The property value of a residential property is the most important thing for a homebuyer to know. Without the knowledge of this vital fact, a homebuyer cannot take part in a property transaction or perform any of his or her promises. However, the property value of a piece of real estate is merely an estimate with the value determined subject to change on the basis of how the transaction progresses.
The negotiation phase of property transaction reveals a lot about pricing as the transaction progresses with offers and counteroffers being exchanged between the parties and discussions being conducted on the terms and conditions that may be recorded in the sale agreement or deed. The determination of the value of the property depends on several factors, both internal and external in nature.
It is for the parties to make the estimates that are closest to accuracy and conduct the negotiations in a transparent and fair manner. This article seeks to explain some facts about negotiation and address some questions related to this topic.
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Negotiation of the price of the house after acceptance of offer price
You have seen the asking price of the property as stated by the seller and determined it to be too high. So you decide to assess the condition of the house and get it appraised to assess its value. Soon you realize that the price of the house is actually lower than the asking price fixed by the seller and decide to make an offer of your own.
The seller agrees! You just avoided the negotiations over price and took a step closer towards becoming the owner of the house. However, if you think you have altogether avoided negotiation, you are mistaken.
- There are still several differences between buyers and sellers that need to be ironed out before the important terms and conditions of the transaction are recorded in the sale agreement.
- If you find the house needs to be repaired when you are assessing its condition, you may want to get the repairs done soon so that when you move into the house, you have a proper liveable house.
- However, you believe that the seller needs to bear the expenses of the repairs because you are of the opinion that the seller has lived in the house for long and is obligated to undertake repairs and renovations for fixing defects in the house that s/he bears before transferring the ownership and possession of the property to you.
- In case the seller refuses to accept the obligation, you have to gear up for negotiations. The seller’s view is simple. S/he is transferring the house and the proprietary interests that lie therein. The house is also free from encumbrances. There is nothing more for him or her to do. Whatever you want to do with the house can be done because it is your prerogative after the transfer of ownership.
- In the negotiations undertaken between you and the seller, you need to take his or her view also into consideration. There is a good chance that the house in need only of minor repairs that can be remedied easily because the seller may have undertaken major repairs of the house to make it look presentable and saleable.
- If both the parties are unable to agree on who will bear the expenses of repairs of the house, a good alternative would be to apportion the repair expenses between themselves on a pro-rata basis that can be agreed upon.
- Negotiations can also be upon the way payment for the house is made. If there is any encumbrance on the house, the seller and buyer may negotiate on the obligation to discharge the encumbrance. If there are home loan dues of the seller pending on the property, the buyer may agree to satisfy the dues in return for the proportional reduction in the amount to be paid by the buyer. This can be done if the buyer is paying cash for the property.
How to negotiate house prices with builders?
Negotiating the price of a house from the builder or developer of the residential property involves knowledge of the property and the market it is being sold in.
- First and foremost know whether the market you are a part of is a buyers market or a seller’s market. If it is a buyers market, you have the leverage. If it is a seller’s market, the builder has the leverage.
- It would be useful for you to get the quoted prices and sale prices of all the similar properties built by the builder and other builders in the locality to know the trend of sale of properties. Knowing the prices would allow you to keep tabs on the trend and estimate the price discount that is possible from the builder.
- If a property of the builder in that area has been on the market for too long, find out the reasons. This could be used as leverage in the negotiations with the builder to lower the price in your favour.
- Thus, if you are making a quote, it is best to start low like around 15-20% lower than the quoted price to give you room for
- You need to be flexible. You cannot adamantly stick to your offer price for this may consequently cause the deal to fall apart. Thus be willing to take a lower rate of discount from the builder if possible.
- Ultimately it all comes down to how well you stick to your goal and negotiate on these matters with the builder in order to persuade him or her to conclude on a mutually beneficial ground. Make sure you get everything in writing for record and evidentiary purposes.
Things not to do during negotiation
The various don’ts of negotiation includes:
- Knowing the details and facts completely and not making assumptions
- Establish a relationship with the other party. This will help in smoothening the process. Thus don’t rush
- Don’t Overnegotiate
- Don’t stress and cause your anxiety to affect your demeanor
- Never neglect the other person’s perspectives and respect the same
- Do not use agressive or accusatory language
Negotiation is a complex process where the parties to a transaction try to arrive at a reasonable and enforceable conclusion after comprehensive discussions. This exercise requires us to focus on one’s goals but at the same time a willingness to be flexible and modify the secondary objectives to reach a mutually beneficial conclusion. A property transaction has several elements that may require negotiation to iron out the differences between parties. This may result in the process being unusually prolonged if parties have reached an impasse.
A builder, developer, or home seller wants to sell the property and make a profit from the sale. A buyer wants to purchase a house property for a bargain. There are other issues like the discharging of encumbrances or the undertaking of repairs that may be the subject of negotiations between home buyers and sellers. Information about the property, its market, and the seller’s motivation behind the sale is the key to purchasing a house on favorable terms for yourself.
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