The majority of buyers are scared off by high asking prices.
They assume that the seller is not serious…
… or the seller is simply looking for a buyer who doesn’t know what they are doing.
And sometimes, sellers get lucky and a buyer does come along and pay completely the wrong price for what are often decidedly average properties. I see this almost every week.
So, what should you do when you find a property that you like but it has been mispriced?
I have just found an off-market property for a client. It is over 4000 square feet on just three floors as the house is over 35 feet wide (which is very wide compared to most properties in Kensington & Chelsea). It has a west facing garden and a garage for two cars.
The issue is that the asking price is about 40% higher than I would advise my client to pay. So, do we just wait and watch hoping that sanity will prevail?
Well, that is certainly one option but buyers default to this far too early. Wouldn’t it be better to negotiate in a vacuum while other buyers ignore the property & wait for the websites to tell them about a price reduction? Why wait for competition?
So, the first thing you absolutely have to do is work out fair value and then what the property is worth to you. Unfortunately, you will then be tempted to use this in the wrong way:
Once you have established the maximum that you would be willing to pay, you will probably put forward an offer based on all the comparators you have assembled. This will show the sellers and their agent “the facts” which you hope will make them agree to your offer. After all, it is clearly well thought out and rational.
Unfortunately, this logical approach is likely to end in failure almost every time. Why? Because you have waded into the negotiation without establishing:
- Why is the property so overvalued in the first place?
- Was it the agent or seller who overvalued it?
- What are the reasons for selling?
- What are the sellers’ emotions and views on the sale of the property?
The chances are that you are not going to find out this information from just one or two cursory calls. It is essential that you dig much deeper over several calls and even visits to the property to establish exactly what are the key mental obstacles you need the seller to overcome.
Please note, that you will also learn a lot during the negotiations so it is essential that you ask lots of questions and really listen to the answers – not just the words – but the emotions behind the answers to get a full understanding of the other side.
Now, you may think that this all sounds airy-fairy and pointless. Indeed, you may be asking: how can this approach work if the sellers are going to ignore the comparators? Well, the problem is that if they have made an illogical decision to reach the guide price, why do you think logic is going to solve the issue? Would it be unfair to say that something else is at play?
To prove this point, here is an extract from a testimonial I received:
“Jeremy had warned us that it would not be an easy negotiation because the sellers were going through an acrimonious divorce: they did not need to sell the property and it seemed that they were more interested in arguing with each other. In addition, it soon became evident that the agents did not have a good relationship with the sellers either.
The negotiations took several weeks and, to be frank, we didn’t think Jeremy would succeed in reaching an agreement at a price that would work for us because the sellers, especially one of them, were completely unrealistic. However, he found a solution and agreed a price that the agents didn’t think would be possible (Jeremy ended up speaking directly to one of the owners) and which was very favourable for us.
While previous buyers and the agents had tried to convince the sellers with various “logical” arguments, Jeremy took a different approach which clearly succeeded. As he says, emotions often trump logic!” Mr J Cole (Kensington & Chelsea)
Indeed, the more “difficult” of the two sellers was an analyst at a major bank who prided herself on her logical approach despite the fact that she was being completely illogical. Every other buyer and the agents representing her kept telling her she was wrong and kept trying to prove it with facts.
I used a completely different approach and agreed a price that was lower than previous offers and which the agents didn’t think she or her soon to be ex-husband would agree to.
I have lost count of the number of people who contact me saying that they have found multiple properties they like but can’t reach an agreement with the sellers. They always assume it is entirely the sellers’ fault. But it takes two sides to negotiate.
If you don’t use tested and proven strategies and just rely on “facts” you will often fail to reach any agreement and certainly won’t achieve the lowest price possible.
Alternatively, you can use a more sophisticated approach. It won’t work every time – and I certainly advise clients to walk away from properties because I can’t agree terms that work for us – but you will be more successful and achieve lower prices if you use this less “logical” approach.
And, in case you are wondering, no I don’t issue ultimatums as a way of scaring people into accepting our offers. While they can be effective in limited situations, most of the time they are not the best approach.
If you are open to discovering more about how to negotiate the lowest price and best terms possible, simply email my assistant [email protected] or call 02034578855 (+442034578866 from outside the UK).
