Episode 3 of The First Home Buyers Show - Negotiation

One of the scariest things that you are going to do is actually negotiate a property purchase or even worse, going to auction. It's when the auctioneer puts his hammer up and he says going once, going twice, passed in. And that's exactly what happened to me. When we went to auction for our very first home, we had the property passed in. However, we were the highest bidders. So we got to go inside with the auctioneer and start negotiations. Oh my goodness. We didn't know where to start, but we had with us a pest and building report that indicated there was about $50,000 worth of work to do. And we also had a RP Data or Residex back then report of comparable sales. So we were off and starting. So I want to share with you some great negotiation tips today with one of the best negotiators I have ever, ever worked with. And I'm going to introduce you to him today just in a moment. So without further ado, let's play the title.

It's the first Home Buyers show where first home buyers go to watch their wealth grow. And here's your host, Jane Slack Smith.

Hello, it is Jane here. How are you going? And it is interesting here we've got the first home buyer scheme that has just been announced with more and more details and the detail is out there. It was released last Monday. We now know the caps on all the capital cities and we also understand that there is maybe about 10,000 people who are going to get access to the first home loan deposit scheme that comes out. The first, the first 2020. So what does that mean to you? Well, that means that you should be saving your money now, but you don't necessarily have to have the hundreds of thousands of dollars that most people need. Now in our financial freedom framework that we covered in episode one, we talked about, we talked about set it, getting the budget set up, understanding what you can borrow, then sourcing it, understanding where you can afford to buy. But then we get to the very next step in the process and that is slam it. That's when negotiation comes into play. Conveyancing, pest and building inspections. Today I have a very, very special guest with us and that is Scott from hello House. Now Scott has been with hello House for a while. He has been a real estate agent for what, over 20 years?

Scott? Yes. Hi Jane, how are you?

20 years, I'm good. Now, Scott, tell me the premise of. Tell me a bit about your background. You've been a real estate agent, but now you've kind of changed things up a little.

Bit I was just about to say let's just call it how it is. Ex estate agent, which is the reason why I'm talking to you and I can give you all these insider tips, otherwise I'll be shot. If I was still in the industry giving away all the tricks of the trade. Well, I did my sort of apprenticeship here if you like, in Sydney and then went away to London and worked in real estate for five years there. Came back to Sydney and I was a director of Bell Property. Had three franchises in the Sydney's inner East in recent suburbs and then did that for about 15 years. And the last three years or so I've been property developing up on the Gold coast and have set up a property negotiation business to help buyers and yeah, get back on the other side of the fence for the first time ever and be transparent and do something completely different in the negotiation space to help people. Here I am today.

Now we kind of connected three or four months ago and when Scott told me about his interesting business, I'd never heard of a professional negotiator before. I had to learn more. We put him to a bit of a test. I had him do a purchase or assist my best friend buying in London. A lot of late night negotiations and saving hundreds of thousands of pounds. And then one of my mentoring students, Sharon, which once again saved tens of thousands of dollars. So we put Scott to the test. He then came down and ran a mini masterclass for the mentoring students in Melbourne. And I just knew that as first home buyers, if you're not used to negotiating then you need someone like Scott on your side. So Scott, it's an absolute pleasure to have you here and sharing all your tips. Thank you.

Thanks for having me.

So for those people who've never been in the property market before, there's a number of ways that people can actually purchase a property. You want to tell us the differences?

Yeah. The two you're going to come up most against in the main cities and more populated areas of Australia are going to be private treaty where it's listed for sale at a price or it's a guide guide over a certain level. And the main one that you're going to come up against is auction. And auction is typically a property marketed either without price in some states or with a guide price in others of a maximum 10% range with an auction typically on the fourth Saturday. And that tends to be how majority of property is bought and sold in Australia.

I think the thing is for people who are in regional areas, it's Usually the private treaty that we see and as you said, auctions. Auctions, I know in Melbourne are a bit of a sport. People just go out on Saturdays to watch them.

Absolutely. It's a contact sport right across the country. And it seems to be that Australians are just obsessed with property. You go to a dinner party and people are openly talking about what they paid or what something sold for. And it's not like that in every country, certainly most countries I've traveled to, it's not like that. So we have a unique take on that whole property sphere. And yeah, I think it was an interesting time for me to set up a business that offered buyers complete transparency and someone that was on their side. Because I found from 20 years on the agent side of the fence that buyers were lambs to the slaughter. They're left on their own to find their own property, do their own due diligence and fend for themselves when it comes to negotiation time. And that can be, to be honest, brutally aggressive towards them from the agent and they end up coming off not so good.

It was funny. There was one of the first home buyers that we interviewed last week on episode two, and you came back to me with a comment that she had said she had said something to one of the agents about. She didn't say, is there much interest? She said, how many contracts are out? And you said, oh, it's interesting she said that because they're really.

How many offers have you had and what was the highest offer? So I thought my take on that, listening to your interview with her, was that she got a lot of confidence. She gained a lot of confidence by asking that question and she perceived that answer to be a straight answer back to her. That gave her some sort of understanding of where it was at with this campaign and what possibly she had to do to secure it herself. What I wrote to you afterwards was I actually find that it's probably fairly misleading from the agent because if they asked a buyer asked that question, in that scenario, you're going to position your answer to suit whatever you need to do to prop up your campaign. So she thought she was getting a straight answer by asking a direct question. She was probably going to get a lie or whatever answer the agents needed to say to her. It might not have been a complete lie, but it might just be a withholding of part of the story to make it sound a little better or favorable for them.

