Forums / Property Investing / General Property / A phrase that's worked for me…

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  • Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,750

    I hope you’re having a great weekend.

    I found myself with a little extra time this afternoon and thought I’d write you a quick email explaining a useful negotiating phrase that’s worked well for me when buying property – something that has sometimes knocked down the purchase price by thousands, even tens of thousands, of dollars.

    By way of context, the art of negotiation is giving up something you don’t want (i.e. ‘deal leverage’), to get something you do want. If you don’t have anything worthwhile to offer up, then it can be hard to justify asking for something else (like a discount) without seeming unreasonable.

    So let’s say you’ve already negotiated the price down, and now you are looking for a new angle to chisel an even bigger discount. That’s when these words (see bold below) can really be valuable. Here’s how I’ll use them:

    “Okay, great. I really appreciate the seller has gone down to $Amount. Now, what’s the price for cash?”

    Hang on a minute, won’t you be paying cash anyway? Well, yes, you will (but maybe EFT rather than folding notes), but what I’m talking about when saying ‘cash’ is buying without a ‘subject to finance’ clause. This can be seen as advantageous if the seller has had other offers fall over because of financing issues, or if they don’t want a contingent sale on an event that is becoming harder and harder (i.e. qualifying for finance, lower valuations, etc.).

    Now, I don’t like risk, so I’ll still routinely buy myself some time by using a ‘get out’ mechanism in the form of a blanket due diligence clause (and I can use that time to shore up finance, if needed*), but taking any ‘subject to finance clause’ off the table provides the deal leverage needed to request a discount.

    Sure, it’s not going to work in every case, as sometimes the price for cash is no different. But you’ll be surprised how often a little, or big, discount will be offered, if only you can come up with a plausible reason to ask for it.

    * If I can’t get the finance arranged in the due dilly period then I can either extend it, or quit the deal and get all of my deposit back.

    P.S. I NEVER recommend buying a property without some kind of ‘get out’ clause unless you are an experienced professional investor who fully understands the risks.

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of CoatesmanCoatesman
    Participant
    @coatesman
    Join Date: 2003
    Post Count: 2

    Great one Steve. I recall a recent study that said if you use the word “because” it helps people agree with you even if the reason (of the because) is not entirely valid. Eg Can I step in front please because I need to use the photocopier (of a line of people using a photocopier) Apparently like over 70% compliance. Keep up the great work!

    Profile photo of Joe BlogsJoe Blogs
    Participant
    @joeblogs
    Join Date: 2018
    Post Count: 9

    What is a good get out clause?

    Profile photo of MalMal
    Participant
    @newair
    Join Date: 2017
    Post Count: 2

    Thanks for the tip Steve! I like your tip too Coatesman!
    On Friday just gone I was trying to employ the the strategy of signing the contract with either a DD or finance/build/pest “get out” clause. The vendors had instructed the agent not accept any offers with “subject to” clauses. I thought this a little out of the norm. Thoughts anyone?

    Profile photo of James2506James2506
    Participant
    @james2506
    Join Date: 2013
    Post Count: 1

    Thanks, Steve. I will put the knowledge into practice.

    Profile photo of Kerry512Kerry512
    Participant
    @kerry512
    Join Date: 2017
    Post Count: 1

    As usual, a great tip Steve. It’s surprising how many buyer simply don’t do things like this. Even when I bought a new remote control for my TV priced at $69.95, I asked the question “How close to $50 can you come to for me on this?”. And ‘yes’ I did get it for $50.

    And ‘surely’ you mean ‘shore’ up finance in your article! :)

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,750

    Great one Steve. I recall a recent study that said if you use the word “because” it helps people agree with you even if the reason (of the because) is not entirely valid. Eg Can I step in front please because I need to use the photocopier (of a line of people using a photocopier) Apparently like over 70% compliance. Keep up the great work!

    Indeed! That is from the excellent book ‘Influence’.

    I have it in my library.

    https://www.amazon.com.au/influence-Psychology-Robert-PhD-Cialdini/dp/006124189X

    – Steve

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,750

    What is a good get out clause?

    A clause you add as a special condition to a purchase contract that makes the contract conditional upon (or subject to) that clause being satisfied. Common examples are subject to finance, subject to building inspection, subject to planning approval, subject to due diligence, etc.

    The more get out clauses you have, the less attractive your offer. Hence my preference for a general due diligence clause that really encompasses all the others.

    – Steve

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,750

    Thanks for the tip Steve! I like your tip too Coatesman!
    On Friday just gone I was trying to employ the the strategy of signing the contract with either a DD or finance/build/pest “get out” clause. The vendors had instructed the agent not accept any offers with “subject to” clauses. I thought this a little out of the norm. Thoughts anyone?

    My expectation is that the vendor may have been burned by a bad experience in the past. In this case you could offer a much lower price for cash (i.e. no conditions) IF you were prepared for and were willing to underwrite the risk, with a higher price but a subject to condition. That way the vendor could decide if they wanted price or terms.

    – Steve

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,750

    As usual, a great tip Steve. It’s surprising how many buyer simply don’t do things like this. Even when I bought a new remote control for my TV priced at $69.95, I asked the question “How close to $50 can you come to for me on this?”. And ‘yes’ I did get it for $50.

    Indeed and well said. I just negotiated a $500 discount of a medical procedure using the same approach.

    A dollar saved is a dollar made.

    – Steve

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

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