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February 2017

Paying The Price – Is A Reduction Justified?

After months of searching for the right property, the joy of finding a suitable home is soon replaced with a desire to secure the subject property for the best (lowest) possible price.

The focus question moves from “is this the right home?” to “what is the right price?” In working out who the unreasonable party in a negotiation is, it is important to remember that fear is pulsating through buyer and seller.

A buyer’s fear of overpaying for a piece of real estate is equalled only by a seller’s fear of underselling. A negotiation can quickly turn into “the sellers are greedy” and “the buyers are bargain hunters”.

Issues such as buyer competition and/or market conditions will dictate whether the buyer needs to come up in price or the seller needs to come down. Sometimes both parties may need to make a move to get the dance going.

Relating the general market conditions to an individual sale campaign can be an error. A seller who puffs out their chest and states “it is a boom out there, so we want top dollar or we are not selling” may inadvertently send their best buyer packing. Even in a booming market, sellers still decline the highest offer, only to sell for less down the track.

Conversely, in a soft market, a buyer who acts with an attitude of, “I am going to low ball every vendor until I pick up a bargain” will continually get pipped in the negotiation by competing fair minded buyers. Even in a soft market, good properties are still contested by multiple buyers. 

Properties that sell for bargain prices do so because they often have a major flaw, or flaws, that cause the wider market to dismiss it. If you feel that you have snagged yourself a bargain, be careful, you may have bought a lemon. When a buyer’s primary goal is low price before quality real estate, the buyer may get a low price on a property, but they are unlikely to get a quality piece of real estate.

Cheap is rarely good and good is rarely cheap.

As prices continue to drift lower, trying to price in an Armageddon scenario to your offer will cause the agent and seller to continue searching for another buyer. Regardless of where you think the market price may go, every property has a value in today’s market. Any vendor will justifiably expect that price or higher, during the negotiation process.

A bargain hunter waiting for prices to crash usually ends up waiting as opposed to buying.

There are two key questions to ask yourself when making an offer to purchase. 

Can we afford to pay the owners price?

Is the owners price fair and reasonable in the current market?

To suggest that an owner should come down in price because the wider market conditions are weak is a flawed thought process. If the agent and seller have priced the property correctly for the current market, there is no need for the owner to come down in price.
As a buyer, if you find the right home at a fair price that you can afford, pay the price before someone else does.



Source: Harris Partners’ Property News.