Okay, so let's talk about this. You mentioned that agents or auctions, there's a four week campaign. Tell us Some of the things that we would hear about an agent would say to us during that campaign to get us to auction. Because I imagine that's their goal.

Yeah, their goal is definitely to get you through the four week campaign if they can. And you're going to hear a lot of different throwaway lines that they train to use internally in their office. They practice these lines to try and ensure that they can get as many people dragged along to that fourth Saturday. And they have their public show which is the best chance for them to sell the property at the highest price they perceive and to put their skills, I guess, on show to the most people to try and pick up more listings elsewhere. So you'll hear lines, I'll rattle off a few of them because anyone that's been interested in property or out looking recently at open for inspections would have no doubt heard these during an auction campaign. The first one is my vendors are committed to the auction process. This is a standard one that kind of just shuts everybody down. Can I buy it prior? No, my vendors are committed to the auction process. So they're, they've made a decision they're going to sell on the day and that's final. So they won't be swayed from that decision. Another one is we're letting the market dictate the value by running it through to watch.

I've heard that one.

That's one to say maybe the market's low, maybe the market's in the middle, maybe it's high, who knows? But the market will decide on the day. So let's just run it through to auction and everyone's got a fair chance. So that's all just P.S. anyway to get you along to that fourth Saturday. Another one is we've got strong interest in the property and the only fair way is let everyone have a go at buying it under auction conditions. Now that one seems like a pretty fair answer, I guess if you ask that of the agent. There's heaps of people that are interested in buying this property. So let's just let everyone have a fair and open go at it under auction conditions. But you'll definitely hear that one along the way. Another one is it's a tricky property to appraise. The vendors would prefer to run it to auction and let the market decide. This can be used really often because it's very difficult to find two homes that are alike. Things are in different conditions, different aspects, different streets. So that's an easy one for them to put out there and not trick you, but get you along to that fourth Saturday, I'm dealing with multiple vendors. It might be a deceased estate or a family sale. It's easier to run it to a public auction as they can't all agree on a selling price. So that's a constant one that comes up. Another one is, it's a messy divorce. One of them wants to sell prior, the other one wants to drag it out to auction as punishment to their other ex partner.

Which is interesting. You know, I had a friend at one stage, they were buying a block of apartments down in Sydney and the age, they asked the agent how much and it was insane. It was like 1.6 million. And this friend of mine said, oh God, I'm really disappointed. We really wanted this, but you know, we can't, there's nothing we can do. And the vendor somehow heard this conversation and the friend had said, oh, you know, I grew up in a certain town. And the vendor said, oh my God, so did I. Look, this is a divorce. I really, he's got enough money, you know, I don't really don't care. What can you afford? And she said 1.2 and said, done. And that was the negotiations and it was the punishment for the ex husband. Right?

Yeah. This sounds funny, but I've had two of those messy divorce lines thrown at me in the last month of negotiating for clients for hello House. So this is a line that constantly come up, I can tell you. One of them went nowhere. It's still on the market and I'm still just waiting because they won't see eye to eye. It wasn't an auction. And the other one was just bs. It was complete hot air. We made an offer that was above the guide price in the first week. He gave me all these lines, exactly what I'm just showing to you now. But one of those the whole time was, it's a messy divorce. The wife accepts your offer. He actually said to me, don't offer more money, stop offering more money because it won't sway the husband because the husband just wants to drag it out to the auction day as punishment for the wife. And I'm like. But neither of them live there, so it's not really punishing anyone. The property is vacant and styled. So this was just his line to get me there. And as you know, as it turns out, we went to auction. He told me the day before, all the things, you know, there wasn't going to be much competition and you're going to buy it for less than what you, it's going to be one of the rare auctions where you bought it for less than what you offered in week one. Anyway, we turn up five or six competitive bidders. We ended up having to spend 2,500 more than we offered to buy the property. So we got it, but it cost us slightly more. And, you know, turned out that what he was saying was just hot air as what I'm trying to relay to you now.

So, I mean, we sit on one side of the fence and we're hearing all of these things and going, oh, okay, that makes sense that it's really hard. You have to go to auction, and we bow out. But being someone who's been on that side and understands all of these lines, you're sitting there going, they're just pulling my leg. Why are they doing this? Tell me, why would an agent say this? And why are they trying to get us to this auction?

Part of it is they want market feedback, right? So they're looking to see what's happening in week one, week two, which is typically when the best buyers come through the campaign. They're the ones that are hot on real estate and domain.com and looking at all the new listings. Part of it is they want to see those buyers come through, give everyone an equal opportunity to see the property, give that feedback to the client, and then set the vendors expectations for how that auction campaign will run from there. So that's the sort of realistic way and the nice way possibly of what they're trying to do there to service their clients, but to give you some of the sort of dark side, which I know is what you want to get out of my brain all the time. Jay.

I want the dark side.

Yeah, the dark side. Step into the dark side for a second. What the agents are saying when they do that is probably four or five different things. I'll tell you what they are. The number one thing is they're trying to secure themselves four weeks of public marketing. So they want to enhance their market profile. They want to control more listings in the marketplace. They want more online presence, more sign boards, more local paper, print media, letterbox drops, and the rest of it. Because if they have more time, they're going to meet more sellers and win more listings and grow their market share. So that's the key reason why they want to run you through to auction.

