Being a good negotiator is a very important skill for all home buyers, but it’s a skill that is often overlooked in the property buying process.
Remember, the better you are at convincing the real estate agent and the vendor that you’re an experienced buyer (even if you are not), the more leverage you’ll have to negotiate a lower purchase price for your desired property.
Buying a property at the lowest price possible is so important because mortgage interest repayments can last up to 30 years.
For example, on the assumption that you have a $50,000 deposit, reducing the sale price by $10,000 on a $500,000 property with a 4% interest rate, saves you more than $7,100 in interest repayments over 30 years. Every little counts.
My husband is an excellent negotiator. In fact, his lengthy experience in dealing with big budgets and difficult people has made him a professional negotiator.
He always does his research so he knows all his facts. And by adequately knowing his facts, his views are always delivered confidently, without hesitation when challenged.
From my husband, I’ve learnt a great deal on the best negotiation tactics for buying a house, of which I have listed the top 6 tips below:
6 tried and tested tips for negotiating a lower property price
1. Act confident … even if you are not
We’ve always informed agents and vendors that we own a large portfolio of properties, even when we only owned one property back in the day.
I don’t encourage excessive lying, but I’ve always found this ‘white lie’ helps to convey the message that we are serious buyers – ‘we are not here to waste your time, so don’t waste our time’.
Having a bank pre-approval helps but other buyers also have this document. So what you need to convey is that your ‘team’ of brokers, solicitors and conveyancers (even if you don’t have one) have been informed of your offer and can start their work immediately.
Also, don’t reveal your total deposit – just give a vague indication, with an air of confidence, which hints you can source more money if required (even if you can’t). You don’t want to be immediately pigeon-holed as a ‘poorer’ buyer based on your deposit.
2. Do your own research on how much the property really costs
Prices given by real estate agents do not always reflect the correct market value. Type the building address in ‘Google search’ and in property websites, like Domain and Zoopla to uncover historic sales prices. This allows you to estimate the value of the property before negotiating.
3. Investigate the current and historic sale prices of neighboring properties
Using the above method mentioned in point 2, investigate the current and historic sale prices of neighboring properties, particularly those which are on the same street, are of the same size and built in the same period as your desired property.
Similar properties should have similar prices no matter how rapidly the housing market is growing. By knowing this, you can be more confident in arguing your offer against pushy agents.
4. Check the planning permission history of the building
Go to the ‘planning permission’ section or similar, on the local council’s website to uncover if there have been major renovation works done to the building. This is public information.
Sellers often overvalue their properties based on ‘additional features’, such as increasing the selling price by £20,000 for a loft extension which might have only cost £7,000 to build. The same applies for kitchen and bathroom renovations as well as conservatory and garage extensions.
Understand the real cost of the renovation work so you can estimate how much the property is being oversold – and use this price disparity as a negotiating tool.
5. Double check that all major renovation works have official council approval
Using the method described in point 4, double check that all major renovation works have official documentation confirming council approval.
We successfully reduced the purchase price of our house by thousands of pounds after uncovering that the vendor did not have legal paperwork for the loft extension.
6. Be aware of environmental pests, such as termites and Japanese knotweed, which devalue the property
If you are willing to purchase an ‘infested’ property, investigate the eradication costs and use this amount to negotiate a lower buying price. But remember, some banks do not issue mortgages for properties with a Japanese knotweed or extreme infestation.
When is the right time to make your best offer?
On a final note, if you REALLY want to buy a particular property and nothing will change your mind, I advise that you make your best offer from the onset – especially if the seller only accepts ONE offer from each prospective buyer.
We ‘lost’ an excellent investment property due to our over-confidence of mistakenly assuming the seller wanted a bidding war amongst the prospective buyers.
In reflection, the high rental return and capital gain on our ‘lost’ property would have quickly compensated for the higher upfront asking price.
Lesson learnt is always look at the big picture and think long-term.
So, do you have any new tips on how to score the best (and lowest) purchase price?
Please note, though I own a few properties, I am not a legal, financial or professional property expert. I’ve written this post to share my personal experiences and would love to hear your opinions and views.
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