Negotiating with a land seller is part of the give and take in buying a piece of property. The seller asks a particular price and the buyer wants to pay less. To purchase the land at a lesser price, negotiations must take place. The asking price is rarely the agreed-upon purchase price. A wise buyer will offer a lesser amount of money after reviewing the current title of the land for sale and visiting the property. A good land negotiation takes place when both the buyer and seller believe they have received a good deal.
Instructions
Reviewing the Property
Obtain a vesting deed for the land for sale. This is available at the county courthouse from the county clerk's office. The vesting deed is the ownership deed for the current land owner. Review this deed to see if there are any easements or rights of way that have been granted and for what purpose. This information could be a negotiating point to justify a lower offer. This will also provide the legal description of the property.
Review the appraisal. This may have been done by the seller before the property was listed. If it is being done by you, the buyer, ask the appraiser for a list of like properties that have sold in the area. Compare those prices and see if the asking price is within reason of those that have sold. An appraisal will have to be done if you are seeking financing, but during the negotiation phase, like property analysis will do.
Obtain a copy of covenants and restrictions, if any, for the property. This document will detail any requirements from the community for building and include any restrictions, such as building setbacks or housing styles allowed. These could provide reasons for offering a lower price.
Inspect the land that is for sale. Notice aspects dealing with water, sewer and electricity. Is there a phone line to the property? Will you need to drill a water well? Will you need to put in a septic system? If a septic system will be needed, is there appropriate land for a leach field? Will you need to pay to have the power company build an electric line? Is the access a right of way through the neighbor's property? How many gates will you need to open? The answers to these questions will dictate whether a lower offer should be tendered.
Making an Offer
Calculate all of the costs to bring the land up to the condition you would like. It is possible that the land is already prime and no additional costs will be incurred. Calculate the price of like properties that have sold. Calculate the need of the seller. Find out why the land is being sold. If the seller is in a hurry due to a move or money issues, calculate the offer you believe will interest the seller. Calculate the most you are willing to pay the seller.
Offer a lower amount of money than the asking price. Make sure it is significantly lower than the highest price you are willing to pay. The land seller will likely counter with a higher offer than your lowest amount. Judge the amount of time that was taken for the counter offer to be tendered. If it was close to your offer, try one more amount, in between your initial offer and the counter. It is likely that a price will be settled upon. If it was quick, but not much lower than the asking price, wait.
After waiting up to 2 weeks without any word from the land seller, make another counteroffer. The length of time is dependent upon how badly the seller needs to sell. If the seller is willing to wait, the need is not too great. Your next offer will need to be more.
After making a counteroffer, conditions or contingencies may be placed on the offer. You may offer a higher amount, but examples of contingencies or conditions may be that the seller pay closing fees or pay for the appraisal. These items can negate the higher dollar amount that you are offering.
Continue the back and forth of offers until an amount is reached that is agreeable to both parties. Do not exceed the price you initially set as your maximum amount to pay. No property is worth paying more than you can afford. If both you and the land seller believe a good deal was made, negotiations were successful.
Obtain a vesting deed for the land for sale. This is available at the county courthouse from the county clerk's office. The vesting deed is the ownership deed for the current land owner. Review this deed to see if there are any easements or rights of way that have been granted and for what purpose. This information could be a negotiating point to justify a lower offer. This will also provide the legal description of the property.
Review the appraisal. This may have been done by the seller before the property was listed. If it is being done by you, the buyer, ask the appraiser for a list of like properties that have sold in the area. Compare those prices and see if the asking price is within reason of those that have sold. An appraisal will have to be done if you are seeking financing, but during the negotiation phase, like property analysis will do.
Obtain a copy of covenants and restrictions, if any, for the property. This document will detail any requirements from the community for building and include any restrictions, such as building setbacks or housing styles allowed. These could provide reasons for offering a lower price.
Inspect the land that is for sale. Notice aspects dealing with water, sewer and electricity. Is there a phone line to the property? Will you need to drill a water well? Will you need to put in a septic system? If a septic system will be needed, is there appropriate land for a leach field? Will you need to pay to have the power company build an electric line? Is the access a right of way through the neighbor's property? How many gates will you need to open? The answers to these questions will dictate whether a lower offer should be tendered.
Making an Offer
Calculate all of the costs to bring the land up to the condition you would like. It is possible that the land is already prime and no additional costs will be incurred. Calculate the price of like properties that have sold. Calculate the need of the seller. Find out why the land is being sold. If the seller is in a hurry due to a move or money issues, calculate the offer you believe will interest the seller. Calculate the most you are willing to pay the seller.
Offer a lower amount of money than the asking price. Make sure it is significantly lower than the highest price you are willing to pay. The land seller will likely counter with a higher offer than your lowest amount. Judge the amount of time that was taken for the counter offer to be tendered. If it was close to your offer, try one more amount, in between your initial offer and the counter. It is likely that a price will be settled upon. If it was quick, but not much lower than the asking price, wait.
After waiting up to 2 weeks without any word from the land seller, make another counteroffer. The length of time is dependent upon how badly the seller needs to sell. If the seller is willing to wait, the need is not too great. Your next offer will need to be more.
After making a counteroffer, conditions or contingencies may be placed on the offer. You may offer a higher amount, but examples of contingencies or conditions may be that the seller pay closing fees or pay for the appraisal. These items can negate the higher dollar amount that you are offering.
