To Negotiate Property Deals is the maiden topic that came to my mind under real estate category. The first step of all property transactions is “To negotiate property deals”. Let me admit that “To negotiate property deals” is an art which cannot be taught completely. In my post on Property Negotiations – Avoid These 5 Mistakes i highlighted common mistakes that can be easily avoided while property negotiation. Some people have born negotiators and of course, no one can beat women in negotiation skills. It will be right to say that Women are the best in “Bargaining“. There is a difference between negotiation and bargaining. To negotiate property deals is the totally different ball game. It is very difficult to draw a line from where to start and where to stop. I will try to keep this post simple & to the point and cover all the aspects of property negotiation.
How to Negotiate Property Deals
1. Market Dynamics: The first and foremost rule to negotiate property deals is to find out whether it’s a buyer’s market or seller’s market. In buyer’s market, Sellers are more & buyers are less whereas in a sellers market, buyers are more & sellers are less. Just to give e.g. Delhi and Mumbai is sellers market whereas Hyderabad and Bangalore are a buyers market. In a sellers market, the probability of negotiating property deals is negligible whereas in a buyers market you can get good rates from the sellers.
2. Preliminary Research: Before buyers negotiate property deals, it is advisable to do basic research and find out prevailing rates in the area and nearby pockets. You can find out the same from websites like Magic Bricks, Makaan or Common Floor. Also, keep in mind that rates quoted on websites are normally higher compared to actual rates. Most of the postings online are either from builders or brokers. To negotiate property deals, you should never reveal that you got details from the website. Just to share an example, Recently when i checked property rates in few apartments, the final quote was approx 8-10 lacs lower than the quote on the real estate portals.
3. Influence of the Financer and the Broker: Check out the presence of financers in the market and the influence of brokers in the property deal. Again on these parameters, Mumbai and Delhi Markets are worst whereas Bangalore is comparatively better. Scope to negotiate property deals is low in markets controlled by the financers and influential brokers.
4. The Reason for sale: Now try to find out the possible reason/s of property sale. Due to the weakening of the economy, increase in inflation and weakening macroeconomic indicators. The probability of another rate hike in RBI’s next policy review is bleak. The majority of owners are not able to pay their EMI’s on time. They would like to sell the property in a hurry. These properties are normally 15-20% cheaper compared to market rates. Though it is very difficult to find out the reason for sale but little bit research can actually help. It will, in turn, help the buyer to negotiate property deals. In the case of heavily discounted property, you should be extra cautious.
5. Artificial price jack up: I would like to ask my readers what is the price of a property?. Is it the price at which seller is willing to sell or price at which the buyer is willing to buy. Thumb rule of marketing is the price at which the buyer is willing to buy. Sometimes all the owners of society make cartel and jack up the price above market rate. It reduces the scope to negotiate property deals. This kind of cartelization is a trap for prospective buyers and they start believing that market price is what sellers are quoting.
For example, If u plan to buy some furniture and all the shop owners in that particular market quote a similar price then irrespective of the actual price of that furniture, you trust and believe that price quoted is correct price. Cartelization diminishes the power of buyer to negotiate property deals. Beware of these tactics and right way do a small survey to find out the market price in that particular area. You can do this by finding out the prices in apartments providing similar facilities and amenities. It gives a fair idea of property rates and you will be in a better position to negotiate property deals.
6. Payment terms: If you have some idle cash lying or you have pre-sanctioned Home Loan then you can process the payment faster. It gives you leverage to negotiate property deals as sellers prefer buyers who can process payment immediately. Assuming 2 parties approach the seller to close the deal. The 1st party promise to pay a payment of 50 lacs within 3 months and 2nd party promise to pay 48 lacs in 15 days time. In all probability, the seller will decide to go ahead with the 2nd party. He may negotiate from 50 lacs to 48 lacs as he will get the money in 15 days time.
7. Seller’s need: If there is no urgency from sellers end to close the deal then forget about any negotiation. In the reverse scenario, if the seller is in an urgent need of funds and you gauged the same correctly. It will be a blunder if as a buyer you don’t negotiate property deals. Lastly, if the seller is willing to negotiate in lieu of cash then i will not suggest. Cash Payment in a property deal is as good as the circulation of black money. You can pay max Rs 20,000 in cash as a token money.
