We negotiate all the time in our everyday lives, however when it comes to the crunch the ‘Art of Negotiation’ is easier for some than others. In this revealing discussion with Michael Yardney we find out some imperative tips to remember when you are negotiating the price and terms of sale a property.
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PODCAST TRANSCRIPT :

Andrew Mirams (AM):   Thanks for joining me. Sitting with me today is Michael Yardney, one of Australia’s leading property experts. Hello Michael.

Michael Yardney (MY): Hi Andrew.

AM: I thought Metropol Properties buys, and probably less so, sells those properties for clients all the time and I thought a really interesting topic that we might be able to talk about today would be the art of negotiating or negotiations. And I know you do this on a daily basis so enough to get your tips on the negotiating process.

MY: I think, Andrew in our western society we’re not born to be good negotiators. We’re actually taught to be courteous and polite and everyone’s got to win. When, in fact, a lot of our friends from other countries and the Asian countries are maybe more born negotiators. That does mean that sometimes we’re at a disadvantage and we can learn the art, the skills of negotiation, because it is actually a skill.

AM: The bartering system and I know when most people go on a holiday, to Bali or to Thailand or anywhere in Southeast Asia, for that matter; they find that the process is probably something you do get better at. I’ve travel through there, early on you go once or twice and you end up accepting it and there doesn’t seem to be a big dollar difference compared to our money. Certainly, by the end of your trip you seem to be then quite astute in it and probably there’s a little bit of knowing what value is as well. Would that be fair to say?

MY: Oh, sure. Look, we negotiate all the time. With you and me it’s probably who takes the rubbish bins out at home. You negotiate with your kids; you negotiate with your life partner…

AM: You do what I do because we don’t win that one?

MY:  Yes. That’s right. There are some jobs; it’s just not worth arguing about. Exactly right. There are a lot of times when you’ve got to negotiate. Then when you’re buying expensive items, like cars or I guess what we’re planning to talk about a little bit – real estate property, whether it’s your home whether it’s an investment, negotiation can add $10,000, $20,000, $50,000 when you’re selling your home and can save you as much, if you’re negotiating smart, when you’re buying your home or investment property.

AM: I think a great little point I’ll just make there, you see we’re not natural negotiators but then anyone with kids probably undersells themselves as a negotiator because raising children is a negotiation the whole time.

MY: Very much so.

AM: Let’s maybe lead in again. Both of us work in the property markets and it’s something that’s near and dear to us so maybe let’s talk about the art of negotiating when you’re looking to buy a property or something along those lines. You trying to buy a property from me, as an investor, what are some of the tactics that you look to use or implement to get, you know, a good deal?

MY: I think you’ve always got recognise that everything’s negotiable, it doesn’t always mean that you get it, whether it’s related to dollars, whether it’s related to time, whether it’s related to what you get for your money. I guess, the first point is you should always consider things negotiable.

When you start to negotiate though, I think, the big thing we tend to think about is price and when you want power in a negotiation, because we all want the upper hand, I think once you recognise that there are three critical negotiating pressure points, that if you seem to be empowered with those you’re much more likely to be in a better position.

They are options. In other words, the person with the most options feels more power, the person with the most time feels more powerful and the person with the most knowledge, the person who’s got more information, feels more powerful.

AM: That’s interesting, I didn’t heat you mention price in there. Can you please just give me those three tips again?

MY: When you’re negotiating anything, between me and you Andrew, if I have more than one option, if you think that I’m not necessarily wanting…I don’t have to buy your house; I’ve always got another one. I don’t necessarily have to buy your car because I can go to the other car dealers. I don’t have to buy the fridge from you, I can go elsewhere. I have more power if you the seller believe I…

AM: You have options.

MY: …I have more options.

AM: Okay great. So, the first point – options.

MY: Therefore, the first pressure point is you’ve got to have more options. When buying a property it’s so important to convince the seller that you’ve got other options, now sometimes you’re not speaking to the seller you’re speaking to an estate agent, because the power of negotiation goes to the person with the most options.

Look at it this way, if the seller has two buyers lined up willing to buy $500,000 for his property you feel you don’t have much option because you’re actually going to have to match that or do better. On the other hand, if it’s the other way around and he hasn’t got many people, he thinks you’re not hell bent on buying his property because…

AM: Or there are other properties like that so you’ve got other options.

MY: That’s right.

AM: That gives you the upper hand.

MY: Yes. Now again, with all these things Andrew, it’s perception. It’s doesn’t actually have to be reality, but it’s the perception of power. Agents will often tell you they’ve got another buyer interested. That’s one of the ploys they use but simply they’re using the same pressure tactic in reverse on you.  Again, in the power of negotiation you must convince the vendor, I guess, his agent that you’ve got more options than you actually do have. Now, sometime it’s difficult and sometimes at an auction it’s irrelevant. I’m talking more in certain sorts of sales. So while I like…

AM: Off market or private.

MY: …this property, there’s a couple of others I’ve got in mind and they’re a bit different. I guess, the bottom line with this is the person with the most options has the upper hand in negotiations.

AM: The first point is having options. The second point you mentioned was?

