Increase your Bargaining Power while Buying a Home
Negotiation is a complex matter and all transactions are unique. Sides, buyer and seller want to feel that the outcome favors them, or at least represents a fair balance of interests. In the usual case there is a bit of bluff, some give-and-take, and neither party gets everything they want.
There are few things better than a good bargain, more so if the object of purchase is as important as your dream house. As the economic condition becomes alarming and the demand for property wanes, those looking to buy a house can leverage the situation to get a good deal.
So how do you develop a strong bargaining power, one which will help you get the most from a transaction?
What does the market say?
At various times we’re in a “buyers” market, a “sellers” market, or a market where housing supply and demand are roughly equal. If possible, you want to be in the market at a time when it favors your position as a buyer or seller.
Because all properties are unique—it is possible to buck general trends and have more leverage than the marketplace would seem to allow. For instance, if you have a property in a desirable neighborhood with few sales, you may be able to get a better deal than elsewhere. Or, if you’re a buyer who can quickly close, that might be an important negotiating chip when dealing with an owner who just got a new job 500 miles away.
Who has leverage?
If you’re among six buyers clamoring for that one special property, forget about dictating an agreement—the owner can sit back and pick the offer which represents the highest price and best terms.
Know the Trend:
Knowledge about the local market will make you well-equipped to bring the developer to the negotiating table. You should find out the prices of similar properties in the area. You should also know the period for which the property has been up for sale. If houses in a residential project have remained unsold for long, its developer will be keen to strike a deal.
An analysis of prices is a must. Find out the launch price and compare it with the latest price. Enquire about the price trend from local brokers, who will be able to give an idea about how much discount you can expect on the quoted price. A person who has bought a house in the project is also likely to give you the real picture of the discount you can expect from the developer.
Making an offer:
Once you get an idea about the likely discount , make an offer. Talk to the developer’s sales team and tell it that you want to buy quickly. A developer is more likely to give a discount if it knows that you are a serious buyer.
Show the Money:
Developers are interested in selling inventory as soon as possible. If you can make an upfront payment, you are more likely to get a good deal. You should keep cash ready for such a situation.
The real estate market has two sales models. Some developers have own sales teams while some take help from brokers. Often, they use both. The brokers can help you find a property fast as they are aware of the market and the projects in the area. A reputed broker can get you a good deal as well even when you take help from brokers, do your own research and enquire about prices directly. This way you can be sure that the broker is taking care of your interests and not trying to earn a bigger commission by quoting a higher price.
Whether you go out to buy alone or in a group, negotiate for what you estimate is a realistic price. Some developers might not agree to lower prices to your desired level due to various reasons such as high costs. In such a situation, let the developer know that you will analyze the offer before arriving at a decision. Analyze the offers that you have, but wait for a couple of weeks before going for the best deal. Do not be surprised if you hear from some developers willing to close the deal at your offered price or a mutually agreeable lower price.
Be Quick on Uptake:
It is critical to respond to counteroffers as soon as possible and to avoid making a counteroffer with any term that is not truly a deal breaker. Delays in responding leave space open for another buyer to step in and create a bidding war, or even more likely, for the seller to perceive that other serious buyers might be out there. A seller’s mere perception of a hint of a whiff of the scent of a potential bidding war is a home buyer’s number one nemesis, ratcheting up the possible sales price in the seller’s head on an exponential basis.
Gauge the situation when dealing with developers:
A lot of this talk about negotiating and price and terms, etc. may be moot when you’re buying a newly built home. By and large, the builder/developer dictates the terms on which they will sell you a home in their community, and you either take it or leave it. The list price is the price you pay, though in many markets, developers and builders are willing to negotiate if they have a large amount of inventory.
Make your Real Estate Agent work for it:
If you are competing with other wanna-be buyers for a property, your real estate agent’s prep work and presentation of your offer can be critical to your success. Hopefully you interviewed several real estate professionals and hired one you can trust and know will go the extra mile for you. Always communicate with your agent to ensure you both are on the same page in terms of expectations and deal breakers.
Crunch the Number:
Before you finalize your decision about how much to offer, have your mortgage broker run a monthly payment on your offer price and estimate your property taxes and insurance. Often, buyers inch up in price during the house hunt and in the course of formulating their offer, so it’s important to have a final check on the exact monthly and annual obligations you will incur if your offer is accepted.
Category : Flatons Advisors Blog