So this makes sense, doesn't it? Because if I'm thinking about selling my property, and all of a sudden I see XYZ real estate everywhere, every. And they've convinced the vendor to do every single marketing trick possible and having websites for the property and all of the things that they're doing, I'm thinking, gee, XYZ is really clever at this. Maybe I should list the property with them.

Correct. Top of mind.

They're getting free marketing.

Yep. So you've got to be top of mind in that industry to retain market share or grow market share. So they absolutely want to stay in the public eye as much as possible. So that's part of the reason. The other thing is if they go for four Saturdays, they're going to get eight open for inspections because they do midweek open for inspections or seven possibly. So it means more open homes, it meets more neighbors, meets more potential sellers and more buyers that they're going to cross sell into office listings. So if you're not right for that property that you came through with me on Saturday on my auction campaign, I'm going to call you up on Monday morning, I'm going to get your feedback from it and I'm going to try and cross sell you into another listing that we might have that may be a better suitable property for what you're looking. So that's another key to it. The other one is probably harder to realize for buyers if you're not in the industry as to why they're doing it. It's because if you make an offer during the campaign, the agent is legally bound to present that offer to the vendor. So if they've given you a guy price of say 750 and someone walks in on week one and offers 750,000 and it's unconditional and they present that to their client, which they must do by law, if their vendor knocks that back legally, they've got to increase the quote. So offers in excess of whatever they knock back, in this case, $750. So you've got all these buyers that may have been really strong buyers in three weeks time or four weeks time at auction day that are at the low end of that range at 7, 720, $, 730 that are now going to be told that, well, they're not even going to sell for 750, you have to pay more than that. Well, they're out, so they're gone. So all of a sudden the auction is dead because all of your other buyers that are going to push your 750 buyer are no longer there anymore because they can't afford to spend over 750. So the agents don't want your good offer early in the campaign because that's going to blow up their auction campaign and make it very difficult for them. The other thing is, if they ask.

Is it only a written offer that they have to pass on, not a verbal?

Yeah, written offer. Legally they have to pass on verbal offers and written offers. But of course a written offer and an unconditional written offer carries a lot more weight. And if you're going to ever go via office of their trading or anything else, you need to have something in writing that you've done that I think anyone that's putting an offer forward should do so on paper, that's the best thing. But the other thing is if the vendor has been waiting painfully for four weeks and then you come in as the agent and set your auction reserve price with them maybe on the Thursday night before the Saturday auction and you've given them nothing, but either low ball offers that are below the price guide or no offers at all. So you've given them no good news. The chances are when you set the reserve price, the vendors are going to come crashing down because they're stressed, they're highly stressed that their property is not going to sell. They're at their weakest point and you're going to be able to get a reserve price out of them that's lower than possibly what you told them. And you know that over inflated price to win the listing in the first instance.

These real estate agents are so clever, aren't they? They're masters of psychology.

They want to control that. They've got to control the vendor, they've got to control the buyer and they've got to run their campaign in the middle. So they don't want your high offers and they don't want to pump up the ties of the vendor. They want to keep things status quo and then get everybody to the pressure cooker environment of an auction. And it works both ways for them. They've got buyers that are highly stressed and they're all eager. They've had no bad news. So they're going to get lots of buyers there, they've had no reason not to come and they're going to get a vendor that's highly stressed that may even move south of where their price they said on the Thursday night because they're under pressure to sell. So what ended up happening is auction day rolls around, all the buyers are there, they bid with confidence. It smashes the reserve price and keeps going. The agent turns around and says, I'm the reason why, I'm the best agent and I sell for over reserve price. So if you're going to sell this with me.

So I guess. And then those that have bidded at auction and haven't been successful, they're obviously people that the agents are looking for for the next auction as well.

Yeah, absolutely. So, you know, the more people you get there, the more people that show their cards and then you've got the opportunity to sell, sell them another property. The other thing is, if people go to auction, they have to get all their ducks lined up. They have to do. Well, they don't have to, but they should do. And most do. Strata report or a building and pest inspection, have the contract reviewed. So they've done the hard yards in terms of preparing themselves to purchase the property. So then you know that if they miss out, well, then you've got 2, 3, 4, 5, 10 under bidders that are genuine people that have spent money on this, on this buying journey and.

And.

Their appetite for looking around is just wane. So it's easier and easier to mold those under bidders into a property that they may not have been perfectly suitable for and to get them to pay a lot of money for it because they're over it. They've burnt, they've spent $600 many, many hours of their time and they're just ready wrapping up.

I'm feeling very manipulated now. My next question, I guess, agents, the dialogue that they have to encourage you to attend the auction instead of making the offering or even if you had had a previous offer, it's been rejected. What kind of dialogue are we going to hear? What do we expect to see?

Well, you'll get these thrown out to you if they've rejected an offer during the auction campaign. So you'll hear these from whenever you've had your offer rejected right through to the auction day. But typically for any buyer that's just coming along and they're dragging you along to that fourth Saturday, you'll hear it in the last week and normally in the last one or two phone calls as they kind of prep you and close you basically to get, get along to that auction. So you'll hear things along the lines of, you're one of my strongest competing. Sorry, One of my strongest competing buyers has just purchased a home locally. They're now out of the race. So this is a golden opportunity for you to buy with less.

