Negotiating is ingrained in the Indian culture. Everyone expects to bargain and is not surprised or insulted when this happens. However, when acquiring property in prime central London, it is likely that the seller is not used to your style of negotiation. Here are some basic guidelines that will improve your chances of a successful negotiation.
Establish your ‘walk away terms’: What is the maximum you will pay? What timescales will be acceptable both for exchange and completion? What items will you want included in the sale for that price? What are the payment terms? If you do not have a target for your negotiation, you are almost certain to fail.
Gather all relevant information: Why are they selling? How long has the property been on the market? How many viewings have there been? How many offers have they had? How strong is the market? What time pressure are they under? What will motivate them to sell other than price (which is often not the overriding factor)? How does the property compare to other similar properties on the market/that have sold recently? What nationality are the owners? How old are they? What is their profession/business? How might this affect their negotiation style?
Always play the reluctant buyer: The negotiation starts as soon as you speak to an estate agent. Therefore, you should never be overly enthusiastic. If you really like a property, show interest, but also point out potential negatives by saying, for example, “It’s nice but I don’t like the way the bedrooms are configured. I also think the price is too high. I would probably consider it at the right price. What do they realistically want for it?” Remember, the estate agent really just wants the deal so he may tell you the actual figure as far as he knows. Consequently, you may be able to achieve even less than the figure he gives you. Simply remain neutral and point out some of the issues that ‘concern’ you even if you really like the property.
Ask for more than you can get: You can do this by putting in a low offer. However, this must be a figure that you can vaguely justify. If not, the seller and agent will assume that you are a time-waster. However, you should also ask for extra items to be included, for example, the Ferrari, the furniture and the artwork. Even if you do not want these, you can use them as bargaining chips later.
Raise your offer by ever decreasing increments: Each offer should be carefully planned. If the asking price is £4 million and your target price is £3.5 million and your initial offer is £3 million, you may want to increase your bids to £3.2 million, £3.3 million, £3.375 million, etc. You can also improve your offer by offering better timescales or dropping the Ferrari rather than increasing your offer price.
Avoid ultimatums: You must consider the egos and personalities involved. Generally, an ultimatum will be construed as confrontational. Instead of saying “this is my final offer—take it or leave it”, a much subtler way would be to say: “Unfortunately, this is the maximum I can offer you for the house. You just need to decide whether it works for you or not.” The message is clear: We can’t offer any more. The fact that it is apologetic is the key. This gives the other side the illusion that they have won by extracting your very last penny.
‘Lose’ the negotiation: You are far more likely to succeed if you let the other side think they have won even when you have achieved the terms you want. This is also important as the agreement is not legally binding until contracts are exchanged, so they will be less likely to renege than if they thought you had got the better of them.
Jeremy McGivern is the head of Mercury Homesearch
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(This story appears in the 23 November, 2012 issue of Forbes India. To visit our Archives, click here.)
Very good post. I remember a friend of mine who left London and came to live somewhere in Asia. He says London is becoming a strange place for him, the culture, the people and everything seems indifferent to him and felt it wasn't a good place for him anymore. I am from the US and only visited London i think only 3 times but i would say the place is very beautiful. The people and everything is awesome. The sceneries are lovely. And my accommodation is great.on Dec 29, 2012
I am surprised that this article, partly superfluous and partly nonsensical, managed to make it to Forbes India. All of its suggestions are either generic ("gather all information" - huh, how insightful!) or misleading ("play the reluctant buyer" - was he talking about buying a curiosity from Chor Bazaar?). Obviously, the author has immense experience dealing in London properties, going by his website. I only think there has been some transactional loss in conveying his thoughts. On the other hand, I have only a passing acquaintance with the process. But even to my untrained eyes, the omissions and shortcomings are glaring. Before discussing details, let us pause for a moment and look at the picture used with the article. It is a real letdown. In the article, you talk about multi-million pound homes but in the picture, you have shown the most down-market property you can possibly find in some corner of East End. Or in Greece. In all probability, this is a Council apartment complex, a block of houses built to accommodate the homeless and destitute. This is not part of the London real-estate market at all. Now to the shortcomings of the article. The real-estate market in London is quite well evolved. There are norms and practices perfected over the years that all the three sides - buyer, seller and intermediaries - are expected to play by. Negotiating in this city is a fine art, very different from the way it is done in India. You may be quite rudely shown the door if you play the reluctant buyer. This gets to be truer as you move up the value chain of property prices. People here want to do business with only those who are serious and have the means to quickly bring a deal to closure. Pointing out flaws in properties doesn't impress anybody. It is an old trick in the book that became out-of-date a long, long time ago. No owner will reduce prices or become more willing to negotiate just because you point out flaws in the property. In all ikelihood, they are going to get annoyed. A bad thing for your negotiations. Property consultants know this trick and counter this early by listing out the flaws in the properties they show. The implication is that all this has been quantified and discounted in the price. If you haggle with the agent, they will curtly tell you they don't have a house you are looking for. The word "offer" has been used here loosely. In London, the offer is not made orally. It is made in writing at the end of negotiations. The price bids are made throughout the talks with various prices being quoted by both sides. Once you make an offer, the issue practically goes out of your hands. The sellers will compare many offers and then let the consultant know whether they have accepted it or not. If you make a low offer in the hope of using your "Indian negotiating skills" to beat down the price, you may find yourself booted out of the transaction. It is not unknown for offers to be revised. However, it is an extremely risky proposition and is often done only when information previously unavailable comes to the notice of either party. For instance, if a series of foreclosures take place on the same street as a property you are looking for, the sudden glut will depress the prices. You will cite that development to renegotiate an offer. This is an exception. Property prices are not quoted randomly in London. Both buyers and sellers employ independent valuers who give an opinion on how much a property is worth. So, the range of prices quoted and negotiated is much narrower here than in, say, Mumbai. Now, some suggestions on what could have been included in the article. Property values in London are a function of many things, but a handful of factors top the list. Perhaps the most important is the availability of schools. If there are state-run schools ranked as "Outstanding" by the Office of Standards in Education (Ofsted) or reputed Public Schools (actually, they are run privately), the value of the property will be much higher. If there are Council apartments nearby, that will depress the price. Similarly, the availability of green spaces, the mix of population and access to tube stations are some of the other considerations. Don't buy a house that doesn't rank high on these attributes. Then the regions that are hot and not hot. Traditionally, we have been led to believe that East London isn't good for families to live in and that's still true for some localities. But there are some new neighbourhoods, which are relatively cheap because of their East End connection but are suitable for family living. Houses around Middlesex Street or a property in Leyden Street would command a significant premium over other properties just half a mile away. A long list of these up and coming neighbourhoods would have been useful. There are very good websites that help you research about a neighbourhood.For instance, Ofsted's website will give you all the dope on schools including detailed inspection reports. There are other sites that will tell you about night life and shopping options. You can use the relevant Council websites to research social and economic factors. A list of these websites would have been useful too. When it comes to dealing in a property, the offer is not the most important thing during negotiations. Sure, everybody is talking with money in the minds, but there are other immediate concerns too. If you don't live in England, they will certainly ask you about your background. You won't have a credit history in the country and that is going to be a big deal. You won't have a local bank account. Also, there are security concerns. Nobody wants to sell a house to terrorists and get into a legal tangle later. A local guy would have a trail such as a driving licence, national insurance number and direct debit facilities. Without all these, a stranger will have difficulty getting a deal done. So, it would have been helpful if the author had given practical tips on how to overcome these difficulties while buying a property in London. In some cases, hiring an Indian consultant may be better, but in others, local talent must tapped.on Nov 22, 2012