Want to buy a house? 8 strategies to adopt during negotiations

Do Your Homework And Present A Professional Proposal

If you are buying a house for the first time it is normal that you do not know what information you should provide the seller to consider your proposal. But this is a basic thing and you don’t want to create an amateur first impression, so prepare yourself and inform yourself about what you should present in the promissory contract of purchase and sale (PPSA).

The better structured your proposal is, the greater the probability that the seller will consider your proposal and compare it with others. Thus, the topics that cannot be missing in your PPSA are the following:

Overall business value – proposed acquisition value
Signal value – input value that will be delivered with PPSA signature
Deadline for PPSA – number of days you need before you can sign the PPSA
Deadline for the deed – after signing the PPSA, define the number of days required until the deed is executed
Contingencies – If the proposal/PPSA is dependent on any external action/event
Payment method – indicate whether the business will make prompt payment, using bank financing or otherwise

Have a Strategy And Stay True to Yourself: Set Maximum Value

The risk of not clearly defining how far you are willing to go when buying a house is to feel lost, disoriented and not knowing what to do. In short, it is the risk of making a bad deal or losing a good one. So prepare yourself and before presenting a proposal to the buyer think about the following aspects:

What is the maximum value you can give for the house (do not forget to calculate this value taking into account all taxes)
How much money does it count to be able to give as a signal?
Can you be flexible with the purchase terms?
If there are contingencies, can you manage them separately, so as not to interfere in the negotiation?

Thus, when negotiating with the seller, if he presents you with a counterproposal, you can quickly check whether you are within the parameters you set and to what extent you can change the initial proposal. The fact that you don’t hesitate and present a proposal quickly shows that you are prepared, which can allow you to gain points in the eyes of the salesperson.

Note: not all salespeople are the same, some value more the entry money, others the deadline for exit, others the overall value of the business. Try to understand, in a subtle way, what is the case of the seller you are dealing with.

Don't Wait More than 48 Hours to Make a Proposal

If you already have a plan to buy the house, you already know the maximum amount you are willing to pay and you already know the type of house you are looking for, as well as the locations you are interested in, when you find the business that meets your needs don’t wait a week to submit a proposal! Present it as soon as possible: our suggestion is that you do it within 48 hours after visiting the property. There are two great advantages in doing this:

The seller looks at you as a serious and committed person
Decreases the likelihood of the seller receiving another more financially advantageous offer

In the Middle Is Virtue

It is very common that the initial amount that you ask the seller to do is below what he wants and that the counterproposal that he does is above what he wants. Therefore, what you should do is try to reach a middle ground that satisfies both parties.

And even if the seller’s initial proposal is already within your parameters, you may still consider trying to reduce the price of the house, but be careful, not too careful. It is important to make a risk assessment, because a too bold proposal can have serious implications on the negotiation, with the seller seeing you as an unserious person.

We advise you to increase the overall value, within common sense, in order to achieve your goal. This will be seen by the seller as a moral victory.

Global value and increasing the signal

Another hypothesis when you can no longer / want to increase the overall value, is to increase the value of the input, also known as the signal.

This strategy is especially effective in case the owner has a short-term need – example: having urgent debts to pay.

In addition, the higher the signal the greater the commitment and therefore the lower the perception of risk.

Finally, a high deposit may still serve as a tiebreaker if the seller has another proposal of the same value but with a lower deposit.

Suggested initial signal payment: 10% – 15% of the total value (obviously if it has capacity to increase between 20% – 30% this will definitely capture the seller’s attention).

Scripture Deadlines: Flexibility Is the Key

When choosing the term to be set for the deed, you should try to understand the type of seller you have ahead, that is, what is the reason for the sale, in order to adjust your proposal to the needs of the seller.

Having said this there is obviously a tendency of the sellers to prefer a short term for the deed – until 30 days. However, this will only be possible if you buy the house in cash. If you do as most people do and use bank credit, you should ask for between 60 and 90 days.

However, imagine that the owner still hasn’t found a place to go after selling the house, do you think it makes sense to present a short deadline? Of course not. In this situation it is very likely that the seller prefers a proposal in which it is possible to extend the term, to 120-180 days.

Remember: adapt yourself as much as possible to the house seller’s needs, without obviously compromising your strategy.

Learn How to Manage External Contingencies

Sometimes there are events outside the business, which can influence the final outcome of the contract. When this contingency occurs on his side, the seller usually twists his nose. Why? Because if this contingency results in a situation of non-compliance, the PPSA can go back with the return of the signal.

Some examples of more common contingencies are:

Bank credit approval
Property valuation
Need to sell the current house (of the buyer)
Legalize a specific area of the property (e.g. collection)
Be able to transfer part of the money from another country (to buy the house)
Have the condominium situation regularized
Make arrangements in the property

Our advice is to try to avoid as much as possible imposing these contingencies, as a necessary condition for the business to be done.

For example, if you need bank financing, you should first try to talk to some banks to find out what conditions the market gives you and close a credit approval, so that when you close a deal you do not have any kind of contingency, which forces you to ask for a longer PPSA. One of the most important aspects during this analysis and negotiation with the banks is the spread rate.

It is crucial that this approval be made in advance, because it will make the strategy and parameters (maximum value) adopted by you more realistic, that is, by knowing exactly how much the bank lends you, you can be more precise in the maximum value you are willing to pay, and therefore be more assertive and coherent during negotiations. Not doing so may lead you to accept a proposal that you later realize you cannot pay.

And Last... Forget Never Give Up

Contrary to what is often said, sometimes giving up is really the best solution. But it is to give up in order to move forward without looking back, knowing that there is nothing more you can do to reach the amount you want and can pay.

So if you’ve exhausted all your approaches and strategies and still can’t get a deal with the owner, then maybe it’s time to move on. Believe me, knowing how to abandon a negotiation is a sign of perspicacity, which not all people can have and which often leads them to make decisions under pressure, which invariably leads to bad decisions.

We believe that these tips will help you a lot the next time you’re looking for a home: remember, the best improvisation is the preparation and development of a strategy.

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