Here's How Your Home-Buying Negotiation Can Go Wrong
Home buying is expensive and we agree that you want to buy a property at the best price. Hence, negotiating the price of the property with the seller is a given and justified, too. But, how much is too much? When to know that you are negotiating way too much to put off the seller and the property might just slips off your hands?
PropGuide shares tactics that a homebuyer should avoid when negotiating for the price of the property:
You din't quote that low a price, did you?
Negotiating price doesn't mean that you will make a low-ball offer. Make a reasonable negotiation. For instance, you can't simple waive off lakhs from the asking price. At times this could be insulting for a seller and put him off, and sometimes, going below the market value puts your credibility as a buyer at stake, too. So, before you make a lowball offer know the property prices in the market, discuss with your agent and quote a price that might satisfy the seller.
Can't reduce price? Give me an add-on instead
This is one of the most widely practiced tactic. In case the seller refuses to lower the price, the homebuyer asks for certain add-ons and upgrades in the property. For instance, some might ask for the furniture in the property, while some ask for the appliances. You may think it is ok to ask for additions because you are ready to pay the asking price, but the asking might alienate the seller. What if the furniture you want is what the seller plans to sell at a good price online?
The home inspection tactic
Another commonly used tactic is continuous negotiation during the time of inspection. The moment you see a discrepancy in the property you ask for a cut. A leak and you want the seller to lower the price, a broken window, slash some more. Even though the home inspector suggests changes after the inspection. It is not for the seller to make those changes until the discrepancy in the property is major.
Going back-and-forth negotiating
When negotiating, one of the tactics that could put off your seller is when keep coming back with a new price every second day. Make only one final offer to the seller and let him take a call. Multiple negotiations make the seller think that you are confused about the property and might not want to waste time. He would rather move to another potential buyer.
You just got too defensive
Do not overpower the seller. Going all out, quoting your price and giving the seller a deadline to get back to you with his decision can be a very bad proposition. This would instantly put off the seller. What if he is ok with your price but needs more time to decide. Negotiation should always be open ended.
'For Sale' is an extremely undesirable sign for anyone who has waited for long to sell his property. The sign, if put up for an inexcusably long period of time, can make other prospective buyers withdraw, as the agents start ignoring your home while scouting for prospective buyers for their resale business. It can also leave you waiting for the completion of the sale. If, for some reason, the deal falls through, an overall bad impression is created around the home, making it difficult to resell. Though it is uncommon, a sale can go wrong at the last minute leaving either the buyer or the seller in distress, depending on who backed out of the deal first. Pending sales can go wrong because of many reasons, including, but not limited to, remorse, lower appraisals, failure in getting home loan or any such development.Buyer's or seller's remorse
The days between agreeing on the deal for a ready to move in apartment in India and the following inspections are the most anxious ones for the buyer and the seller. The seller is worried about what might happen if the buyer backs out and the buyer is worried and nervous about the amount of investment involved and whether the home is good enough for its price. A buyer's remorse can be triggered by his second thoughts and factors such as the results of home inspection visits. If there is a faulty result in the inspection, the buyer might ask for a reduction in the price, leaving the seller unimpressed. Similarly, a seller might realize that the price the property is fetching is too less and may be, he could get a better price from other buyers or by selling the home later. Pricing effectively is the key to avoiding remorse.
Bank issues
If you have bought something on a loan like a car, higher education, or expensive furniture, took loan to start a new business or some other major investment, the bank will think twice before granting you another loan to buy a new apartment in India. Rejection of a loan application can make the sale negotiations go wrong. Sellers usually ask you to prove that you will be eligible for the desired loan before going ahead with the deal. A buyer's impulsive bank activities are sure to make it difficult to get a loan . The key here is to not take any loans for a long-term period before you plan to buy a home.
Contingencies
There are several contingencies that could emerge while sale negotiations are midway. What if the buyer, after agreeing to pay a specific amount as advance to block the deal, goes back on it after paying a fraction of it? Both the buyers and sellers, hence, should ensure that certain terms and conditions stipulating specific payment terms and timelines are clearly outlined in the agreement and duly agreed to. Both parties should be allowed to cancel the deal if either of them is not happy with the property after visiting it. The best way to avoid this situation is to keep a residential project in India in shape that allows it to pass the inspections from prospective buyers. It is also a good idea to have a solid backup plan in case the deal doesn't get finalized. Buyers should also ensure that they do all checks, including checks on ownership of property, before finalizing the deal. Often, property deals go wrong because of legal wrangles. Last minute discovery of disputes can land buyers in unwanted, long term court battles.
Also Read: How To Sell Your Home By Yourself