Buying negociations tips and experiences

Hi there, at the request of @MiriKi in a different topic (Who would yell if Real Estate prices begin to fall? - #3 by MiriKi), I am sharing my experience buying my first owner occupied home in a small mountain village (Valais/Wallis). As my method is obviously not perfect and I’m sure we can benefit from sharing our experiences, I think starting a dedicated topic for that is the right move.

My experience:
Asset: 5.5 rooms, 115 m2 individual house in a small mountain village (no resort) in Valais/Wallis + 2 small plots of land nearby.
Transaction price: 75% of listed price.
Initial offer price: 55% of listed price.
Visits : 2
Rounds of negociations: 1.5 (a small exchange with the sellers’ agent to signal that I was open to counter offers).

Of import: the sellers were private people with no experience in real estate sales and they had a fair agent who genuinely did what he could to make the transaction occur in a very professional manner. They were probably under some time pressure as the owner of the house was an older person moving into an elderly home and it is likely the money would help them pay part of the costs.

I work in a field adjacent to real estate (engineer in public infrastructures) so I have inside knowledge of the legal procedures involved and adjacent knowledge of the defects I can expect in a house.

This is by no mean a perfect process and I haven’t had the opportunity to refine it, having rapidly found a house I was interested in at a price I was willing to pay. Others may have other methods that are as or more effective.

Step 0: I estimated how much I was willing to pay for a fully renovated house fitting my criteria. I’ve then searched for house that could fit the bill without too much importance given to the listed price.

Step 1: I’ve visited the house on my own, assessed if I would enjoy owning it as well as what I thought could be the defects I would have to deal with and could argue on, then said I would come back with an architect to assess the renovations that were required.

Step 2: I contacted a local architect to ask if they could come visit the asset with me and asked for an estimation of their price for that. They did answer positively (I didn’t do it but a recommanded step here is to scan your network for recommandations on a good architect/contractor and to ask for several price estimates before choosing who you want to go with).

Step 3: I revisited the asset with my architect, asked for an assessment on what the price of the required renovations would be according to them, asked for their estimate of the value of the asset.

Step 3 can be done and redone as many times as necessary with as many different architects/contractors as necessary until you have a good feeling about the person you’re doing it with. I’ve been lucky on my first try.

Step 4: I made an offer through the sellers’ agent with a semi-detailed list of the defects I was estimating and the hidden costs I could encounter (you can request the help of the architect/contractor for that part) in order to make clear that I was the one taking risks in the transaction and my price would be adjusted to take account of those risks. I aimed for a starting price that was below what I was willing to pay and below the estimate of the architect, that ended up being at the limit of what I would have considered an insulting offer.

Step 5: When the agent came back to me to defend the original listing price, I simply replied that I was open to negociations and was expecting the counter offer from the sellers.

Step 6: They actually came back with a “final offer” at the exact price I had estimated the property was worth and I was willing to pay, so we closed on those terms. I may have been able to drive it a bit more down if I had been willing to try or settle for another property but, being satisfied with the final price, I saw no reason to risk loosing the deal by trying that.

I would say a key component for a successful negociation is to be under no pressure yourself. The sellers often are, at least somewhat (they pay mortgage interest, property and wealth taxes, utilities and maintenance costs to keep the property fit for visits). Also, most people tend to want to be nice so being professional but firm can move the needle to your advantage (as a general principle in life, being kind but not nice is often a winning move for successful deals and relationships).

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Thank you for sharing! It shows how important it is to have the insight of professionals if you aren’t one yourself.

As I understand you were in a good negotiating position (no “hotsport” for real-estate, lots of work to to on the property, seller under some kind of pressure).

I live in Zurich and it is the other way around. Listed price is the beginning of a bid war between potential buyers, where the final transaction price sometimes ends up being 200% of listed price. In such cases there is no buying negotiations possible, unfortunately.

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Exactly my thoughts, market situation has probably been more important than the procedure.

In some places, the house would have been sold at full price between step 1 and 2, in others it would stay on the market for years if the sellers doesn’t follow.

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Market situation plays a very important role and in some places, there really is no other option than ponying up the money (or keeping renting, which may make more financial sense depending on the situation), however, the main take away, for me, is “if the conditions allow for it and you can afford to wait, don’t be afraid to be aggressive with your first offer”. That’s part of what allows for a better assessment of the actual conditions of the market/the asset targeted.

Sure, if the listing price is already at or below market price, there’s no leeway for negociations, absent special circumstances.

Indeed. I would say that’s part of the process. A seller who’s not willing to lower the selling price to meet the market where it is is just as useful as no seller at all. I’d make my offer, let it stay unanswered and move on to other assets.

Edit: I think my other main takeway is that listing price shouldn’t be taken as market price and that probing around is worth it.

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