Let’s talk about what the buyer should know directly about the negotiation process of real estate purchase.
So, you have watched with the agent a sufficient amount of real estate, and one fine day, you finally chose a house that you liked so much that your indispensable desire to buy it matured. Of course, you want to buy it not only by all the rules, which the agent will probably help, but also naturally beneficial. Each of the buyers, having decided on the choice of a house, almost always asks the agent the same question. “What do you think, for what amount can we really buy this property? Tell me five thousand dollars will be ceded to us, or maybe ten? Our friends have bargained seven thousand. Can you do the same for us?”
You ask the agent as a specialist a question and expect a professional answer from him, which is quite natural. Nevertheless, you are hardly seriously reckoning that the agent will scratch his head, look faraway into space and say that he will be able to bargain 5.560 dollars. I must say that it is quite accurate to predict the amount of price reduction – not a very real task. Each house is unique in its own way, and the personal situation of sellers and their position can be completely unpredictable.
Some people believe that the amount of money conceded in the auction is approximately the same for all cases and, as it were, was originally included in the sale price. Therefore, the agent is asked a question usually in the following form. “How much are usually inferior when selling?” Of course, this is hardly the right approach. Suppose you buy a house, one of which is in very poor condition, and the other is almost impeccable. It is clear that a decrease in property prices of the same value can be very different in these two cases. At the same time, you will agree that it is quite difficult to demand a significant reduction in the price of a house, which is reasonably priced and has practically no flaws. Even if the seller is willing to listen to your arguments, which ones do you plan to bring to him? There is also a situation when the seller is interested in the quick sale of his home and the initial cost is already extremely close to the real selling price. It is clear that in this case it is quite pointless to demand a significant reduction in prices. Despite the foregoing, it is still possible to obtain approximate information on the size of the price reduction in a standard transaction, and a little further we will talk about how to do this.
So far we touch on another situation, which also often arises with the buyer. It looks something like this. “We like the house. Please call the seller and say that we are ready to offer $ 10,000 less for their house. If this proposal suits them, then we agree to buy a house.” The buyer should know that the work of real estate agents in Canada is a bit like the work of lawyers. You know that each side there is represented by its own lawyer, and neither lawyer has the right to conduct direct negotiations with the client of the opposite side. Absolutely the same situation in the relationship between the parties in the real estate market. Neither you nor your agent has the right to contact the seller personally and decide with him any questions regarding the property he sells. All negotiations can only be conducted strictly through the agent of the seller. In addition, the consumer should know that in most cases, neither the buying agent nor the seller will discuss any details of the proposal verbally. It’s not difficult to explain. If I act as an agent representing a seller’s interests, then I always answer the same phrase to another agent about such calls about the possibility of lowering the price of a house. “If your client is serious about buying a house, then we expect from you an official (in writing) proposal, which my client and I will gladly consider.” By the way, not only me, but most agents adhere to a similar position and that’s why.
Firstly, I can’t give any forecasts regarding the reduction in the price of real estate for sale, since the decision for what amount in the end it can be sold only to its owner.
Second moment. An official offer to buy is valid only if it is signed by the buyer. As a seller’s agent, such a written offer speaks to me of the seriousness of my interest in acquiring this house. In all other cases, such calls about the price are just conversations, and conversations not supported by specific actions are not valued too expensive.
Thirdly. Even if I’m ready to speak orally with the buyer’s agent over the telephone, what after such a conversation can I tell my client? It will be difficult for me to explain that a certain agent called and offered some money for the house.
The idea is quite simple. Houses are not bought or sold by phone and we will have to negotiate, as they say, face to face with the opposite side of the transaction.
Another of the common situations.
“Can we invite friends or relatives to participate in the negotiations. We have never bought real estate, and therefore are a little nervous. They have already bought a house and know how to behave in this process.” Almost always, all negotiations are conducted by your agent and neither you, nor, moreover, no one else, are allowed directly to the negotiations. The terms of the transaction for the purchase of real estate are confidential and outsiders cannot be present at the same time. Even if you are not concerned about the confidentiality of the transaction information on your part, then at least you must provide the opposite side with such an opportunity. Also put yourself in the shoes of the seller. When selling a house, you are unlikely to want to see at your door an advanced group of negotiators consisting of 4-5 people, waving posters and chanting “Give the house!”.
