea of taking the first step onto the property ladder, but wonder if the timing’s right. A positive sign it may be time to buy are record low interest rates.

Three of Australia’s big four banks announced fixed loan rate drops on Wednesday to a historically low interest rate of 4.99 percent on 5-year fixed rate home loans, the lowest 5-year fixed rate on record – and a great sign for potential home buyers.

The Reserve Bank of Australia’s (RBA) July 1 monetary policy meeting also shed light on Australia’s property market. 

Though established housing market conditions eased somewhat in the March quarter, strong growth in residential construct was expected, the board noted.

“Dwelling prices have increased significantly over the past year, though there have been some signs of a moderation in the pace of increase recently,” Glenn Stevens, Governor of the RBA, said.

A softening in housing growth is great news for those looking to enter the property market for the first time – as is the current historically low interest rates.

Make yourself known

The first thing you need to remember when buying a property is the role of the real estate agent. They’re working on behalf of the vendor, and have a vested interest in securing the highest price possible.

Of course, the seller isn’t going to be all too happy if they get no offers. While their agent will be looking to secure a favourable re-sale price, they’re also aware of the need to get a buyer to sign on the dotted line.

From the get-go, demonstrate to the vendor and agent that you’re serious about buying. Use a home loan calculator to establish your borrowing capacity and obtain loan pre-approval accordingly. If you attend an open inspection and the property appears to check the boxes, follow up with the agent as soon as possible so you’re seen as a serious purchaser.

Do some investigating

If you can establish why the property’s on the market, you’ll be able to negotiate a lot more effectively.

For instance, if vendors are selling because they need to relocate to a new city in a short time-frame, effecting a quick sale is likely a priority. By contrast, if a young family’s looking to upgrade to a bigger home and is more concerned with lining up a sale alongside a second purchase, signing a contract of sale super-fast is probably not in their interest.

Strike the right balance

If you make an offer below market value, it’s a pretty sure thing the vendor will return with a counter-offer.

But if you go too low, they may not bother negotiating with you at all. Be realistic when you make an offer — while it’s reasonable you want to secure a low price, you don’t want to remove yourself from negotiations altogether!

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