Many buyers may find themselves in the situation where they have found a home that they love and is the ideal size, layout, condition and meets all the criteria that they have been looking for. However, there might just be one problem; the price that the seller is asking for is just too high and out of the buyer’s budget.
Another way to make the offer more appealing is to have pre-approval from a financial institution, so that the seller knows that the offer is financially backed and secure.According to Adrian Goslett, CEO of RE/MAX of Southern Africa, this is the stage in the home buying phase that few look forward to and even fewer have mastered; the art of negotiation.
Goslett says negotiation is just that; an art form. He says there is a degree of skill involved, but mostly it’s about having the know-how to diplomatically enter into a discussion and persuade the other party to come to an agreeable compromise.
He says while your gut feeling may be telling you that the sellers are asking too much for the property, the best way to enter into any negotiation with them regarding lowering the price would be if you have solid facts and figures to justify an offer below the price they want.
Goslett shares a few key elements to consider before making your offer:
1. Statistics, figures and other comparables
According to Goslett, the best way to determine whether a property’s asking price is within the fair market value range for the area is by referring to a comparative market analysis (CMA).
This report is normally compiled by a real estate agent and is done by comparing the home with other similar homes that were recently sold in the area. Elements that will be considered would include the size in square metres, the layout of the property and any additional features that may set it apart from other homes.
Goslett says the data derived from the CMA will give the buyer a starting point for their negotiations, provided the result is in their favour.
He says other considerations should include what homes in the area were originally listed for compared to what they sold for, as well as the number of days that home has been on the market.
If the sellers have had their home on the market for some time, they may be more inclined to consider lowering their price. All the information gathered will help the buyer to form a better factual case for making a lower offer, he says.
Goslett says if the buyer is a cash buyer, often a seller will look at accepting a lower offer, especially when the seller has accepted offers subject to home loan approval, that have fallen away.
Essentially, it is up to the agent to negotiate a lower offer with the seller based on facts, condition and location of the house. Should the seller not accept the offer, the agent could try get a written counter offer from the seller to present back to the buyer.
2. Follow the process
Once the potential buyer has compiled the necessary information, they can submit their offer to purchase along with a written proposal detailing the facts and data that have been collected to justify the lower offer.
Goslett says once the sellers see the statistics in writing, there is a better chance that they will consider the offer. He says a motivation letter from the buyer telling the seller their situation and feelings about the property could also make a good impression.
3. What is the seller’s motivation?
Although it may not be an easy thing to find out, understanding the reason why the sellers have put their home on the market could be a strong negotiation factor.
Goslett says if a homeowner is selling because they are interested in another property and their offer is subject to selling their home, for example, they may be motivated to sell more quickly. Having information and knowledge at hand is power, especially during negotiations.
4. A lower offer can still be appealing
According to Goslett, it’s all about making the offer work for both the buyer and the seller. A lower offer can be more appealing if it includes compromises that work in the seller’s favour, such as the buyer being flexible about the date that the seller needs to move out.
Another way to make the offer more appealing is to have pre-approval from a financial institution, so that the seller knows that the offer is financially backed and secure.
5. Is it possible to make the asking price work?
If the home’s asking price is within the fair market value and not too far off the buyer’s budget, there might be a way of making the price by requesting additional concessions from the seller.
For example, there may be some household items that the buyer could ask to be included in the sale such as a dishwasher, the curtains or furniture that is custom-made for a certain space in the home.
6. Plan B
There is always the chance that the seller declines the offer. “Not all negotiations will end in the buyer’s favour. This doesn’t mean that they have made any mistakes; it could just be that the buyer and seller were too far apart regarding the price.”
In these instances, he says it’s time for plan B to kick in and for the agent to find the buyer other properties that meet their criteria.
“There is more leverage in negotiation, if you're willing to walk away.”
It is important to remember that a successful negotiation is where the parties reach an agreement that is acceptable to both of them.
Remember, it’s not about who wins the negotiation or who doesn’t, Goslett says it’s about finding the right house at the right price.
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