Negotiation is key when purchasing a property11th Nov 2019
Finding the right property is hard enough but negotiating the right price and related fees can be harder, especially if one party is unwilling. Sometimes you may need to walk away from the deal.
At a high level, the main costs that can be negotiated are:
- the purchase price – always negotiable
- the transferring attorney – charged at a standard rate based on the purchase price of the property, but slightly negotiable
- the bond attorney – charged at a standard rate based on the purchase price of the property, but slightly negotiable
- the bank loan initiation fee – an admin fee that is, theoretically, negotiable but you’re unlikely to succeed
- interest rate on loan – always negotiable.
Negotiating a better purchase price
Any negotiation requires that both parties are willing to compromise a little from their ideal plan, but there are, unfortunately, some developers and sellers who are not willing to budge at all on the price.
You can of course ask, and some tips when trying to negotiate a better deal include:
- Do your research on the area, the property and the developer. Understand the general trend of the area, and discuss your pricing concerns with the seller.
- Be serious about your offer and back it up with either a pre-approval certificate stating that you do qualify for a loan, or a cash offer that often gives you more leverage. If this is an investment property, you could always finance the property after you have made your cash purchase.
- Be willing to compromise on other areas besides the price. In some instances new developments are fitted with appliances that may be negotiable, or you may be happy to pay the asking price if the owner agrees to attend to maintenance issues you point out. There could be small wins to be made.
Negotiating attorney fees
In a property transaction, the seller appoints the transferring attorneys. This generally has little to do with specialised expertise or service levels, but rather with the working relationship between the developer/agent and the conveyancing firm – and the possible kickback. You are entitled to request that your own attorney deals with the transfer and, if you get it right, you may be able to negotiate a better deal.
If dealing with attorneys with whom you have no working relationship, you may ask if they can offer you a better price, but you don’t stand much chance of success, as you have nothing with which to barter.
Negotiating with the bank
When dealing with the bank, your areas of negotiation would be around the loan amount offered and the interest rate. Your success will depend largely on your financial status, as well as your history with the bank.
Having comparative deals from other institutions can often assist your case, as well as negotiating a small increment instead of an unrealistically large amount.
General negotiation tips
- Do your homework and clearly define your limits upfront.
- Decide what you are, and are not, willing to accept.
- Remain calm and avoid getting emotional.
- Don’t make false threats – the other party can probably see right through them.
- Always be polite and friendly, and allow yourself to see the situation from the other’s perspective.
- Listen to what is being said, and know when to either accept what is being offered or walk away.