5 things to do to get the best deal possible when buying a property
1. Know what price to pay – and stick to it
You need to do your homework. What are properties in the area going for? Go through property listings and compare properties of the same size. Consider the condition of the property you want to buy and compare it with that of other listings. Apply a discount or premium based on this condition.
You can also get sales trends and automated valuation reports online. These reports will show you what properties in the area have sold for in the last couple of years, as well as an estimated valuation for the property.
These values will give you an estimated ‘fair value’ for the property – and a target price if you want to buy a ‘bargain’.
2. Don’t show your hand too early on
“The first person to name a price loses.”
You should try to draw out a price from the estate agent. What is the seller willing to settle for?
In negotiations, if you are the first person to show your hand, you are most likely going to end up losing. The less the other party knows about the depth of your pockets, the better.
In a slow property market, such as what we’re experiencing now, you should be patient. Let the seller wait on you a bit. A motivated seller will have the estate agent follow up with you – that’s a clear sign of eagerness to sell.
3. Cash offers trump all else
Making a cash offer is usually much more attractive to sellers. Especially if they are pressured to get a sale done. Cash deals are often accepted at lower prices than offers that are subject to loan approval.
A cash deal is a guaranteed sale, and means a faster time from signing the deal to transfer of the property because there’s no need for loan approval.
So make sure you have access bonds on your home loans. That way, as your property is paid off, you can get access to excess funds over time – which could allow you enough cash to buy your next property without having to register a new loan (this also saves you money as the bond origination and registration fees aren’t needed.
4. Be flexible with your offer and conditions
Many property buyers don’t want to be flexible around things such as occupation date, occupational rent, and deposits. That’s a bad idea – and can often be the reason for a deal to fall through.
If the seller wants to stay on in a property until they have concluded the purchase of a new one – be flexible about this. For example: An elderly couple listed their property through an agency, but were determined to sell before they put a contract on another property. A buyer secured a contract by offering the same amount of money as another interested party, but making the settlement open-ended. The couple could remain in their property until they found another one, giving just 15 working days’ notice before settlement. It took them five months to buy a new property, but that wasn’t a problem for the buyer.
Don’t make the mistake of thinking that negotiating is just about money. It’s about the whole package, and you can make your offer more appealing by throwing in sweeteners for the vendor. Most commonly, this is about the settlement date. Vendors who have already purchased may want a simultaneous settlement date, or they may want a long settlement so they can go house hunting.
5. Go in hard and fast when making your offer
If you’ve found a motivated seller, whether it is because they’ve found another property and the purchase of that is subject to the sale of this property. Or if it is because they are in a financial squeeze, or perhaps emigrating. What you want to do is ensure the motivated seller knows your intent and takes your offer seriously.
So don’t give them weeks to decide whether to accept your offer. Give them 24 hours, or 48 hours.
Make sure they understand that you’re offering them a fair price and that if the offer is not accepted – the deal is off the table.
You should also consider your offer price – instead of a price such as R500,000 rather go for something such as R503,000 Or R496,000. The specificity of your offer price instead of an arbitrary number has a psychological effect. It shows the seller you’ve thought about the matter and there is a specific level that you can afford.
This, combined with the pressure of the seller needing the deal to go through will work in your favour.
When you invest in property you need to develop the mentality that if it’s meant to be, it will be, he says. And having a backup plan couldn’t hurt.
When I start looking for a deal – I shortlist five to ten properties. I don’t take a rejection of an offer personally. I move on to the next opportunity.
Here’s to unleashing real value