The convention in South Africa is that buyers tend to conduct their own negotiation, while sellers are represented by industry experts in the form of estate agents. It is vital therefore that buyers arm themselves with as much market information as possible. Market knowledge courses through the veins of experienced real estate agents, so during your house-hunting phase, consult with many agents, ask questions and arm yourself with as much market knowledge and insight as possible.
Negotiating a house purchase means:
• Doing intensive research about the market, the property you want to buy, and the seller’s situation
• Figuring out an appropriate negotiating strategy and style based on that information
• Consulting an attorney, or other expert, before you sign any papers to protect your interests
Tips for Staying Sane
1. Do your homework.
2. Ask questions constantly.
3. Share the details of your budget, emotions, and mental state only with your advocates (whoever is either involved in the transaction with you or advising you).
Market conditions are the single most important factor in negotiation strategy. And just like the weather, the landscape is a crazy quilt of micro-climates. Markets vary nationwide from place to place and neighborhood to neighborhood. The first thing you need to know is whether you’re in a buyer’s, seller’s, balanced, or red-hot, bidding war market.
Negotiating in a Buyer’s Market
You have more leverage in a buyer’s market than any other type because there are more homes for sale than buyers to make offers. For sellers, especially those who have to move for whatever reason, this is the most nerve-wracking market. Property takes longer to sell. They can’t let potential buyers slip their grasp. They may hate your demands, but they have to wrangle and they almost always have to sell for less than the asking price.
Buyer’s Market Strategy: Ask for the Moon
1. Make an offer at least 10 percent under the price you want to end up paying.
2. Ask for transfer time convenient for you.
3. You want all the appliances and the entertainment center? Ask for them.
4. You’d really like the gas grill and flower pots on the deck? Go for it.
Buyer's Tip: You’re most likely to win concessions and personal property in a buyer’s market.
Negotiating in a Seller’s Market
Pit bulls beware. In a seller’s market, buyers don’t have much clout, and style matters. If the seller has a desirable home and doesn’t like your offer, he won’t invest time in negotiating with you. In a seller’s market, a good strategy is to make a straightforward, “clean” offer.
Buyers cannot procrastinate once they’ve found a home they want. Any agent worth her commission would advise you to make a quick decision in this kind of market, perhaps drawing up an offer the same day you tour the property. In a market like this, the agent knows that you need to act swiftly because the property will sell quickly.
Seller's Market Strategy: Keep It Simple
1. Getting pre-approved for a loan is essential. This can be done easily and at no cost through a reputable bond originator.
2. Offer the asking price or close to it.
3. Ask only for the standard contingencies — financing, appraisall, inspection — to protect yourself.
4. Expect the seller to set the transfer date to his advantage.
5. Don’t expect to receive the personal property you want. (But if the seller is planning a garage sale, you may be able to work a deal ahead of time.)
Buyer's Tip: Forget the wrangling and go for the house. If you have done your market research, you’ll feel lucky to get it.
Negotiating in a Balanced Market
A balanced market feels less like a pressure cooker because there is a more equal supply of homes and buyers. Since neither side is feeling market urgency, personal priorities reign. Expect the back-and-forth counteroffer phase to take longer than it does in either a buyer’s or seller’s market. After several rounds of paperwork, buyer and seller might agree to do a 50-50 split of their differences on price, terms, and personal property.
Balanced Market Strategy: Split Your Differences
1. Offer less than the asking price.
2. Include the standard financing and inspection contingencies.
3. Offer terms beneficial to you.
4. Ask for whatever personal property you want.
Buyer's Tip: Both buyer and seller are likely to feel good about the transaction. They will each gain and give up something in the spirit of compromise during the negotiation.
One Final Buyer's Tip: Remember that buying a home is not always about money. You will probably spend at least the next 5 years in the house, so make sure it’s the right place for you, and make sure you get what you need and want.