Being a good negotiator is one of the most important skill for homebuyers, 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 likely you will buy a property at the lowest price.
Buying at the lowest price 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. Professionally, he deals with big television budgets and difficult people. These skills are transferable to property investing. He always knows all his facts. And by knowing his facts, his views are always delivered confidently, without hesitation, when challenged. I’ve learnt a lot of negotiation tactics from my husband.
Below are the six best tips:
Six tips on how to buy a property at the lowest price
1. Act confident, even if you are not
My husband I always inform agents and vendors that we own a large portfolio of properties, even when we only had one property many years ago. This ‘white lie’ labels you as a serious buyer. And, thus, vendors and agents know that you are not here to waste their time, so they should not waste your time.
Having a bank pre-approval certificate also shows that you are a serious buyer. But, other buyers also have the pre-approval certificate.
To stand out from the competition, you need to tell the agent that your property team (even if you do not have a team) has been informed of your offer, and are ready to start the buying process immediately. A property team includes the mortgage broker, solicitor and conveyancer.
But remember; never reveal the amount of your deposit at the beginning. Just give a vague indication, with an air of confidence, and hint you can source more money for the deposit, if required. You don’t want to the agent to classify as a ‘poorer’ buyer based on the size of 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 sale prices. This allows you to estimate the value of the property before negotiating.
3. Investigate the current and historic sale prices of neighbouring properties
Investigate the current and historic sale prices of neighbouring properties on ‘Google search’ and on property websites. Focus your research on properties that 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 or declining. By knowing the estimated value, you can be more confident with the offer you are giving to pushy agents.
4. Check the planning permission history of the building
Go to the ‘planning permission’ section on the local council website to uncover if there were previous renovation works done to the building. This is public information.
Sellers often over-value their properties based on ‘additional features’. An example would be increasing the selling price by £20,000 for a loft extension that 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 each 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
Double-check that all major renovation works have official documentation confirming council approval. The documentation can often be found in the ‘planning permission’ section on the local council website.
My husband and I 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
Environmental pests can include terminates and Japanese knotweed. If you are willing to purchase an ‘infested’ property, determine the eradication costs and use this amount to negotiate a lower buying price. But remember; some lenders do not issue mortgages for properties damaged by terminates and Japanese knotweed.
When is the right time to make your best offer?
If you really want to buy a particular property and nothing will change your mind, make your best offer from the onset. This is especially applicable if the seller only accepts one offer from each prospective buyer.
My husband and I ‘lost’ an excellent investment property because we mistakenly assumed the seller wanted a bidding war amongst the prospective buyers. In reflection, the high rental return and capital gain on this property would have quickly compensated for the higher upfront asking price. The lesson learnt is always think long-term.
So, what are you tips on how to buy a property at the lowest price?
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