Embarking on the journey to homeownership is an exciting experience, but it comes with its fair share of challenges and can be daunting, especially when it comes to matters such as negotiation which is crucial for securing the best possible deal on your dream home.
Read: First-time homebuyers' fears - how to overcome them
“Negotiating your first home purchase requires a combination of preparation, strategy, and a level of flexibility,” says Arnold Maritz, Co-Principal for Lew Geffen Sotheby’s International Realty in Cape Town’s Southern Suburbs and False Bay.
“It’s also important to remember that negotiation is a two-way street and it's essential to strike a balance between getting the best deal and maintaining a positive relationship with the seller.”
Maritz offers the following tips to empower buyers to negotiate the fairest deal:
Do Your Homework: Before entering negotiations, research the market and comparable properties in the area. Understanding the going rates will give you a solid foundation for your negotiation strategy.
Know Your Limits: Set a realistic budget and be clear about your financial constraints. Knowing your limits ensures that you don't overcommit and end up with a property that is financially burdensome. Don’t forget to factor in addition monthly costs such as rates and taxes and building insurance.
Be Patient and Flexible: Negotiations can take time, and it's crucial to be patient. Be open to compromise and find common ground with the seller. Flexibility can lead to a more favourable outcome for both parties.
Consult a Professional: If, after doing your homework and setting your budget, you’re still apprehensive, consider hiring a real estate agent to guide you through the negotiation process. Experienced agents have insights into market trends and can provide valuable advice on crafting a competitive offer.
Factors to Take into Consideration
Maritz says that crafting a compelling offer is a critical aspect of the negotiation which involves the consideration of various key factors that can influence the outcome:
- Property Condition: The condition of the property can impact its value. If the property is older, consider hiring a home inspector to assess any potential major issues and use the findings to negotiate repairs or a reduction in the purchase price.
- Market Trends: Stay informed about the current real estate market trends in South Africa and also the area in which you want to buy. Factors such as supply and demand, interest rates, and economic conditions can influence the negotiation process.
- Seller's Motivation: Understanding the seller's motivation can give you an advantage in negotiations. If the seller is motivated to close the deal quickly, you may have more room to negotiate on price or other terms.
- Local Amenities and Infrastructure: Proximity to schools, public transportation, and shopping centres can affect the property's value and should be factored into your negotiation strategy.
READ: How to negotiate a quick and trouble-free property transfer
Conducting Thorough Inspections
“A thorough inspection is a powerful negotiating tool and can also save you from buyer’s regret and costly repairs later on.
“Hire a reputable home inspector to assess the property's condition and identify any potential issues. Armed with this information, you can negotiate repairs or a reduction in the purchase price based on the inspection report.
“When presenting your findings to the seller, focus on significant issues that may impact the property's value or safety. Use the inspection report as a basis for negotiation, aiming for a fair resolution that benefits both parties.”
Navigating the Offer Process
The offer process is a crucial stage in the negotiation journey and Maritz offers the following tips to navigate it effectively:
- Craft a Strong Offer: Take note of all the key factors such as the property's market value, your budget, and any unique features that add value to the property. Work with your real estate agent to create a compelling offer if you have appointed one.
- Include Contingencies: Depending on your circumstances, include contingencies in your offer to protect your interests. Common contingencies include a satisfactory home inspection and mortgage approval.
- Personalise Your Offer: Add a personal touch to your offer by including a well-written letter to the seller. Express your genuine interest in the property and explain why it's the perfect home for you. A personal connection can make your offer stand out if yours is not the only offer on the table.
- Be Prepared to Negotiate Terms: Once the seller responds to your offer, be prepared to negotiate terms. This may involve adjusting the purchase price, requesting repairs based on inspection findings, or negotiating the closing timeline.
READ: Tax guide and property transaction | Everything you need to know
Knowing When to Walk Away
“While it's exciting to find a home that you love, it's essential to be able recognise when it's time to walk away from a deal. If negotiations reach an impasse, or if the terms are no longer favourable, you must be prepared to move on,” says Maritz.
“Having a clear understanding of your priorities and deal-breakers will help you make this decision. Don't let emotions cloud your judgment and remember that there are always other properties on the market.
He adds that walking away from a deal that doesn't align with a buyer’s needs is a sign of a savvy and confident negotiator.
READ: How deposits work for first-time buyers
RE/MAX of Southern Africa runs us through the A-Z of property transactions: Read full article here: Exploring property transactions: an A-Z guide
Asking Price:
The price set for the home, usually suggested by a real estate professional based on a competitive market analysis and agreed to by the seller. Depending on demand, buyers can choose to make offers above or below the asking price.
Bond Originator:
A free service that can help buyers find the best deal on their home loan. Bond originators have several services that will help buyers navigate the bond application process more efficiently.
Conveyancer (also known as a transferring attorney):
A legal professional who will attend to all the paperwork and other legalities that are required for a property transfer to take place.
Deposit:
An amount of upfront cash provided to the buyer upon acceptance of an offer to purchase. The rule of thumb here is roughly 10% of the asking price. A deposit is not a legal requirement but can make a buyer’s offer more appealing and could help the buyer acquire the remaining home finance.
General Valuation Roll:
A document that presents a value upon which household municipal rates will be calculated until a new roll is issued. It is important to check this when it is released to make sure you do not end up paying more for municipal rates than what the home is truly worth.
House Price Appreciation:
A percentage of growth calculated based on average house prices in an area (usually calculated at a national level). These averages can provide an indication of how much more a property will cost in a year’s time. For landlords and tenants, these averages can provide an indication of what a fair annual rental escalation could be.
Interest Rates:
There are various rates at which interest is calculated on debts, including home loans. Consumers should focus on the Prime lending rate, as this is the base rate that banks use when offering loans to consumers. This will either be above or below Prime depending on how good your credit score is.
Off market sale:
When a property is for sale, but it has not yet been publicly advertised or listed on any property portals.
Pre-approval:
A certificate issued by a bank that provides a buyer pre-approval of a certain loan amount, calculated based on what a buyer can afford. These amounts are only 100% finalised after the bank has completed a property valuation and has received a signed Offer to Purchase on a property.
Reserve Price:
The minimum price set for a home when it is sold via auction.
Sole Mandate:
A written agreement that places the responsibility on a single agent for a period of time. It is often far more effective to sign a sole mandate and allow one agent the space to secure the best sale. A sole mandate is also a more convenient option because sellers will only have to liaise and deal with one agent rather than several.
Turn-key property:
A property that is move-in-ready, with no need to do any further renovations or updates.
Unconditional offer:
An offer to purchase that is not subject to any other conditions, such as a home loan or private home inspection, etc.
Zoning: the type of property that can be built on a plot of land. Local planning authorities control zoning permissions.
“There are a lot of moving parts to any property transaction. That is why the real estate profession exists. Property professionals are there to help guide clients through these transactions. Never feel afraid to ask questions if you are ever unsure of anything during the process,” says Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.
Want all the latest property news and curated hot property listings sent directly to your inbox? Register for Property24’s Hot Properties, Lifestyle and Weekly Property Trends newsletters or follow us on Twitter, Instagram or Facebook.
Print
