How Do You Negotiate Real Estate Purchase

Summary

 – Definition of the negotiation margin of a real estate purchase

 – Negotiation margin for a real estate purchase: advice

When buying a property, who is not tempted to negotiate the selling price proposed by the seller? But before making an offer below the posted price, make sure that it is appropriate to deal. If so, how much room for negotiation is possible? Prepare your negotiation and justify it with concrete arguments. 

Definition of the negotiation margin for a real estate purchase

The negotiation margin is the difference between the initial sale price and the price proposed by the buyer and accepted by the seller (price appearing in the deed of sale). It is the deduction that the buyer obtains on the selling price.

Difficulty in advising a negotiation margin

Indicating a negotiation percentage is a delicate and challenging exercise. It is impossible to recommend a predefined negotiation margin for a specific property.

Too many factors come into play in negotiation: the situation, the nature and the quality of the property, and the quality of the relationship between the seller and the buyer. Each sale is different, and each negotiation margin is different if there is one.

The declining trend in negotiation margins

For many years, the trend was for a large negotiation margin (at least 10% of the sale price). This trend has left its mark on buyers who believe that these margins are still very significant today.

However, the trend today is for negotiation margins to decrease. This is at least the observation made by certain studies which compare each year the selling prices of properties announced at the time of their marketing and the final selling prices noted at the signature of the sale.

Negotiation margin for property purchase: advice

Evaluate your chances of negotiation

Before embarking on price negotiation, ask yourself if it is appropriate to negotiate and if your negotiation proposal has a chance of succeeding.

Good to know: find out the state of supply and demand.

The higher the demand, the lower will be the negotiation margins. Indeed, given the low number of properties for sale, buyers do not want to take the risk of not being able to buy the property they want.

When demand is lower, buyers are in a strong position and can negotiate more easily. The seller is more inclined to accept the proposal without missing the opportunity to sell his property.

Good to know: find out when the property will be put up for sale.

Some sellers still refuse to face the reality of the real estate market. Despite the current prices and the property’s actual value, they set their price too high.

This type of property usually stays on the market for a very long time. The real estate ad can be visible for months. In this case, please pay attention to the marketing date of the property. The negotiation margin can then be significant.

Please note: when selling a property, it is necessary to establish the property’s real value. This value is determined by considering the value of similar properties for sale. The tax authorities can compare similar properties to determine the property’s real value. If the property is sold at a lower price, the tax authorities have the right to demand a correction, as the price agreed upon is used as the basis for calculating taxes.

As it is always customary to negotiate when buying real estate, sellers consider this when setting the selling price. They generally reserve a small negotiation margin for themselves.

Properties sold at the right price sell very quickly. But negotiation margins are not automatic either. Sellers may set the selling price as close as possible to the property’s actual value to sell it quickly. In this case, there is little or no room for negotiation.

Don’t cut yourself off from the opportunity to acquire the property by attempting to negotiate (or in trying to negotiate at too low a price). It is sometimes better to buy at a price, as competition from other buyers may be substantial.

Be careful with the amount of your proposal. If you know that the selling price of the property you are interested in is the right price, avoid proposing much lower, just for the principle of starting a negotiation. The seller may be “offended” by the under-estimation of his property and may not want to enter into negotiations. You risk losing your credibility. 

Prepare your negotiation arguments

Before starting your negotiation, prepare your arguments well:

 – find price references for similar properties (Internet sites, mortgage department, notaries, etc.);

 – list and quantify the possible work to be done on the property to bring it into good condition or to bring it into conformity;

 – List the elements that may justify a discount on the sale price: for example, exposure of the property; lack of light; absence of an elevator for an apartment located on a high floor; etc.

Make a written offer to purchase

Once you have determined your negotiation margin, make your price proposal in writing to the seller. List the arguments that justify, in your opinion, the price you are proposing. Also, state the arguments in your favour to convince the seller to accept your proposal.

For example, you can pay cash without taking out a loan is a strong argument.

Thus, if you prepare your negotiation well, you will undoubtedly obtain a negotiation margin on your real estate purchase. Even if the seller does not accept your first proposal, he will make you a counter-proposal and will thus agree to sell his property below the price initially fixed.