In my journey so far, i observed two types of property buyer. The first one are those who are an Honest, and the 2nd category is of Smart property buyer. Honesty is the best policy but not always. Here i am not saying that a property buyer should be dishonest. I am trying to say that as a property buyer you should reveal only that much what is required. On the other hand, honest property buyer reveals all their cards in the first show. It goes against the natural law of negotiations. In past, i shared a post on how to negotiate property deals. This post is a continuation of same. In this post, we will discuss five crucial points that a buyer should never disclose to the seller or broker till the deal is finalized/closed.
In my another post on the similar subject, i shared mistakes the property buyer should avoid during property negotiations. I would request my readers to go through these two posts for 360 degrees perspective on the subject. I received a request from large no of readers to share more on property negotiations. Hope this post will be useful to all the readers. As i highlighted earlier also that property negotiations are not 2+2 = 4. It can be 3 or 5 also. A smart property buyer should analyze and study all the factors that can influence the deal.
At the same time, most of the buyers are not conscious about the fact i.e. points they should disclose to seller/broker. Always remember that if you are doing your homework, then the seller is also doing his homework. Mostly, the broker or agent discuss and negotiate on behalf of sellers. These brokers deal with so many clients on the daily basis that they can judge & evaluate all the factors within few mins. If the buyer is not smart, then he cannot stand in front of a broker. If you are also paying a brokerage to a broker, then you should check 5 points as i shared in the post, Real Estate Agents – Five Points to Check.
With this background, it is important that property buyer should be careful in sharing the details from his end. Only those details should be shared that are necessary for a property deal. Though there are so many points to be shared from my end, i have shortlisted five most crucial points. At the same time, they may or may not be applicable in all the cases.
5 Points a Property Buyer should Never Tell a Seller or Broker
1. New to the City: Sharing of this info can be suicidal for a property buyer. Here i mean to say that if you are buying a property within a year of shifting to a new city. In fact, in large no of cases, i observed that property lovers buy within few months of moving to a new city. Even if you are new then also you should never reveal the same to seller or broker. Though they may find out, You should take a stand that you are familiar with the city. Ideally, you should stay in a city for at least two years before you decide to purchase a property. It is important to understand the nitty-gritty of the city. Every city has its demographics, real estate rules, and regulations. You should stay on rent and do fundamental research for two years before finalizing.
To share an example of my friend. He shifted from Mumbai to Bangalore. He and his wife were fascinated by big flats in Bangalore. Secondly, he was not aware that property in Bangalore is almost 50% cheaper compared to Mumbai. He told his broker that he recently shifted from Mumbai. A broker played his part well, and my friend bought a property worth Rs 4,500 psf at Rs 6,000 psf. On a lighter note, one thing i like in Indian context is that a property buyer will not mind overpaying 20 lakh. On the other hand, he will think 1 lakh times before shelling out few thousand rupees for a professional advice :). We want everything for FREE :). It is advisable to hire a good CA or Lawyer as they can help you in saving a lot.
2. Own Source of Funds: Though 70% deals are through Home loan but rest 30% buyers are the darling of seller’s eye. It’s a human tendency that you spend more when you have easy availability of funds. On the other, if you are availing a loan then a property buyer will do all the calculations and try to negotiate as much as he can.
As i always suggest that even you are pooling 100% funds from own pocket then also you should avail Home Loan. You may close the loan after few months, but the biggest advantage is the title of the property is verified. Secondly, through the bank, you will get complete documents set from the seller. As a buyer, i may not be knowing what all documents to demand from the seller. A bank will give you a list of documents for home loan processing.
My general observation is that my clients who bought from own funds have paid min 10% more than the market price. On the other hand, the psychological fear of home loan or credit brings out the negotiator sleeping inside the property buyer. Therefore, you should never disclose that you will pool 100% funds or for that matter 50% funds. Always maintain a stand that you are availing home loan for 80% or 90% as the case may be.
3. Self Occupied or Rented: Another imp point that should not be disclosed. If you disclose that you will rent the property, then it’s a direct signal that you are an investor. Though there are genuine cases also but in 90% cases, the conclusion is what i shared. Secondly, this disclosure has NO correlation with the property deal. Therefore, a buyer should maintain a stand that he is buying for self-use. If you are buying in some other city, then you can say that you are shifting shortly to the city, in which you are buying the property.
4. Timeline to close the deal: This is another mistake from property buyer. I found that usually NRI buyer’s share a timeline to close the deal on their short visit to India. In some cases, the buyer is in a hurry in the event of shifting or personal reasons. Though NRI cannot hide the status, As a property buyer, you should always maintain a stand you are not in a hurry. Trust me once you show desperation to close fast, you will pay more than the market rate. Secondly, brokers will show you the properties that are not getting sold or are disputed. I observed it as a common trend in such cases.
Another typical scenario in which buyer is in a hurry to meet timeline is near expiry of the pre-approved home loan. Typically, the banks also pressurize the borrower to close the deal asap as they have their targets to achieve. Not many borrowers are aware that Home Loan is approved for three months/six months. After that, you can take one extension of three more months without any additional charge. The pre-approved loan usually lapses if a borrower is not able to find property even after the first extension that is a very rare scenario.
Therefore, you should not mention the timeline to seller/broker. Always plan in such a way that your property deal is closed without any hotchpotch.
5. Office Location: This is a tricky one. There is always a location premium for the property. Even if you are planning to buy a property in non-premium location due to proximity to office, you will end up paying a premium. A property buyer is always willing to pay a little bit premium for same. If you tell seller or broker that your office is nearby. You are buying this property because of proximity to the office then trust me seller/broker will try to fetch a max premium from you. A property buyer should always maintain a stand that he is buying a property as his budget is watertight and will not mind forgoing the property if it exceeds the budget.
Words of Wisdom: I hope that above mentioned points will help property buyer to negotiate property deal in a better way. In short, you should disclose only what is necessary. An excess information is not good for your financial health. You may regret it later.
Copyright © Nitin Bhatia. All Rights Reserved.