8. No property is perfect in this world: It is always advisable to find out the flaws in the property as we know that no property is perfect in this world. Once you have decided to buy a particular property, you are agreeing to compromise on current limitations but these limitations actually help to bring the rate down. For example, if the property is on a higher floor, you can always mention top floors require air conditioning during summers. Thus, higher electricity bills. Similarly, on the ground floor, there is always a lot of disturbance & people movement. Moreover, you will not get a good view.
9. Crack a deal with seller’s broker: Build a good equation with sellers broker and offer him additional commission if he can get you an extra discount. For example, if a deal is of 1 Cr and he will get 1 Lac brokerage from each party i.e. total 2 lac as commission. Offer him to get the price reduced by 2 lac to 98 Lac then he will get 98k and 98k from both the parties and you offer him to pay additional 50k for the deal so his net earning will 2.46 lac i.e. 46k additional. Lastly, there are some points a buyer should never tell a seller or broker. It will weaken your power to negotiate property deals.
After determining all the factors, now you are ready to sit at the table to negotiate property deals. You must be having X price in your mind that you are willing to pay for the property depending on above mentioned factors. You will also have a fair idea how much you can negotiate now, so what are you waiting. Start negotiating and Happy Buying !!!
In my next blog, i will share how to calculate the fair price of the property.
Happy Reading!!!
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Hi Nitin…Your articles are really helpful and umpteen thanks for your valuable guidance to the people in doubt…I’ve finalized a property in pune from a reputed builder and he is coating arnd 80L for a 3bhk…property is 2-3 yrs old and is one of the last two unsold inventory…it is non garden facing and on 5th floor…aminities are good, society is recenty formed and builder wants to exit…my budget is arnd 72-73L…my loan eligibility is 40L and rest I have to arrange…given the above, could you please suggest how can I negotiate and to what extend?
If property is unsold from last 2-3 years than 1st pls check the reasons for same.
Hi Nitin. Thank you for your helpful article on property negotiation. I have shortlisted a ready to move in apartment in Bangalore and it is the land owner’s share and the builder share apartment are all sold out. The apartment is new and entire block with 7 floors and 10 houses in each floor are still available and the land lord is quoting 4900 per sq. ft. I have checked the prices in the area and is around Rs.4000 per sq. ft. Any tips to close the deal at 4000 per sq ft?
I suggest you go through my posts on same topic.
Hi sir, while buying commercial shop in the ground floor of an apartment should the buyer pay for carpet area or super built up area? Because the seller is asking me to pay for super built up area.
One more question, can a 2BHK flat in ground floor be used as a commercial shop? Kindly reply soon.
All property transactions are on Super Built up area. A residential flat can be used for commercial purpose provided you convert it into commercial from residential.
I am looking for buying a flat (2nd floor) from a builder who has been given general power of attorney by the land Owner with a 50-50 agreement. In the agreement it is clearly mentioned that builder will get 2nd floor and land owner will get 1st floor.
The land owner was an unmarried woman aged 40 years, residing in the same building at 1st floor. She is the only child of her parents and her parents were died before this agreement.The agreement was happened in between that woman and the builder.
The building completed by Dec’2015 and this woman died in March’2016.Before her death, she already lived in that building in her portion(1st floor) for three months.
Now, I have some general questions.
1) As the woman died, so is this general power of attorney not valid any more, in that case I heard, if I buy this flat, then may be I get into some trouble at the time of the mutation of this flat, though builder is saying there will be no problem, as he is selling from builder’s portion not the owner’s portion.
2) Only one uncle of this woman is still alive (as blood-related person), So in future will be there any way that this uncle can demand the sahre of this property(2nd floor). Though, we are not buying the property of that woman(1st floor). We are buying the 2nd floor from the builder’s portion as mentioned in the agreement.
3) In this case,if somehow, we are managed to take the declaration from Uncle (as we want to be always in safe side), that he will not demand any share from the flat (2nd floor)in future, will that work to be in safe side.
For the 1st floor that is the portion of his niece, whatever he want he can do, we have no issue with that.
Here,I need to mention that this woman has never make any warish for her property not even her uncle also.
4) Can you please tell me, What are the other trouble may I have to get into in future, except this..
All the documents are cleared from the builder’s perspective.
Please advise me whether I should proceed or what are the legal way through which I can move ahead.
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