I recently bought a fantastic apartment for a client that was 30% percent below the original asking price. The original price was £2.75m and we transacted at £1.935m.
How was this possible?
Well, I had been tracking this property for a number of months. When it first became available, the market was very strong and unfortunately for the sellers they were greedy and ignored the agents’ advice. They put it on the market for a price that was simply too high. This put off buyers.
It was also on with a very small agency so despite it being on primelocation and other websites, it was not getting the exposure it warranted. After a while it was reduced to £2.5m and then £2.35m. Now at £2.35m I was surprised that no-one was showing interest, but this often happens. When a property has been overpriced and consequently been on the market for a long time it becomes stale.
Buyers who scour in the internet recognise the property but don’t necessarily register the price change. And even if they do, they seem to write it off. I suppose they think that as the property has been available for ages that here must be something wrong with it as no-one else has bought it. I see this a lot and such situations create great buying opportunities.
But why did the sellers accept £1.935m? Well, I knew they were keen to sell through my discussions with the estate agent. So I put forward an offer of £1.9m explaining the reasoning behind the valuation. Now the logic behind the offer was stretched to say the least but I felt that it was worth testing.
The agent was slightly taken aback at the low price but I made it very clear that we would happily walk away if this was not acceptable. We then awaited a response which came back pretty swiftly. The seller would accept £2.050m. The speed at which they responded showed how keen they were to sell.
Now most buyers would probably respond with a counter-offer of just under the Stamp Duty threshold of £2m and agree a price (and not a bad price either). Instead I did something exceptionally clever…. I did nothing. I simply said to the agent that unfortunately the price was too high and then waited.
Ok, I admit that describing this as “exceptionally clever” is rather exaggerating the point but I wanted to highlight it as 90% of buyers overlook this tactic. I suppose it seems too simple. Indeed, you may have been hoping for something more exciting, but sometimes simple is best.
By politely declining the sellers’ counter-offer and then doing nothing we gave a very clear indication that we were not desperate and that we had other options (which we didn’t). Soon the agent was calling: “Were my clients still interested?”, “How much did I think they would pay?” etc., etc. To which I simply said that £2,050,000 was too much and that they needed to come back with a price for me to tempt my clients with.
The agent quickly called me back with a revised counter-offer of £1,999,999. My clients were happy to accept, but I said that we should wait. A day later, the agent who was keen for his commission called up. “What were my clients’ thoughts?” I said that the price still seemed a little high and that they were considering it but that I didn’t think they would accept.
About 45 minutes later I received another call. “I can’t believe this but the sellers have said that they would accept £1.975m. They know your clients are good buyers and don’t want to lose them.” I responded in similar style by saying that I thought that this was still too high, but that I would speak to my clients.
They were happy to transact and said to call the sellers’ agent to tie up the deal rather than try to negotiate a further reduction which I thought would be possible. They didn’t want to lose this opportunity. But we did get lucky.
I had a meeting which lasted thirty minutes so couldn’t make the call immediately. During the meeting I missed a call from the agent. The sellers had agreed a further reduction to £1.95m which had to be agreed immediately. So effectively we saved £100,000 by doing absolutely nothing (and if you are wondering, an extra £15k reduction was negotiated at a later stage).
There are numerous lessons and tips to be taken from this, but the most overlooked point here is time.
The speed at which you respond to offers indicates many things. So judging the timing of your offers is a crucial part of your negotiation strategy. Too many people focus on the numbers themselves when in fact the negotiation is far more complex. If you think that pure logic will win the day then you will be sorely disappointed more often than not.
The good news is that there are more opportunities now to negotiate good prices if you know how than there have been for some time.
If you wish to acquire a property in London and would like to discover how I can help you find your ideal home or investment and negotiate better prices than you would have thought possible, please email me at firstname.lastname@example.org to arrange a meeting.