Many buyers may find themselves in the situation where they have found a home that they love which is the ideal size, layout, condition and has all the criteria that they have been looking for, however there is just one problem.
The price that the seller is asking for is just too much and out of the buyer’s budget. 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.
“Negotiation is actually just that, it’s an art form. There is of course 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,” says Goslett. “While your gut feeling may be telling you that the seller is 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 says there are a few key elements to consider before making the offer:
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.
“The data derived from the CMA will give the buyer a starting point for their negotiations, provided of course the result is in their favour,” says Goslett. “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 seller has had their home on the market for some time, they may be more inclined to consider lowering their price. All information gathered will help the buyer to form a better factual case for making a lower offer.”
Goslett notes that if the purchaser is a cash buyer, often a seller will look at accepting a lower offer, especially when the seller has accepted offers subject to a bond grant, 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 purchase.
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 that once the seller sees the statistics in writing, there is a better chance that they will consider the offer. He notes that a motivation letter from the buyer telling the seller their situation and feelings about the property could also make a good impression.
What is the seller’s motivation?
Although it may not be an easy thing to find out, understanding the reason why the seller has 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 property, for example, they may be motivated to sell more quickly. Having information and knowledge at hand is power – especially during negotiations.
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 intuition, so that the seller knows that the offer is financially backed up and secure.
Is it possible to make the asking price work?
If the home’s asking price is within the fair market value and is 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.
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, 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,” advises Goslett.
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 – it’s about finding the right house at the right price,” Goslett concludes.
This article “The Art Of Making An Offer Below Asking Price” was issued by RE/MAX of Southern Africa.