One of things I love about the real estate game is that it is all about people. Sure, bricks and mortar are involved, but it is people who build, sell and buy property. Try as they might to remain unemotional, the fact is that very few people can be clear-headed, particularly when it comes to buying or selling their own home. This personal involvement intensifies if the property for sale has been lovingly renovated by its owners. Even investors can get very personal when it comes to choosing a property to add to their portfolio and selling it down the track.

So one thing to never lose sight of when negotiating on a property is that the owners are human beings with very real emotions and sometimes very irrational ideas on what their property is worth. Everybody loves a bargain when they buy but nobody wants to “give their property away”. Even in a forced sale situation, there is a difference between the seller walking away feeling resolved about taking a loss over them leaving the deal feeling fleeced.

It is crucial when negotiating to understand the concept of win-win. This means that both parties come away from the negotiating table with the feeling that they have achieved something. If a deal is struck, the buyer gets to buy the property, which is an obvious win for them. Ideally the purchaser feels like they paid a fair price and the seller feels like they achieved a fair price. But is is not always possible, particularly if the vendor’s expectations are too high or if the market has dropped since they purchased the property.

In a sellers market, the buyer may be the one to feel remorse after paying “too much”. But in a buyers market the person who takes the hit is the owner. And if you expect somebody to take less than they want for their home, you will be more likely to achieve a favourable outcome if you haven’t insulted the vendor during the negotiation process.

There are so many ways to deliver an offer and buyers often forget life’s little niceties in this situation. How often have we met sellers who have been put offside by the manner in which the buyer has wielded their market power? And then they dig their heels in and refuse to negotiate further with that particular buyer. Or they drop their asking price to a more realistic level and find another buyer, who they favour over the first one, sometimes even at a lesser price.

I love the saying “honey attracts more flies than vinegar” and it certainly applies to property negotiation. How you deliver your offer can make the difference between acceptance and refusal. Show empathy for the owner who needs to take less if they want to sell, don’t be arrogant. Work with the selling agent to get them to prepare the vendor before delivering a low offer, give them some sort of advance notice so that the offer isn’t a rude shock. And if your offer is at market value, you will no doubt be able to get the agent on side. But if you insist on making an offer that is way below market value you run the risk of alienating both the agent and the seller, which greatly reduces your chance of getting any subsequent offers accepted even if you reach a fair price.

Regular readers of my blog will now that I often talk about getting the “ducks lined up” before making an offer on a property. We often see buyers making bids far to early in the process and long before they are in a position to sign a contract. But in the time it takes to complete the due diligence, it is important to employ some “pre-negotiation” tactics. Communicate with the agent and keep them posted on where you are up to in your own process. Don’t just go silent then turn up with a signed contract and expect everybody to jump for joy.

Just remember that you are dealing with people who have feelings and probably take the sale of their home very personally. Even if they have to take a dive on the eventual sale price, their half of the win-win equation will be knowing they got the best price that market was likely to offer, that their agent worked hard for them and that they can now move on with their lives.

I have a real issue with property spruikers claiming to know the next hot spot, the inference being that if you buy in these areas you will automatically be making a great investment decision. Particularly as there are so many would-be investors who are trying to identify the next big location in their hopes of striking real estate gold.

The thing that is so rarely talked about is risk. Now don’t get me wrong, there is a time and a place for taking risks in the hope of big capital gains. But this is the realm of serious investors who are educated and experienced (or pay for advice) and who already have substantial equity to back them up. It is not an investment strategy that we advise for first time investors or those with a large debt to equity ratio.

There are two main elements to capital growth. There is the location and there is the individual property. Many people providing property investment advice will focus on buying in the next hotspot to the point where the actual piece of real estate becomes secondary. In fact many of their clients purchase property sight unseen, with decisions made solely based on “the numbers”. We believe that this is the riskiest strategy of all as every suburb and town has a median growth rate, which means that 50% of properties in that area will under-perform. If you are not focused on the actual property and it’s attributes then you run a very real risk of missing out on the opportunity for good capital growth, let alone maximum returns.

