Asking the right questions

People often ask me how I found out information about a sale. When it comes to negotiation or auction bidding, our job is to establish the facts, read the play, and execute the best strategy with the right tactics. It shouldn’t come as a surprise when we know roughly (or exactly) where a reserve price sits, or predict a likely outcome or even identify other bidders. 

That is our job.

Finding out the background details is important and there are many ways to do this without offending the agent.

Aside from better preparing ourselves for an auction or negotiation, asking questions also gives us insight into how we could frame our offer to enable the vendor and buyer a win/win. This can make the difference between a campaign running to auction and an agent recommending that their vendor accept a suitable offer prior to auction.

Just this week we shortlisted a great house in St Albans for an investor client and all of our due diligence pointed to the property being a strong contender.

Recognising that the appraised value sat in the high fives, we dreaded the thought of competing against emotion-fueled first home buyers with $600,000 budgets, and decided to workshop some ideas to secure it prior for a fair price.  Our discussions with the agent revealed that the vendors were downsizing and hadn’t commenced their search yet. They were anxious about the length of their search and the likelihood of finding a suitable home in a specified period.

Our solution was simple. A flexible leaseback license agreement.

The most important thing we have to be mindful of when asking questions is that we ask them in the right order. 

This is where many buyers get it wrong.

The first questions for the agent may be at the point of setting the inspection or attending the Open For Inspection. If the buyer has specific requirements that are not obvious on the listing advertising, it’s OK to ask the agent over the phone or at the door about the campaign or the property. Determining whether the house fits the requirements of the buyer is an essential step. For example, title type (strata vs stratum), land size, zoning type, even whether the vendor will consider conditional offers are all relevant questions.

But there are a few questions which buyers shouldn’t ask before they have even viewed the property because the agent has no reason to take a buyer seriously until the buyer has at least viewed the property and determined that they are potentially interested in buying it. These questions aren’t necessarily insulting but they do paint the buyer in a different light. Robust discussion can be undermined if the agent feels the buyer is just pumping them for information without a genuine interest in the property, and nobody likes being pumped for private information when trust hasn’t been built.

Some of these questions that should be saved for after the inspection include:

• Why is the vendor selling?
• What is the reserve? (Some agencies state this as policy but others are still reluctant and leave the final reserve setting to the vendor on the eve of the auction). There are softer ways to explore what the likely reserve could be.
• Is it a divorce?
• Will they take offers prior to auction?

Agents will disclose information based on the relationship they have built with the buyer, the direction in which the conversations are headed, and in particular, how genuine they feel the buyer is.

It’s important to remember that when you ask for something, you need to reciprocate.

We give a little and get a little.

This may be as simple as walking through the property and then going back to the agent and advising them that you have interest in the property. It’s quite simple to express that a property is on the shortlist without giving away your budget or your degree of enthusiasm. Simply saying “I have interest in this property. Can you please note my details?” is all it takes to start the discussion.

From this point, we will then ask our important questions in the most non-confrontational way.

• “Are you open to advising your vendors to sell prior if the price and terms are right?” (This is very different to asking if they will take offers prior. Many buyers fall into the trap of making offers after an agent has responded with “we will present all offers to the vendor”, but they have neglected to establish whether the agent will encourage the vendor to actually accept the offer. When handled badly, this can lead to disappointment all round because a buyer feels violated for having been encouraged to put an offer out there, while an agent holds an offer that may not be strong enough – or have the right terms – to tempt the vendor to sell.)
• “What terms would your vendors prefer?” Often an agent will say “They are flexible”, which could then lead me to ask whether they have bought yet and have a specific date we could match, or if they value a longer settlement to find their next home. If the question is posed in a way that shows a genuine effort to appeal to the vendor, the agent is more likely to shed light on the terms that could work best for the vendor. There will always be situations where the vendors have total flexibility; ie. they may have another property to move into temporarily or they may be moving to a new location once the sale is finalised.
• “Which recent sales do you think are most comparable to this property?” This is a very different question to “What are you quoting the property at?” or “What price do you think it will reach?” because the agent isn’t being asked yet to declare the reserve, nor are they being asked to predict where the final price could end up.
• “Are you aware of what the reserve is yet?” This is a direct question, and often we get the answer, or at least a hint of what to anticipate.
• “How much competition do you think I have?” Agents will generally give insight into other buyer numbers and possible interest levels. Further questions about the number of contracts requested, number of building inspections conducted, number of other advocates on the property and previous properties that competing buyers have been under-bidders on will put of lot of pieces of the puzzle into place.
• One of the most important questions we must ask if we are considering making an offer prior to auction relates to the Agent’s rules around how they handle competing buyers. Being prepared for the process we trigger is essential.

Negotiating an exciting purchase for our lovely investor clients was a highlight to our week. Secured for $570,000 with a 60 day offer and offering a flexible leaseback while the vendors shop for their next home was a happy outcome for everyone.

Wishing our buyers years of capital growth…. and wishing the sweet vendors a smooth transition to their next home.