Do you know how to negotiate? As a Chama it is important for members to realize that old-school haggling can work wonders when it comes to getting value for money in real estate. Let’s say a Chama is in the process of buying a beach apartment from the original owner. The Chama makes a low offer. The owner counters with a high demand. Both parties chest their cards, each hoping the other will misplay his hand. After lots of back-and-forth posturing, they settle on a price each can live with, although both know that the deal is likely better for one side than the other. At some point, it still comes down to determining who gets which slice of the cake.
Now imagine the same property but a different process, one in which the parties openly reveal their own interests from the beginning. The seller learns that the Chama plans to use the beach apartment only in December holidays to rent out to tourists, and in the course of negotiation agrees to look after the property in the off-season. Here both sides win: the seller gets a little extra cash and the opportunity to spend additional time in the apartment, and the Chama takes care of low-season maintenance concerns. Win-win solutions like that could leave both parties better off than a straight cash deal.
Skillful negotiation starts with having a clear sense of when to walk away, in order to avoid being cajoled into accepting unreasonable terms. It also involves having a keen sense of where the other party will be left if you hold firm on your terms. Careful analysis may reveal that the other party needs the deal as much or more than you do. Keep in mind that the art of negotiation lies in simultaneously creating and claiming value, it is like riding two different horses at the same time. On the one hand, if we don’t explore mutual interests, we may not create mutual value. But on the other hand, if we show our cards and the other side doesn’t reciprocate, then we run the risk of losing the whole pot. So how do you avoid risking all? Here’s how.
Price negotiation is an art, and like every art, practice makes perfect. However, there are five simple ways you can avoid risking it all when it comes to buying real estate.
If you reveal your final walk-away price to the seller they will attempt to get as close as possible to that walk-away price meaning they will squeeze every last cent out of you. You could end up negotiating prices that are a lot higher than you anticipated or what the property is in fact worth. Keep your cards to yourselves if you’re pushed to reveal your budget, advise the seller or agent that you have adequate finance approval but are looking to buy a property at market value. Give a market-price range estimate if necessary, or indicate a price that is lower than what you are capable of spending.
You might absolutely love a property, but show desperation and it could be your downfall. Sellers and agents can smell buyer desperation a mile away and will not hold back from playing on your heartstrings. They will use threats of other interested buyers, time running out, or vendor resistance, and they will try to get you to commit to the highest possible price. Conceal your emotions and balance the playing field by pointing out factors that might realistically and adversely impact the value of the property, such as work required to be done, structural defects, troublesome easements, covenants and so on. A building inspection or pest report, as well as a copy of the contract, can be wonderfully beneficial in this regard.
Not being ready, willing and able when it comes to negotiating property price, it helps to be a ready, willing and able buyer. That means having money in the bank to buy right away. Without the certainty of these benefits, you could be wasting the seller’s and agent’s time, as well as your Chama’s. Get your Chama’s finances lined up before you enter property price negotiations, as it will leverage you as a serious buyer and prevent problems securing the property. Also, use your readiness to your advantage. Advise the agent if you can settle within a shorter time frame, waive the cooling off period or are willing to release the deposit to the vendor before settlement.
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