Okay, so competition, you're the winner.

Yep. So let's kill off the competition now. We've built the competition up, let's kill them all off to make it as easy for you on auction day. Second one is the owners have set a reserve price lower than the offer you've made. They're serious about it being sold on the day, so it's a fantastic opportunity for you. This means absolutely nothing. They've rejected an offer that you've made, price which they don't need to disclose to you. So, I mean, it just is hot air and bs.

It's a line that you can use as an excuse to ring up and go, are you going to be there Saturday?

Exactly. Exactly. Another one is our best buyer's not got bank loan approval, so they haven't got their mortgage approved. They won't be able to bid at auction, but we will expect them to have it as a formality on Monday. They simply ran out of time to get organised to get in place to bid on Saturday. This is always dropped on the day before the auction because it's like 4 o', clock, 5 o', clock, Friday afternoon, geez, we've lost our best bidder. They did everything they could. The bank manager let them down or whatever, their broker let them down. But you know what? They'll be there on Monday. So if this fails to sell, I guess we've got it, we'll get it right.

I feel a bit dirty now. I've heard that before and I believed it.

The reason I say that is because the next time you hear this is on Saturday at auction, when the bidding is stopped and they're going to come up to you and say, look, we told you about yesterday, I told you about that buyer that just missed out. They're going to be here on Monday. So you either bid up now again and you've got a bid against yourself here because you haven't quite yet met reserve price, or you're going to lose this on Monday morning. So you're called, you want to lose it, you're in pole position to buy it. What do you want to do? And in that instance, people are just under the blowtorch and if it's another 5, 10, 15, 20 grand, depending on what you can afford and what you're buying, a lot of people just give in and pay the price because they think, well, here I am, I've almost got the keys, it's only going to take one more bid or two more bids. And that's when you really need someone like myself, or if you've gone through this training and understood what lines are going to be thrown and when to be able to stand firm and say, hey, don't bid against yourself in this.

Scenario, hold for grab when you say that it sounds dumb, right? But the reality is it's exactly what they've just talked you into. And it sounds like a good idea when it comes from their mouth.

When you feel like there's other people around you that have been bidding and competing against you, you just feel like they're not quite out of the equation yet. They're still in the room, they're still here. I need to kind of close this out and finish it. That's why even though those other people have tapped out 20 grand a go or 50 grand a go, and they can't afford it, they're not going to bid for it. They're just sitting there watching. But that's the theater of it and that's why they want to get you there, because it's that pressure cooker that can't be replicated anywhere else. If I was bidding with you on the phone and negotiating, or even if I was having a coffee with you and we were trying to negotiate, it's very difficult for me as an agent to create competition. Really difficult. I can tell you there's other buyers, but if you physically can see them and everything's happening, there's an auctioneer shouting loud in your ear, three, two, one. It's going to be cool, it's on the market, it's going to be sold. You're like, okay, five grand, five grand or ten grand, you just pay it. And that's what they're preying on. They want you to do that. That's why they are so heavily trained towards the auction method. And you'll come up again.

Let's just talk about this training. I mean, obviously running your own franchise and having agents working for you. You were training and learning and doing role playing every week. But you shared with me earlier something around the fact that you used to visit other options of your competitors as well and look at their properties. Tell me a bit about that.

Well, we made it a bit of a staff deal really, that you had to get out and see. So anything, any new listing that came on the market physically, we would go and inspect it. So that we knew as much as what the buyers knew when it came to negotiat because we'd seen every property, so we really knew our market value and what was on the market, competing against our listings and what choice buyers had. But beyond that, in terms of the auction side of things, we made it that all of our staff, when they possibly could, because sometimes it clashed with our own auctions, but we would send someone from the office if we Couldn't all be there to go to our competitors auctions to see what people are paying, how much demand there was in the market, how strong the bidding was and who was making the bidding and who was the under bidder at the end of the day. Because the first thing we would do is we would know the faces because those people come around our open homes, they're seeing we've met them before. As soon as they missed out, we'd be right next to them saying, you've missed this one. But I've just listed 14 Smith Street. It's going to come to market.

You've done a, you know, you're just fortuitous and what a coincidence.

Well, you're doing them a service. At the end of the day you're right there trying to find another property, but you're just taking advantage of that before the other agent even is, has, you know, has a chance to sold sticker on the signboard. So that's part of it. And it's also the other part of it is when you're negotiating with me in a week's time or a month's time, I've taken notes that I saw Jane Slacksmith at 12 Smith street and she bid up to 725 grand. It sold for 730,000. So I'm going to find another property, I'm going to ring you or I might see you at another open for inspection in a few weeks time or whenever it might be down the line. You're going to bid and you're going to be in a negotiation one on one with me and you're going to tell me, look, I'll go to 700 on this one, but that's my absolute max. I'm only pre approved for that level and I couldn't spend a dollar. I'm going to say to you, you need to pay more for this property and I'm going to find a way to make you pay more for it. Right, that's what I'm thinking in my head because I know without saying it out loud that I've seen you bid to $725,000 and miss out on another property. So I know you've got more money and that will form the basis of how hard I push you to what you have to pay to buy this.

So this is incredible because we think about big data and X File kind of stuff. They're out there and they're tracking everything they're doing and they don't manipulate us through advertising by knowing our likes and Needs actual fact. What you're telling me is real estate agents have been doing this for 20 years.