This is of course a joke. Seriously speaking, the presence of a knowledgeable agent in the negotiations is more than enough. In addition, it is very difficult for me to imagine a situation in which your friends could be more sophisticated in matters of acquiring housing than an experienced realtor working daily in the real estate market.
Now a little about what generally happens the position of the buyer at the time of bidding. Try to determine for yourself which group of buyers you enter.
The client wants to buy this particular house and no other, and accordingly is ready to offer the amount initially acceptable to the seller, so as not to lose this house.
The buyer is set to bid in terms of price and is ready to offer a low starting price at the start of negotiations.
The buyer wants to buy only cheap real estate and offers a significantly lower price for the house. If you want to buy only this house and no other, then the situation is really risky for you. If you have a desire to bargain, you will have to do it carefully enough, since not only you may have liked the house. There are frequent cases when the buyer, knowing that he found what he was looking for, refused to bargain at all, but simply paid the asking price in full, and sometimes (if several offers come in) even a higher price.
Now about those who are set up for persistent bidding.
This position is not always explained by the stubbornness or everyday stinginess of the buyer. Most often, the situation shows that the buyer is limited in funds and physically unable to pay the proposed price. In this case, the only hope is that the seller will go to lower prices, which is possible and will allow the buyer to stay within his budget. In order not to waste time and nerves to nothing, immediately determine the upper price limit for yourself, and inform your agent about it. The agent, in turn, in the negotiation process will quickly enough determine how far the parties diverge in their ideas about the final price. For example, if the seller’s agent makes it clear that his client is not ready to drop below $ 700,000, and you are not ready to rise above the $ 650,000 mark, it’s obvious that with a tough gap of $ 50,000, there is practically no negotiable item.
Finally, the last option. I came across cases when, no matter how strange it may seem, it was not very important for the buyer what exactly to buy if only it was cheap. In this case, the initial proposal for the purchase of real estate is usually made much cheaper than the asking price. Usually this is the most unpromising purchase option and such transactions do not often end in success. In addition, such transactions are not a small test for the agent. Imagine a seller’s reaction when a buying agent comes up with an offer of $ 400,000 to buy a home worth $ 500,000. To put it mildly, the agent’s house is not very happy with the agent.
Property prices
Let us return to the conversation on how to find out the size of the approximate price reduction in a standard transaction. The easiest way out is to make an analysis of the latest and relatively recent sales of similar houses in a given area. Such a database is available to any agent and an experienced specialist will accurately calculate what your chances of reducing the price are. For example, if similar houses worth $ 580,000 were sold on average for $ 538,000-540,000, then you have a pretty clear idea of what you can count on. It is hardly reasonable to expect miracles, offering the seller an amount significantly lower than the price level of recent sales. Keep in mind that the seller’s agent always has excellent knowledge of this information and is sure to present it at the time of bidding. Analysis of the latest completed transactions is a pretty powerful tool in case the price of the house being sold is significantly overstated. Obviously, in this case, the buying agent, having made such an analysis, has serious arguments in negotiations with the selling party.
By the way, about the low price of the initial offer. Typically, the buyer argues in approximately the following way: “First, we will offer the seller as little as possible. For example, for a house worth 550,000 dollars, we will offer 450,000 dollars and look at the reaction of the owner.” It seems to the consumer that the more the price of the initial offer is underestimated, the cheaper it will be possible to buy a house. For some reason, there is an opinion that the parties agree approximately in the middle between the asking price and the offer price. This is probably why an understated proposal is being made in the hope that the aforementioned summary middle will be at a lower point. Practice and my personal experience show that such tactics lead the buyer to success not always. Moreover, too low an initial price, often leads to results quite different from those expected.
Why is this happening?
Option one. The seller is annoyed and does not want to conduct further negotiations with such a buyer at all. In such a situation, negotiating with the property owner is already very difficult. He seemed to lose interest in bidding, as it were, in a sense, deleted the buyer from the list of potential bidders and returning him back to negotiations from this moment is not at all easy. In a sense, the low price is perceived by the owner of the house as disrespect not only to real estate, but also to him personally. As a result, such negotiations can end almost without having begun.
