APRIL 2020 | Thailand Edition
Successful negotiation involves a win-win situation, getting the best deal for all parties involved. Negotiation comes in various forms, shapes, and sizes. From our years of experience, we’ve pulled together 10 great negotiating tips below.
1. BE THE FIRST
You probably have heard of the saying “The early bird gets the worm”. This applies well to the Real Estate industry. Make sure you do your research and be quick with your decisions the moment a good deal hits the market.
New build: Property developers will offer early bird promotions the day they launch a new project for sale, this is usually before they start to promote it and gives buyers very early access to pick the best units at the best prices. This phase does not last long and prices will start to increase as construction starts, marketing ramps up and sales quotas are hit. Make sure you pick a reputable developer and keep an eye on EIA approval. Check out our buying off-plan property guide for more details.
Resell: Good deals don’t last long on the market. Properties for sale longer than 6 to 12 months are usually slightly over market rate or other factors holding them back from being sold. Good deals on resale units might not even make it online, usually being sold within 3 to 6 months.
2. BE REASONABLE WITH YOUR NUMBERS
Be realistic as the seller can simply turn down your offer and not come back to the negotiation table. Start with a lower value than the asking price, but never as much as half the value from the start. Try to offer a value that gives both parties a win-win situation while still remaining in a good relationship, you may very well need them in the future.
Do some research before making an offer, understand the value of properties in the location, the project and the property type to help justify your first offer.
3. THE PSYCHOLOGY OF DISCOUNT
When asking for a discount, using a percentage works much better compared to a price discount. This is because the human brain often chooses the initial impression of what sounds like a good deal. When it comes to real estate, properties are expensive, you are dealing with values that contain many zeros therefore by using percentage, sellers may be more inclined to agree.
Have a look at these 2 examples:
Assume that the initial price of the property is THB 20 million
Option 1 – Ask for 20% discount
Option 2 – Ask for THB 4,000,000 discount in price
Even though both offers are of equal value, there is a much higher chance that the seller would consider Option 1!
4. THINK BIG!
Price is often the first thing people think of when it comes to real estate discounts, however, there are many other options available to you to save money other than price. For example:
- Furniture – During viewings, you are likely to be shown fully furnished rooms, therefore, be smart and try to ask your seller for some of this furniture such as television, washing machines, ovens, microwaves, the AC, and even the car parked in the drive. These items combined can save you both time and money. We’ve seen all types of deals being agreed and bartered for the sale of a property.
- Additional Costs – Ask your seller to share or cover any additional costs, which can add up to be feasible. Such as transfer fees, service/common area fees, taxes, stamp duty, legal work, renovations, fixing defects, even down to utility bills, and utility name transfers.
5. UNDERSTAND THE SELLER
Getting to know the seller can be a big help by building rapport. Understanding who you are dealing with and why they are selling. Being sympathetic to the seller will allow you to gain a deeper understanding and possibly a much better deal.
Some sellers will have a net number in their mind that you need to discover by getting to know the seller better. Sellers can fit into many categories, here are some of our usual types:
- Not using the property anymore and see it as a cost. Want to let it go to do other things.
- Relocating for work, retirement, kids’ schools.
- Financial pressure and time restraints, willing to drop prices but need a fast answer and a fast transfer from the buyer.
- The property is their life savings and the seller is after a maximum return to buy something new.
- Family home where they grew up and looking for a good owner to transfer to (They might not want to sell to a developer to knock it down).
- Portfolio owners, this could be 1 of the 100 properties they own and they have a net number they will stick to. They see this as a business and income.
- Investors, who like to work by the numbers, if the numbers match his targets then he will sell.
- Casual sellers, who are not too serious but could accept a good offer.
By understanding the seller, this will allow you to shape your proposal and understand what areas to focus on.
Once you’ve understood the seller, you might then need to concede on a point or two to reach the best scenario. The best deals are struck when both parties give in a little on both ends.
Bear in mind not all sellers will discount, some will hold fast on their target. If you really like a property and it matches your requirements then you may need to be prepared to pay the full asking price. Especially if the property is being advertised with a big discount from the start.
Agents can also add a lot of value here. They will know what to use for leverage and may have had private chat with the seller beforehand for some insider knowledge to help your case. A good agent will help both parties reach the best agreement and make sure no one takes advantage of the other party. Reducing the stress, time, make better decisions and save you money.