Yeah. I mean, I don't know that all agents do that. I think we had a really strong business because we went that extra yard and did the hard work to make time to go and do these things and understand it. But what a lot of people forget, agents have got a really bad name and for good reason, I think, which is why I've changed over from that side to helping buyers and being transparent. But what you've got to forget, and I think it is lost on a lot of buyers, is that you're dealing with someone that is paid to get the best result for their client, who's the seller. So whatever tricks and tactics deploy to get you to pay that is because the vendors paying paying us to do that, right. We're rewarded to get the best possible financial result. And the reality is, this is where it gets silly in property in Australia is I may do that to you as the agent on that property and I understand and get you to pay the most money. But the reality is when you go to sell your property, likelihood is you'll employ me because you know how hard I pushed you in the first place and that I got you to do that. So it's like this vicious circle that never goes away because all the vendors, even though they know those tricks that were deployed on them, they want that agent to do that to the Byron public to get them the best possible price.

It's just human grief you go through and you have a look at some open homes and you ask an agent, has there been offers made or.

Can.

You tell me a bit about the campaign? Or why is the vendor selling? And there's some agents that cave completely. Well, we think they're caving. They give us all this information and you think never going to use them if I'm selling.

There's a certain buyer psychology behind it really in terms of what you give out. So people may perceive you told them too much. Some agents that are clever about it, they want you to know they've told you what they want you to hear. It'll be part of their sales tactic. They'll tell you, look, we've just lost a buyer at 735 and if they had another buyer at 735, they'd bite their hand off. The reality is it's 35 grand overpriced, it's worth 700, but they've just told you that they've had another buyer at 735. So you feel like, oh my God, I can't believe it. I might have. Who knows what I would have paid? But now I know all I've got to pay is 735. But really they've just set you up to pay a price that's higher. So you've just got to be so cautious about it. And I just keep saying to my clients, just fall back on your data. Research, research, research. Get out to open for inspections, get out to auctions. There's no better guide to the strength of the market and understanding what's happening in terms of market conditions in your little micro market, your suburb in part of the city, is to go to an open for inspection and see what the numbers are and then turn up on auction day and track what's happening, how many people are bidding, how hard are they bidding for the properties or what things are passing in at, and how long it takes for them to sell. Post that. If you do those things, it's very difficult for the agent to get anything over you because you're incredibly well tapped into what's happening in that little micro market.

One of the things I found as well is if you know who the auctioneer is going to be, actually go to a couple of their auctions beforehand because you get a feel for how they act and you can get a feel for. Well, let's just talk about that quickly before we move on to private treaties. But agents that say, I need to go in and talk to the vendor, what's going on there?

Well, yeah, I mean, this is good. We can come back to that in a second as well. I was going to say to you, talk to you about different tactics that the auctioneers will play out. We discussed this actually in the masterclass that I did for you in Melbourne to your mentoring clients and what sort of game playing will happen. And this plays into the question that you just asked. So an auctioneer, their job is to keep the life of the party going. They want momentum, they want volume and they want to blast you out, really, so you don't have time to think. They're also going to break down those big numbers that you're perceiving. You're going to spend like if they're asking you to spend another 20,000 into small numbers. So they're going to say to you, look, it's only a coffee a day. What, for how long? The rest of your life plus the next hundred years or whatever it might be. They're going to use throwaway lines like that. They throw dad jokes in there just to break the ice, so you have a bit of a laugh. But what they're trying to do is just take your concentration off the fact that you're spending another $20,000, which is the equivalent of buying another car, on top of the property price or whatever. People just need to break it down to what they're actually spending. So when you talk about what the agent's doing while that auctioneer is doing his magic on the dance floor, then often what will happen is the public will bid and the bidding will be exhausted at a natural level. Let's say the bidding gets to 710 and the reserve was 700 on the dot. They won't call the property on the market. They'll let it get to whatever the number is where the public's exhausted. Then the agent will ask for time for the auctioneer. He'll say, bear with me. I just need to go inside and take instructions from the vendor. What they're doing is they're going to basically go in and pretend that they're talking to the vendor and take instructions to see if they're ready to put the property on the market and sell. All the time, they know that they're already $10,000 or whatever that amount might be over the reserve price where they're selling anyway. So they'll go inside. The reality is they're going in for canapes and a glass of champagne, saying to the vendor, hey, what a great job I've done. Watch me get this buyer up another 10, 20, 30 grand. See how well I can do to really earn my commission and earn more money. So they go out and pretend that they're beating down their vendor. They come out to the highest bidder and they say, look, it's really close to being caught on the market. And often they'll show a business card with a number written on it that they've just written as a joke to the buyer. And it might say 750 on it. And they'll go out to the buyer and say, will you pay 750? And the buyer will go, oh, I'm at 710. What do I do? Do I pay 750 or. And then you'll wait and you'll just let them hang themselves. The buyer let them stress and stress and stew over it. And then they might come back and say, no, okay, okay. Well, will you pay 750? And I won't say another word as the agent. I'll just sit there waiting for you. Pressure cooker. Pressure cooker will you pay $7.30? No. Okay, will you pay $7.25? And it just goes on and on and on until you say, okay, yeah, I'll pay $7.20. And then you go, yeah, leave it with me for a second and I'll talk to the vendor and see if I can get the price down. And it just goes back and forth, back and forth, playing ping pong. And until you've bid against yourself and you've spent 20, 30, 40 grand when.