MY: Time. I think time is important. If a vendor was highly motivated and under time pressure, you could find yourself a terrific buy. While it is sometimes a bit hard to work out what their pressures are, they’re not going to put a sign up saying ‘motivated seller please buy this property’, but you can ask the agent a couple of questions just to try and gauge that.  How long has the property been on the market? Have they received any offers? How did the vendor come to his selling price?

I like using time pressure when making an offer. In fact, this only happened last week, when I knew there was a couple of other offers available, I said this offer expires at 6pm next Thursday. Now, really interesting, the agent rang me at 5 minutes to 6pm because he told me I’m actually going to see the vendor afterwards. To be honest, I’d actually forgotten I’d put that time up. It was probably weird buying for ourselves.

I’d forgotten I’d put that time up. He rang me at 5 minutes to 6pm. He said ‘look, the vendor Adrian is running a little bit late, he’s been caught a bit late at work. I’ll ring you in half an hour’. I thought ‘gee, that’s nice, that’s courteous of him’. But in fact, I’d forgotten. He felt under pressure. He actually felt he had to get back to me by 6pm otherwise…Interestingly we got the property.

AM: That, all of sudden, means the less time his got to talk to his vendor the more pressure that they’re under.

MY: The argument I used was, well, actually there’s a couple of other properties I’ve got. I’ve signed a written contract but I have to put a time frame on this because I don’t want to lose out on the other one and I can’t have this offer open over the weekend because if I buy the other one at auction, I can’t afford to buy, I can’t afford to buy this one as well. Therefore what I’ve got to do is either finish it or this offer is off the table so I can go buy elsewhere.

AM: I think that’s a great point because putting a time limit to it actually eliminates some of their options and gives you more options, doesn’t it, which is again the first point.

MY: Deception of power.

AM: Great, great point.

MY: Time pressure is one of them and the other one is knowledge. The person who perceives themselves to have the most knowledge will do better. Fact is, if you’ve done your property research you’ll probably be in a much better position than the vendor, who’s probably more emotionally involved in what he think his property is worth or what’s going on in the market. Apart from doing the research on the area you’ve got to research comparable sales and then you can use that to formulate how you’re going to negotiate, what price you’re going to negotiate and where you’re going to go with this.

AM: Okay. I think, there are some fantastic tips for all of us to learn. Now of course, you can take this knowledge that we’ve just shared with you and go out and do it yourself but, of course, you can use the property experts at Metropol Properties to give you a hand to learn. This is what they do, they do it all the time and they are very, very good at what they do. Michael is there any last point you’d like to add before end?

MY: Maybe we should quickly look at some of the mistakes people make. I think, some of the mistakes are people actually don’t plan the negotiation. They don’t think before they speak. They speak openly and honestly, which you would with a friend but you’ve got to recognise that you’re dealing with estate agents. Estate agents are trained negotiators. They do special courses on that.

They actually learn about reading people and what your motivation is and that’s their job because when you want someone to sell your property, when you want someone on behalf to negotiate smartly for you. If you’re not good at this, thank you for recommending our services, you need someone on your side to level the playing field.

AM: Because some people think that ‘he’s a nice agent and his got my best interests’ but he’s working for the other side. That’s who pays his bills. Doesn’t it?

MY: Exactly right. If you are going to do the negotiation you’ve got to plan, you’ve got to know where your upper limits are, what you’re wanting. Don’t just wing it. That’s a big mistake people make. I think, the other mistake people make is often, again, they’re anxious, they’re keen, they rush the negotiation process, they’re in a hurry to get it all over and done with. Again, the person with the most time or the perception of time, who’s not in a hurry, is the person who’s going to win the negotiation.

AM: A smart agent will sniff out an act of desperation really quick, won’t he?

MY: They will and I think the other thing is, maybe, failure to understand the real needs of the purchaser, so often we’ve actually found it’s not purely price. That property that we talked about, we got last week based on an offer at a particular time, the vendor was still in there, was looking to buy a new property and to them one of the important factors was being able to stay there and not move until they found the new property. A longer settlement, interestingly, was more important to them and to the investor it makes no difference because I’ve already got my foot in the market anyway. And, if I offer $150,000 the settlement is usually organise then, 5 months, it gave them the flexibility to move but I’ve already locked in the property today’s price.

AM: Well, you’ve got a commitment and a contract so if the property goes up you’re still the benefit, still got the benefit.

MY: Exactly right and that was, interestingly, more important than a few other dollars in their pocket.

AM: Yeah. Absolutely.

MY: I think the other big mistake people make with negotiations is talking too much. Actually sometimes trying to act smart, sometimes trying to be too much of a know all. That old story, I don’t know if you remember that old TV (television) show Colombo where he’d actually fumble and he was bumbling around and as he walked out ‘I just got one more question’. Sometimes acting dumb makes agents open up and speak a little bit more.

AM: Yeah. That’s the adage, isn’t? You’re born with two ears and one mouth. You should listen twice as much.

MY: That’s right.

AM: Great points. Okay. I think there are some fantastic tips there, Michael. I appreciate your time today…

MY: Great.

AM: …and we’ll see you soon.

AM: My pleasure. Thanks Andrew.