The second reason. The seller does not take the buyer seriously, as he believes that he simply does not have the financial ability to buy a house for the money that he really costs. The seller’s position in this case is that it makes no sense to waste time on an insolvent buyer, it’s easier to wait for another. As a result, the seller’s agent will quickly make it clear that discussions at this price point are not of interest to the property owner. In a word, either you need to offer the seller a different price, or not waste time in vain and just look for another property.
The third. The seller believes that the buyer is not very clear about what he is buying and how much it really costs and, again, quickly loses interest in him. Figuratively speaking, the owner of a valuable collection of paintings will not paint the merits of an artwork worth $ 100,000 to a person who does not understand painting at all.
As you can see, in the end it turns out that the final result often turns out to be exactly the opposite of what the buyer was counting on. In some cases, you have to buy a house even less profitable than was possible. The reason is simple. The seller does not want to concede in price in principle, without experiencing the slightest sympathy for the buyer. “Someone may concede, but excuse me no.” Unfortunately, in the hope of buying cheaply, we often forget that the negotiation process consists of the positions of several parties and ignoring the interests of the opposite side can cost the buyer dearly. In my view, entering the negotiation process needs to be soft and smooth. It is worthwhile to offer the seller an initial price at a reasonable distance from the real one and only then, benevolently, politely and reasonably, try to approach the amount planned for himself. Just in this sense, a sharply understated offer often works like a blow, after which no one wants to be friends. As they say, it was possible to achieve a powerful effect, but there is no one to talk to anymore.
Of course, you do not need to go to extremes, and of course I do not urge the buyer to indulge all the desires of the seller. The idea is only that a reasonable starting price of the proposal often allows to achieve significantly greater results in the negotiation process.
What to expect
Finally, the decision on the price of the house was made, the proposal to buy it was signed by you, submitted by the agent, and now you are waiting for the reaction of the seller. What to expect
It rarely happens that the seller from the first call is ready to accept your offer. Most often, he will return the draft proposal with his changes back to you. Realtors call this situation “counter offer”, that is, the offer is written back. This means that the seller is not ready to accept the amount you proposed or is not satisfied with the other parameters of the proposal, but does not refuse to continue negotiations with you. At this moment, the buyer is faced with the following choice. Accept seller’s counter offer (accept) or put forward new contract terms?
It’s rare when it makes sense to continue to insist on your initial price, or for this you must have reasonably good reasons. It seems to me that the physical meaning of successful bidding is to move towards each other in search of a middle ground. I would even say that concessions on your part, in a sense, oblige the seller to make such concessions on his part.
The bidding process often creates a rather nervous state on both sides. Often the buyer, seeing the seller’s resistance, for example, in terms of price, becomes even irritable. At the same time, the owner of the house is perceived by him as an implacable, stubborn adversary, which must be defeated at any cost. Often emotions are so heated that the auction comes to a standstill when the parties are unable to agree on a price difference of $ 1,000. As you know, the point is, of course, not in money, but only in the reluctance of the buyer and seller to give in to each other.
If you buy a house, then it is hardly worth being annoyed with the seller. Imagine that tonight we were able to successfully buy your chosen home. For 5 years, you happily lived in it, then the situation in life changed, it became necessary to sell it and buy another. As you may have guessed, this story ends with the fact that we are sitting in the kitchen and are considering the offer of one of the buyers to buy your home. Suppose a bid price of $ 12,000 is at variance with the price at which the house was put up for sale. Try to imagine your condition at the moment when you see these papers on the table. Do not forget that you have lived in this house for years. You certainly love your home, each part of which contains pleasant memories of past years. It is possible that your children were born and raised in this house. Much of the house was done with their own hands, with love and what is called soul. And now this native brainchild should fall into the hands of strangers (obviously an unpleasant couple) who came to bargain for him. Not only do they not understand WHAT they are acquiring, they still do not want to pay humanly for this miracle!