You didn't have to, you're making me angry. Okay, let's move on to Private treaty. Let's tell me about some of the dialogue that we might hear when we go to private treaty. So there's not a four week campaign. It's pretty much the properties on the market. We've got a price guide. What are agents going to be telling us to get our bid or our offer?

Yeah, they're going to tell you that most agents, I think in that situation are going to tell you that they've got either strong interest in the property, which is just a standard throwaway line to keep you competitive, or they're going to tell you that they've got a conditional offer on the property to purchase it, which means that the offer that the other party made was bound by something it might have been, which is a negative. It might be they want a long settlement or they've got a small deposit size, or most importantly, and probably more often than not, it will be that they're conditional upon the sale of their own home. So it means that they've made an offer at a certain level. They'll tell you that the vendors agreed to sell at that level, but it's on the market until that party can go unconditional. So really what they're doing is trying to show you that there's a small window of opportunity here for you to act, put a strong offer on the table that must be unconditional. So they're just trying to push you into making an unconditional offer. They're doing that for a couple of reasons. One is to give you comfort that someone else has already offered a high amount so that you can relax, that you're not overspending on it, that there's someone else that sees value at that level. So it's market value. So that's one thing that they're trying to do. And then the second thing is they're producing competition that they can bring up at a later date. So if you show interest in the property and you go forward and you make an offer. But for whatever reason, if you stall or if there's some sort of delay in progressing your offer or you've got second thoughts, then they'll bring in this trump card of wow, the conditional offer has just all of a sudden found a buyer on their own property and they're ready to go unconditional. So you've got a very small window now, might be a day or a day and a half to act, otherwise you're going to miss it and going to be sold. So it's a way for them to bring in competition at a different stage as well that you've got to be wary of.

Is there any way that you can actually tell if they're making that up or not? Like you'd be sitting there going, even they're making it up and there's someone who's about to put in an offer. Should I do something to keep my hand in? Is there anything that the buyer can do at that stage or is it just sit it out?

It's really, really difficult, to be honest. The only thing that you could ask is for them to produce the contract and show or an email or whatever that's got it from the purchaser and they can black out the purchaser's name or whatever and show you it. But it's difficult to call bluff on the agent in that scenario because often they'll just say, look, for privacy reasons, we can't show you, but what I told you is exactly where it's at. So you need to pay this price or jog on to the next property.

Okay, so Private Treaty and agents, what else are they going to do to try to get us to get an offer in that's at the price point that they want or what they've indicated to the vendor?

Well, I think Private Treaty, they're just going to often, as I said to you, they'll create competition and they'll also position you where you need to be. So they might say to you, look, we've got interest at X level and it needs to be Y to buy the property. But because they're vague about where the interest may be, you feel like they're giving you some really tight guidelines on where you need to spend. But in reality they're just sort of pointing you where they want you to go. So what you've got to be cautious of is whatever they list the price at. I would expect there's always going to be plenty of wiggle room in Private Treaty. It's not always the case but most of the time people understand there's going to be some form of negotiation. So the list price is not going to be where you want to aim at. You want to do your research and try and aim at saving some money below that. But also you don't want to be competing against. And this goes back to what we talked about with auction and guide prices. You need to remove what the agent tells you is the parameters for price. So if they tell you the guide is 7 to $7.50, forget that as best you can, just work on what the comparables are and where the data is. It's the same with private treaty. No matter what the property is listed at for sale, let's say it sells for 750. Well, it's probably going to be on for 789 or 799 or a figure like this. So forget how much you're saving off the asking price. If you perceive it to be a really good deal, focus on what it's actually worth and then what you may have bought it for. That's below that value in terms of what you save. That's the key thing for me.

That's interesting because I know that you went in to negotiate on behalf of one of our mentoring students. And from memory, there was a deceased estate. There was numerous parties involved. They wanted 980. She'd done all the research to think that the top price she wanted to pay was 915. And obviously you ended up going in there and negotiating below 915. But how do you bring that expectation down as part of the negotiation? Do you sit it out and put your best offer out or are you always. They're just incrementally chunking a bit.

