Lesson #1: Never Tell The Agent!
Anyone who has ever heard me speak would have heard me say numerous times "always make sure you know more than the agent, but never let them know that". Knowledge is power! You will rarely win an argument without knowing the subject that you are arguing about, and it is difficult to win at chess if you don't understand the rules. Property is no different.
The Importance of Education:
The good selling agents should make a point of educating themselves as much as possible about property, and then as much as possible about the property that they are selling. However, there are a lot of bad agents out there and the good ones are often too busy to do a lot of research on just one property. As a buyer, you can hone your energy into the one or two deals, or perhaps the one or two types of deals that you are after, rather than 'spread your love' across a the dozen different listings a selling agent or their office may have.
Here is a key example, which came about after an email discussion with a client of mine...
Background: My client is trying to buy a site for subdivision, but it has some potential flood issues. Together we have researched and found that it is a borderline property... any less flooding on or nearby the property and you would go for it, anymore and it is an easy 'no thanks' and walk away. So how do we proceed?
Step 1: The first step is to inspect and have discussions with the agent. If the agent fails to make any mention of flooding, you are in the box seat. Either they don't know about it (and knowledge is power!) or they are keeping it close to their chest. Either way, you are in front.
Step 2: My suggestion would be to get the property under contract at a price where it works even if everything turns negative on us, or failing this, get it under contract as close to that price as possible. The key is to ensure you have a built in 'get out clause', preferably some form of due diligence clause. This firstly enables you to get the property off the market and take control of it, preventing others from coming in and buying it, and secondly it will enable you to get the necessary answers you need whilst you have that control. These answers will usually take 1 to 3 weeks to come back to you, so there is nothing worse than spending good money for information only to find out that the property has sold in the meantime.
Step 3: Once you receive your answers and providing they fall within acceptable limits, you can go back to the agent asking for a further discount in price based of what you have discovered. You will find that either the agent did not know about the flooding and as far as they are aware neither did you and as a result of this discovery you need to reduce the price, or they did know about it but because they did not disclose the flooding they can't come back and say 'you already knew about the flood issues so no further discounts'. You may not get a reduction, but you are in a great position for it to be a real possibility.
Always know more than the agent
So always make sure you know more than the agent, but never let them know this. Actually there is one exception to this rule... let them know when they are wrong and overstating a property's potential! I've essentially halved a property's asking price when an agent informed me you could build 4 units when in actual fact I provided proof that only 2 could be built. Her excuse: 'The builder who just inspected told me you could build 4'. Oh dear!
Investigate Property is a professional buyer's agent in the Brisbane area, snapping up bargains with a twist for their clients. To see a selection of deals we have sourced throughout 2011 join Justin Eslick and the Reno Kings at '7 Recent Killer Deals', being held in Mackay, Melbourne, Sydney and Brisbane. Click here for more information.