But seriously speaking, in reality a lot of people are not easy to part with the house and the buyer unwittingly looks for them as an evil detective. By the way, the buyer’s agent, in the eyes of the seller, also looks like an evil person. Do not forget about the eternal formula “my house is always better than everyone and it should cost more than others.” Anyone who does not agree with this position of the seller, obviously not included in the circle of his sympathies. As you can see, the moral position of the seller is no easier than the position of the buyer. Do not forget that the owner of the house probably already bought a new house for himself, which means that he needs to receive from the sale an amount sufficient to pay for the newly purchased housing. In a word, the seller has his own problems and he is trying to defend his own interests. I repeat once again that the ability to respect the position of the opposite side not only helps to facilitate the negotiation process, but also often achieve great success in the negotiations.
Continuation
… It is quite common that a contract for a house purchase repeatedly walks from buyer to seller, back and forth, in search of a mutually acceptable solution. Be that as it may, the auction continues and the higher the buyer has to rise in price, the more doubts arise. “If I still want to buy this house, how far am I willing to go in my desire?”
Suppose that we do not agree with the owner of the house at a price of $ 3,000, and the seller makes it clear that we should not expect him to further reduce the price. How to be This is not a difficult psychological test. Without going into details, imagine in a simplified form the following situation. Right at the time of negotiations, a certain person appears at the door of the house and speaks to the seller. “I looked at this house, I liked it and I, unlike another buyer, am willing to pay a little more.” The transaction was successfully completed, but without your participation. Answer your question. Will you feel sorry for the lost home in this case?
If not, then it means that you know exactly what limit amount you were ready to pay for the house, and then everything is in order. Option Two. You feel sorry, but not really. I like the house, but not enough to fight for it to the end. The same big problem is not. It is worth working with an agent and picking up something more suitable for yourself. Finally, the last situation. If you feel that losing your home will greatly upset you and would like to buy it, then you should not risk it. Having lost the selected property, you will not only bring down a stream of negative emotions, but you may also get serious problems with the subsequent purchase of a home. The lost house will always stand in front of your eyes, and the rest of the property will seem like a miserable parody of it.
Often the stubborn desire to bargain for the difference in the price of a house for $ 2,000-3,000 is explained quite simply. This usually happens because such money is presented to the buyer by a rather large amount. This is true if you are required to get this money right out of your pocket right now. You can look at the problem from a different point of view. Keep in mind that an extra 1,000 dollars in a loan for a period of 25 years will affect the payment for the house only at the level of 5-7 dollars per month. Just decide what is more important for you, to win 2-3 thousand dollars in the bidding process, or to be sure that from now on this house will belong to you.
Until now, it has been said about a simplified option for buying real estate. The simplicity of this option is that you are the only buyer. The tactic of this purchase is to try to buy a house as cheap as possible. In reality, this situation is not always found. In fact, if you have chosen a really decent home with a very reasonable price, then be prepared for the fact that you may have to compete with another buyer or even several buyers. I had to see cases when 5 people simultaneously expressed a desire to purchase the same house. The approach to buying a house with this option is fundamentally different from the standard type of real estate purchase.
The first recommendation. Decide how seriously you want to buy this house. You already know that you are not the only contender, which means that winning the competition will not be easy. Second wish. Do not try to buy such property cheaply, almost always it will be useless. Each buyer knows that he is not the only bidder, and, therefore, each of them will try to offer the seller the best conditions. This is the main tactical idea of buying such a property. Decide initially what is the maximum amount and what are the most convenient conditions you are ready to offer the seller.
It’s probably worth explaining a little why it is necessary to act in this way. The fact is that in Canada, when buying real estate, an auction system has not been adopted. The competition to buy a house here is more like a tender. If several offers to buy are received at the same time, then the seller, having examined each of them, as a result chooses one. All final negotiations are conducted with the applicant who has proposed the best conditions of the contract.
Now, apparently, it will be clear why your proposal should be attractive initially, otherwise the chances of being a strong opponent are pretty small. That is why often the interested buyer immediately offers the full amount, that is, the amount for which the house was offered for sale. Be prepared that even such an offer does not always guarantee success. A good house is often for sale significantly more expensive than the price for which it was offered.
If the seller is interested in the imminent release of real estate, try to adapt to his terms. It is not a good idea to include a large number of conditions in a purchase proposal. For example, ceteris paribus, your offer will most likely be rejected if it contains a condition for obtaining transaction financing. It is clear that in this situation, the seller will depend on whether you can get a loan from the bank or not. Most likely, he prefers not to take risks and deal with a buyer who does not put forward such a requirement. Carrying out a technical inspection at home, in this case, is also hardly a good idea. In a word, the less the seller has trouble with you, the more likely it is that he will prefer your offer to others.