Well, it's interesting. Sharon, the buyer in that instance had done what I ask all my hello house clients to do, which is deliver me up some comparable sales that we can hang our hat on and we can really study and discuss. Prior to me speaking to the agent, in the first instance, Sharon had some good comparable sales. And in that instance there was quite a few like, for like homes that had sold in, say, three to six months in that local vicinity. So it's not always the case that you can find direct comparables, but there was some pretty good data for us to benchmark there. What I did because there were so many vendors in that scenario. I know from the selling side that it's really difficult to wrangle a whole heap of people that have got all different opinions on where the property value may sit and they're all in different states of financial need in terms of how much people want that money out of the estate or they don't really need it in terms of their financial health. So the best way to do that, I think, is to. I put a written offer on email because I knew that that was something that the agent could share with all of those interested parties as they're trying to get them to make a decision. And what I did is I went into great detail with the comparable sales evidence that we had broken down the reasons why we positioned our offer where we did what the market had done in that suburb in the last 12 months and since those prices had been achieved, to try and arrive at what I perceived as a fair valuation in terms of where the offer sat. That was not an insult to them. So that was the first scenario. And then what I expect from that is a counter offer. The only reason I do that is because I know they're not going to accept it first time. Or it's highly unlikely, especially when you're dealing with so many people. But what I'm looking to find there is a counteroffer. So some sort of movement from their 790 or 700, sorry, 980 or whatever the price was. It didn't happen in that instance. And it took probably another week or two weeks, probably another week actually, for me to then dig deeper with the agent and push the agent a little harder to try and push his clients to give me a figure that they'd work on. And over time, they came back with a figure that was kind of 930, 940. And then we increased a little bit and we got there in baby steps. But what they needed to see from me, I think that made a big difference in that instance, and I use this a lot when I'm negotiating, is that you've got to create a second property that you've got under offer. So in this instance, on Sharon's behalf, I play the game as the agents are playing it against us. I say to them, well, look, we're offering 897, I think, is the first offer that we made on that property. We're offering $897,000. We believe that to be a phenomenal offer and fair market value for this property right now, today. But unfortunately, this is not something that's out of my hands. But Sharon's already found another property. I've negotiated that deal for her previously. This is her preferred property, the one we're talking about with you today. But I've got A timeline where I've got to act on this other property. And Sharon doesn't want to miss either of those two options. So we're going to go for your property first. These are the terms. Just know that if your vendor doesn't accept, it, knocks it back, that I'm under extreme time pressure and we're going to move on the property too. So that's how I frame that first offer. So then the agent, it's not coming from the agent. The agent can pass that off to the buyer and say, listen, the buyer is under a lot of time pressure. They need to act. You're going to miss this person because the buyer's told you that in writing. They can see that there. So I'm just trying to make the agent's job to close their client easier. And then it came back, and then I can buy more time if I need to. But essentially I had to get there in steps. And every single negotiation is different. Sometimes those steps are really quick and easy, sometimes it's dragged out. That one took nearly two weeks of negotiations, but we got there. And at the end of the day, Sharon, if she was bidding herself, could have stepped up and spent more money. And she was prepared to do that at multiple times. If you speak to her, she'll tell you the same thing that she said. I just told Scott, I'll pay that money. I'll pay that 915 or whatever it is now, unless the stuff wrap it up at 9:30 or whatever it was. But I just kept holding her back and said, let's just do it in baby steps. And the reason I was able to do that is because I asked closing questions. And I ask questions all the time on the agents. And one of the questions I ask the agents throughout that negotiation when it drags on, is, who are we competing against? Is there any other buyers on this that are at the same price point? Are we the highest bidder? Questions like that. Because what I'm trying to obtain from them is, is there anyone else that's giving me time pressure on this, or can I keep playing the game that I want to play to get the price as low as possible? If I play that time game, which people watching this now might think, okay, I'll just drag this out next time I offer, and it will happen over a week. You just get gazumped, someone else will come in that was right behind you, beat you to it, and you missed the property. So you've got to know where you sit in that food chain and whether or not you're the top bidder. And whether or not you've got the time to play those games. And in that instance, I did, and I was able to drag it out and wear them down.

Well, look, if you're listening to this and you're going, oh, my gosh, it's all so stressful, this is why I wanted to introduce you to Scott, who's a supreme negotiator, as you can see now for Sharon, he got them down from 980 to 908. And she was very happy to pay a small percentage of the difference of what she wanted to pay at 915 to 908, the difference there to Scott to do negotiation on her behalf. So, hello, house. And Scott Agate is going to be. Let me put it in my group. So you can see this is going to be in our Facebook group supporting our first home buyers. That's the Facebook group, first house buyer. I really encourage you to go over there and ask Scott these questions. I've got going to put an offer in or the agent says this. I'm not sure what they're saying, and I know for a lot of you that you're not all the way through to actually negotiating at the moment. So come back to episode three and listen to this, because it is insane what agents are actually saying and what we're hearing and interpreting and what they're really meaning. You know, Scott, I think you said to me earlier this week that you were talking to an agent who said he refuses to deal with you because you negotiate too hard.

Yeah. But, yeah, there's a reason why he said it, though, right? Because he had an overpriced vendor, an overpriced property, and he wasn't doing the hard work to get that vendor down. So he just refused to take offers from me because he didn't want to just have to keep dealing with me because I was pushing all the wrong buttons.

And legally, Right.

Yeah, legally, he has to. But he got to a point where he just didn't want to deal with us, so he just cut the bar out altogether. But he, you know, he cut his nose off despite his face. That property is still sitting there for sale today and will be for some time.

And I guess you're just sitting there waiting for them to be realistic.

Yep, we're waiting. My client's happy to buy it at the right price, but I'm saying to them, you've done your research. That's what it's worth. So don't pay anymore. And there'll Always be another property. And that's the hard thing to explain to people, especially when you're emotionally involved in the process, that there are other properties, there will be other opportunities and sometimes you've just got an agent or a vendor that just won't play ball and you just have to give up on those ones and focus on the next property.

I know at the moment we've got a couple of buyer's agents working for clients of ours that we're managing, concierging the relationship. And I'm having these constant conversations with them, which is you're two to three weeks in. I understand that you're frustrated that you haven't got properties coming up that you're interested in at the moment. Negotiation so much easier with private treaty and not going to auction. So we're looking at those first, but we're going to start looking at the auctions. But at that higher price point, that 1 to 1.1 million, there is low supply. But at 5 to 7:50, the buyer's agents I'm working with at the moment, we're seeing a plethora of private treaties. So there really is two markets working at the moment and often in any market. So people just have to be aware that there are market conditions that you're up against as well. But a good clean negotiation is going to be one that's going to allow you to buy at or below the market value and not overspend to start with. So great tips, Scarlett.

