Negotiation only sucks if you don’t know how to negotiate
When I was on my honeymoon in Vietnam, I was in a market and was left to negotiate for a fake leather wallet. I ended up paying R 230 for it – and I know it was worth closer to R 50. My negotiation skills were – put politely – stool. I overpaid and felt sick after that.
The property market is so similar – The other day (for interest sake) I stopped at a house in my area that was on show. It was in the market for a crazy amount of money.
This is the way the property market works – you need to negotiate your way to a good deal.
Confidence and assertiveness
So often we feel inferior and like we have no power to exert. We want to buy this property, but we feel it’s a take it or leave it deal.
The estate agent plays hardball
The rental agent makes claims that there’s a queue of people waiting to take the place.
The terrible and great thing is that this is the way the industry works. People want to add pressure to get a good turnaround time and make money. Yet, this does not mean that you cannot fake your confidence. As an example, I had one investment property where I offered a very low amount on a property. I knew that the place was worth slightly more and the estate agent confirmed this. He even told me that I was crazy and that the owner turned down an offer for more than that! I responded by saying that it was his responsibility to take the offer to the seller – which he did and the seller accepted.
How do I get that confidence?!
Wave a magic wand and have it! Apologies, but no – it’s never that easy.
There are many articles on the web that explain about confidence, but I would like to draw your attention to a few things that I believe will help you with this:
- Get knowledge: Learn all you can about the area, property and the industry
- Call a few estate agents and rental agents so that you know what you are getting yourself into
- Bluff – yeah, make a lower offer and if they decline you can always make a higher one.
- If you are planning to buy, get prequalified by a mortgage originator who will do all the necessary checks to confirm affordability and credit checks.
Points to negotiate on
Tenant vs land lord negotiations
Landlords love tenants that pay on time. If you are the tenant, remember that you are able to negotiate your rent. we negotiated our rent some time ago. Here’s the story:
We wanted to rent a place near Sandton in Johannesburg, but the rent was only for the filthy rich. We found a place that was safe, yet the garden looked like someone vomited in a desert – and let it rot for a decade. We negotiated our rent for a lower value with the following conditions:
- We will fix the garden and plant veggies
- We will paint out the interior of the house at our cost
- The rent will be x lower than their offered amount
They took this, and we were able to save a fair amount of money for our time there.
Here are some ideas when you negotiate as a tenant for lower rent:
- Negotiate for less rent if you’re willing to fix up the place, e.g. paint it, fix the garden, etc.
- Sign a 2-year contract and negotiate the rental increase with this
- Explain that you will be willing to pay every month on time –
- Have references of previous landlords at hand.
- Have a good credit score – many rental agents will check this and blacklisting checks.
If you are the landlord, I have a story for you as well! I recently had a tenant that gave notice. Rent was always paid on time. To get a new tenant to replace him I would’ve needed to spend quite some time and money on recruiting and fees. I thus made an offer to the tenant to reduce the rent (that would cost me less than the fees for a new tenant) to accommodate him. I know he pays well, so why would I want to lose this tenant?
Pre-approval / Pre-qualification
Mortgage originators can issue you a certificate that will tell buyers that they believe, according to their knowledge you should qualify for a specified amount. When you negotiate, it helps to know what you qualify for and have done all the credit checks to get this in place.
If you are planning to buy a property, this section is for you. If you are pre-qualified, you already have some level of confidence that you will get a loan. Here are some more points to consider
- Negotiate a lower purchase price due to the condition of the property:
- Request that the seller fixes these things on their cost
- Get quotes and lower the price by that amount. I normally ask my best friend to check this out, as he knows a lot about building and renovations
- Ask about previous offers that were made on the place, e.g. were previous people able to get a bond on the property. This will give you a better idea about where to start your negotiations
- If the market is as flat as it currently is, it gives you the freedom to make a lower offer
Deposits and negotiations
When you have money available for a deposit on a property, you have one of two choices: You could either use this as a negotiation tool for a lower purchase price or use this for getting a better bond rate.
If you tell the estate agent that you can put down a 20% deposit, this will motivate the agent to sell the place, as the bank sees this as lower risk than a 100% bond.
Your second option would be to tell your bond originator that you want a 100% loan. After you’ve received the interest rates, you are able to ask them to negotiate with the banks if you would pay a 20% deposit down. They might lower the rate even more!
Negotiate realistically. Remember that you’re not the only one that want to benefit from the deal – it’s a two way thing.
In the property industry you should negotiate your rent, purchase price and even the amount that you want to sell your property for.
I live by the philosophy of “If you don’t ask, you will not receive”.
Article reposted with permission from Frugal Local.