Advice
To the recommendations on the acquisition of real estate in a situation where several buyers simultaneously claim to purchase it, I can only add a few last details. It happens that in the excitement to buy a house, the competing parties are so passionate about the struggle between themselves that the final price of real estate sales sometimes rises above the prohibitive level. As a result, the house is being sold for money, which, most likely, is simply not worth it. In my opinion, it is justifiable to offer a price that you consider reasonable and justified for your personal case. Then you just need to wait for the seller’s decision and rely on luck. Why not overpay for a house under the pressure of emotions? Even if you really liked the house, do not forget that sometime there may be a need for its implementation, and then the unreasonably paid price will painfully remind yourself of itself during the sale.
The reverse situation also happens. Some buyers, as soon as they find out about the availability of other bidders, immediately refuse to participate in further bidding. At the same time, the consumer considers it reasonable to wait at home, for which no one claims to calmly bargain with its owner. In my opinion, this is a rather controversial position and that is why. Most often, the lack of active interest of buyers indicates the initial overpricing of real estate prices or the fact that the house is not in the best shape. As a result, it may turn out that we managed to find a house for which you can bargain quite calmly, since nobody just needs it anymore.
A bit about the reasons for lowering the price.
Often the buyer prepares for himself a whole list of what the seller needs to express in the struggle for the price of the house. Gather these arguments for yourself and tell them to your agent, perhaps this will facilitate his work in the negotiations. Nevertheless, do not be surprised if you see that he does not show special interest in them. The fact is that an experienced agent himself knows what to say. It can lead, among other things, arguments that are not even among your claims to the house, but which are quite effective in the negotiation process.
What are the reasons for reducing prices effectively affect the seller?
The age and condition of the roof or, more precisely, roofing material. If the age of such material approaches 12-15 years, then there is no guarantee that in the coming years there will be no problems with the repair of the roof. The expectation of such work soon may be a very weighty argument in the auction. Further. Of course, a general home renovation, if it really requires it. By the way, if you are the only contender for the purchase of a house, then the general technical inspection of the building will probably help in terms of arguments. An experienced inspector will offer you a whole list of what you can pay attention to the seller.
There are many other tricks to help bargain for the price of a house. One has only to remember that claims must be reasonable and their number should be limited. Otherwise, it’s easy to get into a situation when you are asked, why are you buying this property? And indeed, if the house is so terrible (according to the number of claims), then what is the point in acquiring it?
By the way, there are a number of not very effective methods of reducing prices. For example, the unfinished basement of a house is not always an effective argument in negotiations. You are probably surprised, because this is its significant minus compared to houses with such an option. The fact is that many Canadian families do not consider it necessary to finish the basement of the house and use this part of the building only for technical and warehouse purposes. Therefore, it will not always be easy to convince the seller that this is a lack of home. In addition, if it was so important for you, it would be more logical to just buy another house.
The argument that the house stands at a noisy intersection of streets or, for example, by the railroad also does not always work. No one hid this fact, and the buyer saw the location of the house from the very beginning. In other words, the house is located where it is, and, in addition, the initial sale price already probably takes this fact into account.
Rather, it is worth talking more about the shortcomings of the house that can be eliminated, but such work will require additional costs from the buyer. Moreover, it is better to talk about the disadvantages of housing that interfere with momentary living in it. Do not confuse such claims with arguments for home remodeling. For example, the following customer position is often found. “The carpet in your home is green. We want to remodel it with beige. We will certainly have to bear the cost. If you are willing to reduce the price of the house by this amount, we are ready to buy it.” In most cases, this is also a rather unpromising position. Having bought a house, you have the right to subsequently rebuild and remodel it up and down, however this has nothing to do with the seller. Another thing is if the condition of the carpet is really poor and it clearly needs to be changed. In a word, you buy what you see already, then you will decide how you want to see your house in the future.
I deliberately do not disclose all the details about buying a property, and it’s hardly possible to tell everything. In addition, many subtleties of the negotiation process to the consumer are not so important to know. Actually for this you invited a specialist to work. Just trust an experienced agent who knows well what needs to be done to succeed.