Don’t miss out on the best investment opportunities, because you haven’t asked the right questions, says Steve Waters.
When researching a potential property investment, there are a range of golden opportunities to source information that could shave thousands of dollars off the purchase price.
And one of those is when you have the undivided attention of the selling agent where the right questions can translate into real dollars saved. Interpret the answers strategically, and the end result could be an excellent investment property at a great price.
Here’s what I always ask agents when given the opportunity… and one question I avoid at all costs!
1. “Are you the listing agent?”
Like most professionals, real estate agents look to delegate their grunt work wherever possible, because they want to concentrate on using their expertise and skill where it’s most productive – negotiating and closing the sale. As such, sometimes the representative you meet at the open home isn’t the primary agent – but that’s the person you need to speak to.
The listing agent has all the knowledge, is well versed in the property and the vendors motivations, and is your primary point of contact with the owner. The listing agent should have all the answers you need. Also – you must form a professional connection with the listing agents so as to communicate your intentions and level of interest. That way you know your offers are being presented fairly and accurately.
2. “How many inspections have there been?”
This is a way to gauge the tempo of the market and its response to the listing. You should also ask for a breakdown between open home inspections and private inspections to measure the sincerity of buyers. While you’re at it, ask how many days the home has been on the market too. The information you glean reveals if the asking price is correctly pitched to meet the market. Overpriced assets are quickly discounted by the majority of buyers, so inspection numbers tend to be low.
3. “Have any contracts been handed out?”
This question reveals whether there are serious offers about to be presented. Potential buyers will request contracts to study the details and consider what conditions they’d like to see in the sale. They will even forward contracts to solicitors for advice in the early stages. This is also a question you can ask repeatedly through the sale process to see if new competition is entering the market.
4. “Have many pest and building inspections been carried out?”
Again, this will help measure the level and seriousness among competing buyers – particularly at auction. Because buyers are purchasing unconditionally at the event, if they’re keen to secure the property, they’ll be happy to pay the expense of having a building and pest done well before sales day. When the hammer falls, they don’t want any nasty surprises.
Knowing how many others are willing to put their money on the line with no guarantee of a successful outcome shows just what you’re up against.
5. “Why are they selling?” not what you think
Most buyers ask this question in hopes of an answer that indicates the sale is due to distressed circumstances, such as divorce or deceased estate. As such, I see this as a question that’s most effective when considered in conjunction with other information. Selling agents are no fools, and their job is to secure the best possible price for the property on behalf of the owner. That said, they may let slip some piece of information that helps tell the whole story so you can form a better overall picture of the seller’s motivations.
6. “Are the sellers after ‘price’ or ‘terms’?”
This question has helped me secure quite a few properties where I wasn’t the highest price giver. Price is not the be all and end all in every instance when it comes to real estate. On occasion, the seller is happy to accept a lower figure if the buyer is open to making their contract conditions flexible. Perhaps you can do a shortened or extended settlement in favour of the seller’s needs?
Another great example is a leaseback arrangement. If the owner is elderly, they may be keen to secure a price, but wish to leaseback the property (at market rent) for a period. This way they can free up capital, but don’t need to move. If you’re the buyer who can help them achieve their goal, you’re well positioned to be signing on the dotted line.
… and the one question I avoid
“Are you willing to reduce your commission?”
While this might be moveable at the pointy end of a deal, broaching the subject of the agent dropping their commission early in the negotiation will torpedo your relationship with them and severely damage your chances of securing the property. Relationships are key in real estate.
In addition, agents work hard for their money so suggesting they take home less while you’re competing with other buyers will see you moved to the back of the line in fast time. Of course, building up a picture of a property and its prospects is done through a combination of offsite due diligence, visual inspection and enquiry. Just make sure when you’re handed the opportunity to ask questions, you are putting forward ones that’ll bring you the most benefit.
WRITTEN BY STEVE WATERS