Negotiation advice

Swri198

Hi

Hoping there are some better wordsmiths than me on this forum who can give advice on how to put together the next round of negotiation for a property.
I am currently negotiating directly with a small developer for a new build property. It is in the highest price bracket for the area and there are only 4 properties to sell. They have so far agreed to knock off 6.5% of purchase price, without me saying what my expectation is. I want to be realistic (although they may consider this cheeky or even crazy) and ask for 14% off. I am ok with either a discount or a combination of discounts and SDLT etc paid. The price on all houses was marketed starting late 2018 when the houses were just starting to be built. We are in a different market now and I absolutely believe that this hasn’t been priced in.
I don’t have a house to sell so am proceedable. The houses have been actively marketed for some 6 months with 1 reserved so far and 4 still available. They are keen to get them sold quickly and insist on completion with 10 weeks. I am ok with that not to overpay vastly as set out in current markets price.
Do any experienced or even inexperienced hours buyers with negotiating skills have any advice on how you would put together the offer in writing without it sounding like I am not a serious buyer.

Thanks

Simby

What are other houses in the area selling for?

That will have an influence if your discount aspirations are reasonable..

I would amass supporting details ( sold house prices, other developments etc..) and then make the request nicely based on supporting data...

Swri198

Simby wrote: »

What are other houses in the area selling for?

That will have an influence if your discount aspirations are reasonable..

I would amass supporting details ( sold house prices, other developments etc..) and then make the request nicely based on supporting data...

The only other 4 bed new builds in that postcode were 20% smaller, lower spec I.e no private electric gate or flooring included. But also 28% cheaper. To be honest these houses really are very upmarket for the area. On the same road though new builds of the same spec sold about 5 years ago so difficult to compare in today’s market.
In this case I want to go in lower after a brief chat with an EA who came to look at my house a few weeks back. And we got talking about the new development. I guess he had no interest in thwarting the sale of the new development since he is not marketing anything similar, the figure he put the new builds at was 14% lower than asking price hence why I want to offer that.

billy2shots

It’s almost impossible to give advice on how to proceed without knowing all sorts of extra information.
The company, when they declare their sales to shareholders, their end of year, have they got other sites in the go, is there a sales office manned on site, is a management company waiting in the wings, just off the tip of my tongue.

However, in general terms the builder will be likely to pay stamp duty (and lower the asking price) as opposed to just knocking down the price as this creates problems for them getting want they want for future sales. You touch on this so I know you are aware.

My tactics involve a cheeky first offer which will be rejected and then fish for a counter offer. Easier to do when dealing with developers, less so with EAs on older houses.
Then I would plead poverty and say it’s out of my price range but I do like the property. ‘Give me some time to see how much I can beg borrow and steal’.
Hold my nerve and call two days later with my best and final offer. Now I have to say it this point, I have a risk taking personality and even if I love a property I will always roll the dice to save a bit of money. I also have no problem going back to the developer a few weeks later to make another offer if things don’t play out, I will never see them again so don’t feel stupid.

In December I made my ‘final offer’. This was laughed at. 3 days later I had a call saying ‘one of the directors’ have asked them to make contact and ask for a tiny bit more. I declined, and said it was a shame as it was nearly Christmas, it could have been a nice present for all of us, a sale for them and a house for me. 3 hours later my offer was now accepted.

All SD paid and £30k off the house. Worked out to around 9%.

My hunch is 14% is a little too much. 7-10% would probably be more realistic.

Good luck.

eddddy

Personally, I wouldn't get into discussions with the developer about prices of comparables, sizes of comparables etc. That's likely to end up in long, frustrating, arguments.

As developers, they will probably have thoroughly researched comparables, house price trends, consumer confidence, etc, etc - when deciding on their pricing. (i.e. They'll probably know more about it than you.)

I would concentrate on points like:

• I'm proceedable
• I'm happy to aim for exchange in 28 days
• I'm happy to aim for completion in 10 weeks
• I like the property, but having done my calculations, the absolute maximum I can offer is £x
• Can you get back to me quickly on the offer, as there are some other options I'm looking at. (But be prepared for them to 'test' you by asking what those other options are.)

For them to accept your offer, they have to believe that it's the best offer you're going to make.

(But if they reject your offer, you can always wait a day or two and explain that you've re-done your calcs and found an extra £y.)

Cash_Cow

Its a funny one as twice recently I've been in a situation where the agent says ' you are not going to lose this property over £3k in a £300k deal are you'. Well I was and i did as I was over budget already (against instinct) which they fully understood and I had made my 'final offer'. So really it was the seller that lost the sale over £3k - it works exactly both ways! The villa remains for sale 2 months later and they will fund this empty holiday house at a cost of far more than £3k over winter... Illogical but they called my bluff and cut nose off to spite face! Having made my final offer it was quite nice to have them chasing me for a b change - so the constant going to voicemails and slow responses approach was returned... But they didn't budge.

I then go for a BTL deal closer to home and we were down to the 'you aren't going to lose this deal by holding out for a 50% split of £4k in repairs for neglect are you'. I felt it fair but I wasn't as they had moved a lot on asking price so the deal was struck and he got away with no maintenance!

Just remove the emotion - its not the only house in the world - and stick to your affordability criteria otherwise there is no point working it out and you wont be convincing when negotiating. Convince that there is no more money and convince that you WILL complete the deal - show funds or decision in principle docs etc

Swri198

Some very interesting responses so far, thanks for sharing.
The developer has one other site but nothing on sale yet on that one and there is no sales office on site since it’s such a small development.
All the advice so far chimes with my own approach to this. I really like the house but removing the emotion out of it. I am prepared to walk away and I definitely don’t want to get in an argument and stay totally professional. If they don’t sell to me, they can take a hit on their cash flow over xmas and still have the property on their books in the new year. I can’t lose what I don’t have. They lose a sale.
One of the reasons I felt compelled to ask the question on this forum was to see who confident everyone else feels as a buyer because of the political situation. As billy2shots pointed out, private buyers and their EAs all have different motivations, no two negotiations are the same because they have an emotional attachment to their property. With developers, it’s a different ball game, they are business people so current market conditions and political uncertainty matters. Which is why I wondered how far people would negotiate on a small development by a smallish developer on houses that have been marketed for well over 6 months now. 1 is complete, the rest are on hold for finishing while they wait for people to reserve.

billy2shots

I personally don’t think a buyer should consider politics in this situation.
Although there are numerous geopolitical issues happening at the moment I presume Brexit is the biggest elephant in the room that you are eluding to.

A buyer should never feel confident using Brexit uncertainty as a tool to negotiate. Tomorrow Brexit could be sorted and then you may find a dozen potential buyers are now interested in the property. It really is 50/50 as in a strength to negotiate with but could become a weapon that goes against you.