If you’re on the lookout for a master class in negotiations, I’d recommend looking no further than Tekka Market – those aunties could give Warren Buffet a run for his money. But what works in the wet market, may not translate so well to the property market. So if you’re looking to get yourself a resale flat any time soon, here’s our list of top negotiation tips that’ll have you laughing all the way to the bank.
Know your market
There are three main types of markets, and the type of market you find yourself in will affect your approach when negotiating:
- Buyers Market – the supply of flats outnumbers demand. Here the buyer is king, so you have the luxury of making an offer below asking price, and perhaps even asking for a few goodies to be thrown in (maybe that nice dining set you noticed in the kitchen?)
- Seller’s Market – the demand for flats exceeds supply. Sellers will have their pick of buyers, so you’ll have to at least match the asking price or, more likely, offer above what’s asked to stand a chance amongst competing bids.
- Balanced Market – demand and supply of flats are about equal, so there’s less urgency on the Seller’s part to close the deal. While you can try offering less than the asking price, there’s less motivation for the Seller to accept your offer as they’re likely quite confident of being able to secure a matching, if not better, bid down the road.
Research, research and…research
A lot of preparation needs to be done even before you approach the proverbial negotiation table. As a rule of thumb, you should base your offer on the value of the property, not the asking price.
Research the recent transacted prices of similar flats in the area to get an idea of how much you should be paying (pro tip: HDB lets you to check the recently transacted prices of resale flats sold within a 200-metre radius of the one you’re interested in).
Make sure you compare your flat with one that most closely resembles the flat you’re interested in buying – there’s no point basing your offer on the recent sales price of a 4-room flat, if the flat you’re negotiating for is a 5-room.
Being able to justify your offer with hard facts puts you in a stronger bargaining position than if you just went in with a ‘gut feel’ of what the price ought to be.
Have a game plan
Go into every negotiation assuming that the Seller won’t accept your offer straight away.
Be prepared with a counter-offer if your first bid is rejected. Make sure you know the maximum bid you’d be willing to pay on the flat, and if there any other concessions you’d be willing to make in respect of the purchase.
Hire an agent
Hiring an agent comes with a slew of benefits. It means you have someone who’ll do all the homework for you like finding flats to view, evaluating the reasonableness of the asking price, and arranging for viewings.
But the best part is having someone handle the awkward business of negotiating a purchase price. If you’re that person who stands in the corner while your friend haggles with the shopkeeper, this would be the option for you.
The downside, of course, is the added cost that hiring an agent involves – on average you’ll need to pay your agent about 1 percent of the purchase price.
Show them the money
Have your finances ready before you start serious negotiations with a Seller.
This means getting your loan pre-approved, or having your booking fee prepared. If you can communicate your readiness to the Seller, they might be willing to go with your offer instead of waiting for other as it shows you’re serious about pursuing the transaction, and more importantly, that you’ll be able to finance the purchase.
Ascertain the other party’s interest
Try and figure out what’s motivating the Seller.
If the Seller’s represented by an agent, a quick word with him might give you some insight into the Seller’s reason, or preferences, in respect of the sale. Otherwise, speak with the Seller directly and see what you can glean.
For example, if the Seller is close to completing a purchase of another property, then a quick offer and a promise to move the buying process along quickly might sway the Seller towards accepting your bid over others.
To succeed in negotiations, you need to be able to offer the Seller something they want.
Practice your poker face
The key to negotiations (and dating) is to act nonchalant – so try not to look too excited at your viewing. Act too keen, and the Seller will feel confident in sticking to his asking price, and won’t entertain any negotiation.
Also, be sure not to give the Seller any indication of your walk-away price (i.e. the maximum amount you’re willing to pay for the flat). Again, the Seller will find no incentive in accepting anything lower than the walk-away price you’ve indicated, which means you may have talked yourself into paying more than you would have otherwise.
Be prepared to walk away
Don’t be cowed by aggressive sales tactics.
If the Seller insists on you making an offer, or pay the booking fee on the spot, without properly negotiating the price or giving you time to think it over, say goodbye, no matter how much you might love the place.
Best-case scenario: you call the Seller’s bluff and can then take the time to properly discuss and negotiate the deal. Worst-case scenario: you’ve lost the flat; but at least you save yourself the headache of dealing with an unreasonable Seller.
It’s ok to make an offer that’s below the asking price.
It’s not ok, however, to lowball (i.e. make a ridiculously low offer).
A good rule of thumb is to pitch a price about 10 to 15 percent lower than the valuation of the property (or what your research tells you should be the value of the property). Go too low and you risk insulting and alienating the Seller, and losing the property altogether.