To Negotiate Property Deals is the maiden topic that came to my mind under real estate category. The first step of all property transactions is “To negotiate property deals”. Let me admit that “To negotiate property deals” is an art which cannot be taught completely. In my post on Property Negotiations – Avoid These 5 Mistakes i highlighted common mistakes that can be easily avoided while property negotiation. Some people have born negotiators and of course, no one can beat women in negotiation skills. It will be right to say that Women are the best in “Bargaining“. There is a difference between negotiation and bargaining. To negotiate property deals is the totally different ball game. It is very difficult to draw a line from where to start and where to stop. I will try to keep this post simple & to the point and cover all the aspects of property negotiation.
How to Negotiate Property Deals
1. Market Dynamics: The first and foremost rule to negotiate property deals is to find out whether it’s a buyer’s market or seller’s market. In buyer’s market, Sellers are more & buyers are less whereas in a sellers market, buyers are more & sellers are less. Just to give e.g. Delhi and Mumbai is sellers market whereas Hyderabad and Bangalore are a buyers market. In a sellers market, the probability of negotiating property deals is negligible whereas in a buyers market you can get good rates from the sellers.
2. Preliminary Research: Before buyers negotiate property deals, it is advisable to do basic research and find out prevailing rates in the area and nearby pockets. You can find out the same from websites like Magic Bricks, Makaan or Common Floor. Also, keep in mind that rates quoted on websites are normally higher compared to actual rates. Most of the postings online are either from builders or brokers. To negotiate property deals, you should never reveal that you got details from the website. Just to share an example, Recently when i checked property rates in few apartments, the final quote was approx 8-10 lacs lower than the quote on the real estate portals.
3. Influence of the Financer and the Broker: Check out the presence of financers in the market and the influence of brokers in the property deal. Again on these parameters, Mumbai and Delhi Markets are worst whereas Bangalore is comparatively better. Scope to negotiate property deals is low in markets controlled by the financers and influential brokers.
4. The Reason for sale: Now try to find out the possible reason/s of property sale. Due to the weakening of the economy, increase in inflation and weakening macroeconomic indicators. The probability of another rate hike in RBI’s next policy review is bleak. The majority of owners are not able to pay their EMI’s on time. They would like to sell the property in a hurry. These properties are normally 15-20% cheaper compared to market rates. Though it is very difficult to find out the reason for sale but little bit research can actually help. It will, in turn, help the buyer to negotiate property deals. In the case of heavily discounted property, you should be extra cautious.
5. Artificial price jack up: I would like to ask my readers what is the price of a property?. Is it the price at which seller is willing to sell or price at which the buyer is willing to buy. Thumb rule of marketing is the price at which the buyer is willing to buy. Sometimes all the owners of society make cartel and jack up the price above market rate. It reduces the scope to negotiate property deals. This kind of cartelization is a trap for prospective buyers and they start believing that market price is what sellers are quoting.
For example, If u plan to buy some furniture and all the shop owners in that particular market quote a similar price then irrespective of the actual price of that furniture, you trust and believe that price quoted is correct price. Cartelization diminishes the power of buyer to negotiate property deals. Beware of these tactics and right way do a small survey to find out the market price in that particular area. You can do this by finding out the prices in apartments providing similar facilities and amenities. It gives a fair idea of property rates and you will be in a better position to negotiate property deals.
6. Payment terms: If you have some idle cash lying or you have pre-sanctioned Home Loan then you can process the payment faster. It gives you leverage to negotiate property deals as sellers prefer buyers who can process payment immediately. Assuming 2 parties approach the seller to close the deal. The 1st party promise to pay a payment of 50 lacs within 3 months and 2nd party promise to pay 48 lacs in 15 days time. In all probability, the seller will decide to go ahead with the 2nd party. He may negotiate from 50 lacs to 48 lacs as he will get the money in 15 days time.
7. Seller’s need: If there is no urgency from sellers end to close the deal then forget about any negotiation. In the reverse scenario, if the seller is in an urgent need of funds and you gauged the same correctly. It will be a blunder if as a buyer you don’t negotiate property deals. Lastly, if the seller is willing to negotiate in lieu of cash then i will not suggest. Cash Payment in a property deal is as good as the circulation of black money. You can pay max Rs 20,000 in cash as a token money.
8. No property is perfect in this world: It is always advisable to find out the flaws in the property as we know that no property is perfect in this world. Once you have decided to buy a particular property, you are agreeing to compromise on current limitations but these limitations actually help to bring the rate down. For example, if the property is on a higher floor, you can always mention top floors require air conditioning during summers. Thus, higher electricity bills. Similarly, on the ground floor, there is always a lot of disturbance & people movement. Moreover, you will not get a good view.
9. Crack a deal with seller’s broker: Build a good equation with sellers broker and offer him additional commission if he can get you an extra discount. For example, if a deal is of 1 Cr and he will get 1 Lac brokerage from each party i.e. total 2 lac as commission. Offer him to get the price reduced by 2 lac to 98 Lac then he will get 98k and 98k from both the parties and you offer him to pay additional 50k for the deal so his net earning will 2.46 lac i.e. 46k additional. Lastly, there are some points a buyer should never tell a seller or broker. It will weaken your power to negotiate property deals.
After determining all the factors, now you are ready to sit at the table to negotiate property deals. You must be having X price in your mind that you are willing to pay for the property depending on above mentioned factors. You will also have a fair idea how much you can negotiate now, so what are you waiting. Start negotiating and Happy Buying !!!
In my next blog, i will share how to calculate the fair price of the property.
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