Continue the back and forth of offers until an amount is reached that is agreeable to both parties. Do not exceed the price you initially set as your maximum amount to pay. No property is worth paying more than you can afford. If both you and the land seller believe a good deal was made, negotiations were successful.
Negotiate: It pays to negotiate
ReplyDeleteEverything in life is negotiable. So they say. But negotiating successfully to get what you want at the price that you want is not easy and doesn't come naturally to most people. In some countries, bartering is common practice with a purchase of almost any kind. In this country it is not so common and we seem to still feel awkward haggling, especially when we are more or less happy with the asking price. The result is that we can end up paying a sum that is not necessarily over the odds, but certainly an amount higher than we could have got away with.
If there are any hard-faced negotiators out there, we would like to hear your tips for negotiating. Let us know your advice. Here is what we have come up with so far:
Most people usually negotiate with the agent. They act as a buffer between you and the seller and take care of the sale. They are professionals who do this for a living. They boost their income from the commission that comes from getting as good a sale price as possible and will probably be fairly ruthless in their approach. Don't let them pressure you and don't necessarily believe everything they say.
There is nothing stopping you from trying to contact the seller directly. Some vendors will be reluctant to let you talk to them directly and some agents may not release their contact details. And you may even find them tougher to deal with than an agent, so beware.
Always try to negotiate face-to-face. If you are a confident communicator, you are likely to have much more success in your dealings if you conduct them in person than over the phone. It is easier to ascertain reactions when you can see facial expressions and read body language.
Keep your emotions in check and don't let them get in the way. Don't get panicked into making an offer when you are not sure about it, and don't let your personal feelings cloud your judgement. Be confidant and calm - it's time to work the charm or put on that ice-cool hard as nails persona. But remember, above all, be nice to the seller. If it comes to a toss up between two equal offers, this may swing it in your favour.
Make sure that you try to project an air of confidence, so that all parties involved feel that you know what you're doing and are not out of your depth. Let them know that you've looked at plenty of properties and that you know the market. Make the seller aware of your position and find out what theirs is.
Don't show over-strong buying signals. You don't want to give the agent any reason to believe you will go any higher.
Anything you want to know, don't be afraid to ask. Asking questions is a way of showing you are inquisitive and knowledgeable. Asking awkward questions of the agent in a way that lets them know you know you are asking an awkward question, can help put them on the back foot and make them realise they are dealing with a tricky customer. Don't overdo it if you are speaking to the vendor though.
Unless you are sure that the house is undervalued, or you know that there are other parties interested, don't rush. Let them sweat and don't rush back with a counter offer as soon as you get a rejection. At the same time, don't be over cautious nor too clever.
Not many people try it, but sometimes the straightforward "I haven't got time to waste" approach can work. If you are making several offers on different properties, why not try it? Tell the agent that you could go through the hassle of making an initial offer, reducing the asking price, counter offering, reducing the asking price again and then agreeing a final sum, or you could just go straight in and agree the sum that you are honestly willing to pay. Then make an offer ever so slightly below your target price and say that you won't be making any more offers. It may well get rejected at first, but if they don't get any more inquiries quite soon, you may just get a call from the agent telling you of a reduction in the asking price…
Negotiate
ReplyDeleteHow much to offer
Before you make an offer, be clear that you know the market value of the property. If you get the chance, have a look at some similar-style properties on the market in the same area. Find out how quickly properties are selling and for how much. This should give you some clue about how realistic the asking price is.
Don't forget that you are not restricted to making an offer on only a single property. Don't fry all your eggs in one pan as keeping several options open can help avoid desperation influencing your decision. Making offers on several properties at once allows you to be more rational about which one to pursue if or when the initial rejections come back. Of course if all your offers are accepted, then you will have to think quickly. Making multiple offers works best when the properties are being sold thorough different agents.
Most importantly of all, remember that this is a negotiation process. You are not walking into a shop to buy something off the shelf. It is rare for the asking price to get paid, as the price has some flexibility built into it. Estate agents deliberately mark the property value up since they know that negotiation will take place. They are usually on a commission that is a percentage of the sale value, so the higher the sale price the better for them.
You should be aware that your opening offer will often go a long way towards determining the final selling price. It is therefore common practice for the asking price to be set artificially high in order to encourage an opening offer that is higher than it would be with a lower asking price. Usually, both sides are aware that negotiation is something of a game of cat and mouse, offer and counter offer.
The first offer is usually 5%-10% below the asking price, depending on the perceived level of demand and current market conditions. The two sides then work towards some common ground with further offers and reductions in asking price. If the agent can push the initial advertised price up a few thousand, then the opening offer is likely to be slightly higher, possibly resulting in a slightly higher sale price.
It is very rare for you to get your opening offer accepted, however close to the asking price it is. Both the owner and the agent will expect you to negotiate. The more people interested in the property, the tougher the vendor and agent are likely to be in negotiations. There is no guarantee that you will get the property for less than the asking price, especially in a hot market. Don't lose out on the house of your dreams purely through stubbornness over the final couple of percent of the asking price.
Make sure that the vendor and agent are both aware of the terms of your offer:
Which fixtures and fittings you want to be included.
What work you want to be completed on the property before the sale is completed.
Make sure the offer is subject to a survey and contract. If the survey shows up something that needs doing on the property, don't be afraid to renegotiate.
Insist that the vendor takes the house off the market immediately to discourage any further offers and reduce the risk of you being gazumped.