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2.0 EXAMPLE, HOW TO NEGOTIATE THE PRICE OF REAL ESTATE; NEGOTIATING, BARGAINING AND
HAGGLING
The
middle ground, between the buyer's and seller's price, is where the real haggling is done.
Both the seller and the buyer know that they will not get the price they want but you can
be quite certain that the seller has jacked up his or her price to put the house (for
example) on the market. The seller has probably made a bottom line calculation about what
the actual selling price must be. So in the beginning of your negotiations the seller will
willingly drop the price a few thousand dollars just to get you involved in the bidding
process.
However,
when you, the buyer, get below that benchmark calculation, you will encounter stiff
resistance from the seller. How do you overcome this?
The
trick is to have real numbers. Have a list of houses that have sold in the last twelve
months in the same neighborhood along with the square footage of those houses. Get someone
to inspect the house you want to buy and make a list of everything that must be done or
that you would like to do for the house to be comfortable. While the size and condition of
the house is important, the prime rule of real estate is location, location, location.
This means that a large house in perfect condition will sell for much less in a middle
class area than in an exclusive area.
Make
a calculation of your offering price this way: figure the average cost per square foot of
the houses that have sold recently and then multiply that number by the number of square
feet of house you want to buy. Although much less important, you should also consider the
difference in the size of the lots and any other major differences such as a patio or
swimming pool. Then subtract from that number all the work that must be done. When you
make an offer to the seller, mention how you arrived at your bid.
When
the seller comes down $2,000 in the price, you might come up $1,000 in your offer. When
you come up in price, justify it. For example, say that you will add more to your bid
because the deck is so nice. The trick is this: you want the seller to drop $2 for every
$1 that you bring your price up.
Now
will the seller go below his or her bottom line price? Most sellers when faced with a
serious offer will do just that. Every month the house stays on the market costs $1000s in
interest.
With
variations this technique works for just about everything. Naturally the larger and more
expensive the item, the more work you should do to figure out a low (but fair) price to
offer.
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