The other thing I was going to say is it can change really quickly too. So if you're in the market for two or three months, it may have changed in that time in terms of your little micro market. So you have to just, if you're going to commit to buying, you have to just commit to it and stay really active for a short period of time. And that's just a sunk cost in terms of your time to make sure you don't overpay.

Look, this is a really important point too. On average, most Australians negotiate a property once every 10 years. As a first home buyer, you may never have negotiated on a property. So actually understanding this nice real estate agent that turns up and is all smiles and is seemingly helping you out is actually a master at negotiation. They role play this every week if they like. People who work for people like Scott when he was on the dark side working in real estate, they've got them going. And watching you at auctions, watching you at open homes and knowing what your price point is, it is stacked against us. It's really important to understand the importance of a negotiation when we get through the entire process of finally finding properties and then starting the negotiation. But as Scott also said, having a second property as well and having don't just choose one property. And that's your whole focus, being aware of what's happening in the market. Because you've said previously, Scott, that you've used that as a buying negotiation for the agents. So you say that we've got another property we're looking at, but this is the preferred one. What can you do?

Yeah, it's crucial to it because it puts time pressure on the seller. And if you don't do that, then they know that they're just going to drag you along and make you pay a higher price for it because you're desperate to buy this property. But as soon as you say to them you're not desperate right from the start and you have to frame it like that, that you say it right at the beginning, it's got to be right in that first conversation or first few conversations that we've already a long way down the line on another property. And unless we act on that fast, then we're going to miss out. And we're not going to miss out. We've got control of this and we're going to drive this really hard. So, yeah, it's important that you drop that line in very quickly.

Well, great tips. I really appreciate you joining us today and sharing your knowledge and insider information as well. From the dark side. Now, as I said, head over to the Facebook group First House buyer Scott's in there and is one of our supporters who will be there supporting you. If you've got any questions on negotiating or where to even start with making an offer, or you can talk to him about his services at hello House, where he can go and negotiate for you and take all the pressure off. Head over to that Facebook group and we look forward to hearing your questions there. So thank you so much, Scott. Really appreciate your time today.

Thank you. Bye.

Well, that's it, guys. For today. Let's do a speedy summary of everything that we've learned. Negotiation is the key to success in buying a property at market value or below. Understanding what you're up against is half of the battle. Real estate agents are out there every single day negotiating, and they are masters of human psychology. They know exactly what to say and when to say it. So don't think that they're giving you a little bit of tidbit of information on the inside. Because in actual fact, it's part of a very strategic sales mechanism that they have been taught year in and year out and probably practice every single week through case studies and live in the market. So Scott Agate from hello House joined us today. He's a master negotiator and an ex real estate agent who's decided to leave the dark side and come over and help people negotiate. He's shared some incredible tips and tricks about what the differences are between the auction process and the private treaty process, what agents will say to you. And I have heard some of the statements that he's made today. I now cringe because I heard them and believe them, why the agents are saying this and what they actually mean. So at the end of the day, you want to be the one that's in charge of the entire situation and the situation is you negotiating to a market value or below. The agent is out there to negotiate on the vendor's behalf, not on your behalf. So know that. Understand the importance of knowing the numbers. Understand the importance of doing your own research and understanding the importance of not giving up and just paying what is being asked. Understand that price guides are just guides, but you should probably forget them. Do your own comparable sales and work out what you think the property is worth. Understand that although you might want to put in an offer prior to auction, that could just be used as ammunition for the agent to go back to the vendor and say, here I am a clever person. If you put in an offer that is going to be a lower part of the price guide, as Scott said, that could actually be something the agent doesn't want to see. So and they may not be encouraging you to do that because they then need to change the price guide if it's a little bit higher to what they have been suggesting to the market. So there's so many things going into play there. The agents are getting a four week marketing campaign for their company and for their brand and so they're very much going to encourage people going to auctions. They want to have people there on the day. And I want you to go back. If you're listening to the full episode, go back and check out what agents say the day before auction to get you to auction. You are going to hear this time and time again. And Scott's insights were absolutely priceless. So head over to the first House Buyer Facebook group. Scott's going to be in there to answer your questions. He's one of our supporters and admin to assist you in your negotiation questions. If you want to talk to him about engaging. Hello, House. I suggest you really take him up on that offer because I've tested him with my best friend and some of our mentoring students and he's done an incredible job negotiating on their behalf. So this is what you need to remember. You want to be in control. Data and research is going to give you that information about comparable sales. And then you're going to need to know what you're up against. Real estate agents are master negotiators and if this is your first negotiation, you probably want to have an expert on your side. So as always, here guys, is to your property success. You'll catch us here every Wednesday. If you'd like to type remind below, we'll send you a copy. It goes live again, which is 1230 Australian Eastern Standard Daylight Saving Time, every single Wednesday. And if you'd like to be a guest and have my one on one assistance in helping you through your struggles where you are, I'd love to have you as a guest on the show. Just type guest below and we will contact you. But as always, here is to your property success.

And that's it for this week's first Home Buyer Show. And Jane will be back next time with more tips, tricks, resources and interviews.

See you then.