The thing that I love about buying real estate is that on one hand it is so simple, the fundamental principals are pretty basic. But on the other hand it is a very complex game, largely because human beings are involved and we often have to be lay psychologists to make sense of it.

One of these fundamental principals applies to capital growth. It is this simple: for a property to grow in value above the median rate for the area it needs to appeal to buyers. So the key to capital growth is understanding what sells well. Brooke and I spent many years as selling agents, and we have stood at the front door of open houses and dealt with often brutal buyer feedback, or lack of feedback as the case may be. As a result we know what sort of property sells well. And we can see when there are simple ways to create buyer appeal as opposed to features that cannot be changed. And we can also see when buyers are being seduced by great presentation and overlook a property’s down-sides.

For this reason, when we are providing property investment advice to our clients, we firstly cast a fairly wide net in terms of location (within our preferred 10km radius of the CBD) and then actively seek the best opportunities within that area. And what makes a good opportunity comes down to the actual property and it’s future saleability.

There is little benefit in filling your head with statistics about projected population growth, infrastructure development, job creation projections etc in order to determine WHERE to buy if you make mistakes in choosing WHAT to buy.

Recently I looked at a strata property for a client in a small complex of five villas. Inside the layout and condition was pretty simple and functional and suited his needs well. But the feature that most appealed to our buyer was a private north-facing courtyard with an established garden.

After the second inspection our client confirmed that he could see himself living there and decided to make an offer. So the first thing we did was to advise the selling agent of our interest and request a copy of the contract of sale.

I always look at the strata plan to confirm the square meters on title and on the first glance I noticed that the courtyard was not marked on the plan. What does this mean? Well in this case it meant that the courtyard is common property and not owned by the vendor of this villa.

This in itself is not that unusual, there are many instances of strata properties where an area of common property is used by one unit holder. Usually this stems from an oversight in the original design, such as a roof cavity that could be used for storage or a “dead” space that could be used as an outdoor area, such as in this case.

But there needs to be evidence that the Owners Corporation have approved this use and the best way for this to be done is in a by-law.

So, flicking through the contract of sale I look for the by-laws and see that there is indeed one that gives Exclusive Use Rights to this unit for a section of common property. BUT, this permission is only for part of the space. Only the deck is referred to, meaning that the garden and fence are not included.

Now I am not a solicitor and cannot advise on a contract, and I can certainly see that we need to get advice in this instance. We need to know the risks associated with purchasing this property without this approval in place.

The legal eagles came back with some options that we will pursue – the most favourable being to try to get the vendor to agree to make permission a condition of the contract. Now this may work as a strategy in a flat market but in a booming market the vendor may not be so willing.

In fact, the current owner of this property only bought it 2 years earlier, when the market was quite a bit stronger. And it appears that the deck had been built around 5 years ago. Which begs the question, didn’t her solicitor pick this up at the time when she was buying?

At first I thought this may be a case of negligence, but when I thought about it further I realised that this could quite easily happen. You see, unless the solicitor or conveyancer actually inspected the property themselves or at the very least looked at the advertising, they could easily overlook the fact that the courtyard was not covered in its entirety by the contract. And while a proactive property law specialist may routinely ask their client questions that could unearth the issue, the thought may not occur to many generalist solicitors.

So, what is the upshot? Firstly, by engaging our services, our client has had somebody on his side that identified the issue and was able to negotiate a suitable outcome through his solicitor. So he did not fall into the trap of paying for something he was not getting. However, if that does not convince you of the merit of using an experienced buyer’s agent, it is up to you to communicate as much as possible to your legal representative. Perhaps you could provide them with the advertising material for the property and be very specific about what it is that you think you will be buying.

Now please take note that this example is with a strata title property. A smart property lawyer will recommend that you get a survey if you are buying a torrens title property to ensure that everything you expect is there – and nothing you don’t expect.