By Ramesh Nair, COO - Business & International Director, JLL India
Yes,
it is possible to negotiate with residential property developers.
As home sales continue to look sluggish in many parts of the country,
developers are becoming more open to a bit of creativity on their stated
terms. How can you, as a buyer, put your best foot forward at the
negotiation table? Above everything else, the Scout's
Motto holds true - Be Prepared.
You
should be conversant with comparable sales in the project’s vicinity,
and know how long it has been on the market. It is important to
establish what the launch rates were, how they have moved since then and
what the current demand for flats like yours is in the stated locality.
You should also find out by word of mouth how much
the developer is willing to negotiate. Typically, developers make
decisions on pricing based on how a particular project is performing, as
well as on how they are faring in general.
If
you are interested in an apartment but feel you cannot afford
it at the quoted price, have no apprehension. Many sale prices today
are quoted prices, and there is room to negotiate. While developers
today are willing to relent off the radar, they are averse to reducing
the official quoted price below a certain point.
This is partially because they don't want to advertise the fact that
certain customers paid less than others. They are often likelier to
offer freebies or incentives.
·
If possible, try to find a group of buyers and negotiate for a bulk discount
·
Keep in mind that that if you have the ability to pay a larger upfront amount, you
have extra bargaining power
·
Ensure
that you have obtained a pre-approved loan from a home finance company
for
a home loan, based on your income. A loan pre-approval will show the
developer that you are serious. Let him know that you are pre-qualified
for the amount you are offering
·
If
sales volumes have dropped and there are many unsold apartments in the
vicinity,
point this out to the developer and use the fact to your advantage. An
unsold apartment will cost the developer more over time than lowering
the price and selling the unit quickly
·
If market prices have fallen since the property was completed and several units
remain unsold, a larger discount may be possible
MAKING AN OFFER
Submit an offer to purchase the apartment even if you are unsure
whether the developer will accept the offer. Some developers will not begin negotiations until you make a firm offer
The
best strategy is to drive around the locality you are interested
in and get the best prices from each developer. Then shorten the list
to the options you are really interested in and go on a result-oriented,
two-day property safari. Let each developer know that you are looking
for the best project at the best price, and
that you are definitely buying that weekend. Let them know that that
you are weighing their offers against the other ones available.
Remember
- without making a formal offer, there is really no way
to know how low a developer will go on his price. While making your
offer, volunteer information such as where you work and how much you
earn to assure the developer that you can afford the property. Always
offer to close the deal fast - make sure you mention
this during the negotiation. Also ensure that you get the developer to
commit first.
IF THE DEVELOPER REMAINS FIRM
ON HIS PRICE
Negotiate
for what you estimate to be a realistic price. If the developer
refuses, don't be surprised if you hear back from him a few days later,
willing to reconsider your offer. There is greater flexibility in
negotiating the extras versus the base sales price. Without making an
obvious display of satisfaction, convey that you
need to look at your numbers before you take a decision.
Your
goal is to purchase a home - not to beat the developer down.
Know when to walk away. Always remember that price isn’t the only
negotiable instrument in your hand. Remember most developers hate to
haggle, so gather all your negotiating points into a single offer and
position it as a take-it-or-leave-it proposition. At
the end of the day, there may be some projects where the developer is
simply not in the mood to negotiate on. If he remains adamant and you
cannot agree on a better price for a flat for which you have other
options, walk away.
Note that here are many factors that will influence the developer’s
lowest acceptable price. These include:
·
The prevailing market conditions
·
The developer's financing pattern
·
Whether he is in a rush to sell or happy to wait for a higher offer
·
How much he paid for the land
If
you think the price is far higher than current market prices,
it is possible that the developer purchased the land during the market
peak. In such a case, he will remain inflexible on his rate since he
will not want to sell at a loss.
TYPICAL MISTAKES BUYERS MAKE
·
Not spending enough time to understand the developer
·
Forgetting to do their homework
·
Not negotiating in person
·
Making ridiculously low counter-offers
·
Making disparaging remarks about the project
ESSENTIAL PROPERTY NEGOTIATION
SKILLS
A good negotiator:
·
Knows how to listen
·
Researches well to gets all the facts
·
Stays calm during the negotiation process
·
Takes notes and makes realistic offer
A
good negotiator does not allow the desire to own a certain property
to become obvious during the negotiation process. Also, he or she does
not to take anything personally and can therefore see opportunities
objectively. Finally, a good negotiator always has other options, never
reveals weaknesses, plays his or her cards close
to the chest and does not take anything for granted.