Concession strategies that might be helpful:
- There is no such thing as the perfect case so be ready for a give and take. Before entering a negotiation, make sure you plan your goals, needs, and priorities that you are prepared to trade on.
- Don’t be afraid to compromise, it’s about reaching a middle point. Then make sure your counterpart clearly understands your position.
- Stick to what you agree, changing your mind at the last minute can mean the seller pulls out and you could lose a deposit.
- Put down on paper, email (or a legal document) what you’ve agreed. Then it’s a good idea to draft and sign a sales and purchase agreement.
- When asking for big discounts – you want to be realistic and quick at paying. Look at ways to take the stress out of the process and make it as fast as possible. Cash is King – having the money ready at hand to pay for deposits will go a long way to getting the best deal.
- Understand your time frames to complete the full payments. Fast transfers and getting bank loans approved fast will help with a good offer. Waiting for loans to be approved could lose the deal, we advise you to do your research on bank loans before making an offer.
- Rent to buy, by paying a deposit and then paying a monthly rental that is later deducted from the final sell price. This can help lock in a price if you can’t afford it outright at the time. These usually are between 1 to 3-year terms.
7. HOW AGENTS HELP
The role of the agent is to act as the broker. In most cases, there might be a seller agent and buyers agent but don’t let this put you off.
Agents take a lot of time finding deals, acquiring stock, getting the inside word, building trust and reputation with sellers. Property developers and private sellers will know who they trust to work with. Picking the right agent can make a big difference to your end offer.
Go Local, someone on the ground that can go in to discuss with local sellers. Face to face negotiations can be a powerful tool.
Private sellers and developers will sometimes go to agents with deals as they know they might have clients at hand for a fast sell. Find an agent with good experience, that listens and filters properties that meet your requirements.
8. SET REALISTIC EXPECTATIONS EARLY
Make sure you understand your personal expectations before you start. Tell the agent the full story at the start so they can aid in brokering the right deal. Most great agents understand how to filter points to the seller and push on the buttons that will help buyers. But also protect sellers to reach the best win-win scenario. Here’s a quick checklist to ask yourself:
- If you make an offer are you 100% ready to see it through?
- Budget – What is the maximum you are willing to pay?
- Have you arranged your financing? (Understand this before you start and line up banks/solutions)
- What features are important to you?
- What features could you live without? (The perfect property is very hard to find, you might need to let go of a feature or two to meet your budget)
- Is the property for investment only? (Focus on the numbers and data)
- Set a purchase/completion/move-in date? (Deadlines are important)
In developed markets, data is transparent and you can see historic selling prices and what is being advertised is correct. In developing markets, such systems are not fully in place. Be careful to understand the real-world value, prices rise faster in some regions due to the infrastructure projects, demand, and local development. In other locations, they can remain flat. Data online 2 to 3 years ago can be out of touch with what is happening at the moment.
Properties listed online and pictures might be outdated or properties that have been sold but have not yet been taken down. Tips for when searching online:
- Use filters – You can filter by newly / recently added to find the new and up to date prices.
- Look at when the property was first listed online.
- Enquire on the very cheap properties to see if they are real or just ‘bait’ to find clients. Stick with the websites and agents where you find the most real stock and properties that are actually available.
- Shortlist one or two agents to work with after you’ve spoken to a few (You do not want to waste time and confuse your messages by talking to too many agents).
Don’t be afraid to search for something outside of your budget, sometimes you can find a good offer that will come down. As soon as you enquire, ask them how flexible they are to set the right expectation early. If not, then move on to the next.
10. IF NOT FIRST… BE THE LAST
Developers of new homes will put out great promotions towards the end of construction when the property is about to become ready to move in. They have already covered their costs and their profit is tied up in the last units. You may not have the best choice of units to pick from but they might be willing to drop the price. Especially if it’s the very last unit available.
With private sellers and the secondary market. They might have advertised their property for a year now, and finally considered dropping the price. Once they adjust the price, this is a good time to re-approach them with an offer as their selling reasons may have changed.
Getting large discounts may not be as hard as you think if you have the right negotiating skills. At Property Co. our agents are well-trained and have many years of experience in the Real Estate industry. We have built strong connections with some of the biggest developers and we guarantee to help you achieve the highest value for money. Feel free to leave a message and our professional agents will give you a call back to offer you a personalized one-on-one service.