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Real estate negotiation: Buying property at the “right price”

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    The real estate negotiation depends on many factors, a buyer will sometimes have difficulty finding it. There are several elements that need to be determined before making the right decision. Here are the most important ones:

    The Budget

    Above all, the most important element is of course the budget available, after determining precisely the personal contribution, but also the amount of bank loan necessary to carry out the project. The financing capacity is calculated on the basis of well-identified criteria: occupational status (salary and contract) of the individual buyer or couple, purchasing power, repayment period…

    To properly evaluate your budget, it is ideal to make an appointment with your banker (or a loan broker) in order to get a clear idea of what can be invested.

    From the total budget available, it is necessary to determine as precisely as possible the costs to be deducted from the budget “purchase price”, it is the acquisition costs (about 8% of the purchase price), but also the costs of moving, work to be carried out in the property … After you have accumulated all these costs, you should have a clear idea of the remaining amount, to be allocated directly to the purchase of the property.

    Comparative elements to be analysed

    Most importantly, prices for comparable goods in the same sector (or comparable sectors): this is what allows you to compare the selling price with market values. It will be necessary to verify what is the basis of calculation of the surface used by the seller: Carrez Act, living space, SHON, SHOB? Some are less restrictive than others.  

    It will also be necessary to take into account the period of construction of the property, its general condition (benefits used, equipment), as well as its situation, and not to forget the percentage of determining criteria gathered in this property, which correspond to YOUR research criteria.

    Finally, a fundamental element is the time to put it up for sale. How long has the house been on the market? The negotiation is different if a property has been for sale for a week or three months… If the period is too important, it is a sign that the property may be overvalued, leaving more room for a house price negotiation.

    Know how to reasonably assess the work to be considered

    A good analysis of the technical diagnostics of the property can already give an idea of the amount of essential work to be carried out, in terms of electricity for example, or thermal and phonic insulation… it is an argument that may encourage the seller to negotiate the sale price.

    Other work may be needed to increase the comfort of life, or to restore a property “up to date” by considering more modern services corresponding to the current trend frequently sought. To properly evaluate them, don’t hesitate to ask for a few quotes from construction professionals near you.

    Determining the reasonable bargaining margin in the sector

    It depends on the type of property for sale (apartment or house), its location (city or countryside), and the frequency of searching for such a property on the market (a very frequently sought-after property usually sells very quickly, with very little or no negotiation).

    Finally, to recognize its ability to analyze all the elements previously seen, and to negotiate under good conditions

    Negotiation between individuals is sometimes more difficult. Calling in an agent (or real estate negotiator) can provide you with welcome mediation. The external advice of a market specialist helps guide the transaction towards more consistent values. This is why giving a purchase mandate is often profitable for the buyer, despite the agency fees to be incurred. In addition to providing expertise in the assessment of the property, an agent helps you argue your negotiation from the points highlighted above. It can give you extra confidence when making your offer to purchase or write. 

    The most important thing: it is less important to negotiate at all costs than to know how to recognize the right opportunities, know how to make the decision at the right time.

    How the negotiations unfold

    The first stage of the real estate negotiation takes place after the visit, when a potential buyer decides to send an offer to the owner of the property for sale. If it can be oral, the offer to purchase in writing has the advantage of being official and legal.

    It is common for the price offered at the purchase offer to be lower than the asking price. This is quite normal: the average bargaining margin (calculated at the signing of the deed of sale) is 5.2% of the asking price for houses, and 3% for apartments.

    When a seller receives an offer to purchase below their asking price, he has three options:

    • Accept the offer on the terms of the purchaser, by recommended letter. Both parties can then consider signing a pre-contract for the sale of real estate (compromise or promise to sell).
    • Refusing and stopping negotiations: this can be achieved by answering in the negative, or by sending no response.
    • Write a counter-proposal that changes the asking price, or that adds or withdraws one of the clauses:

    Like the offer to purchase, it engages the parties as soon as it is accepted. Like any official document, a counter-proposal begins by recalling the identity of the seller, the designation of the property, its address, its area and its possible dependencies.

    The counter-proposal usually includes the mention of a new asking price, located between the original amount and the price offered by the purchaser. It can also identify the conditions necessary for the sale, called suspensive clauses: obtaining a loan, absence of easements, obtaining a building permit… It is necessary to add a validity period.

    In the event that the owner has commissioned a real estate agent to represent him in the sale, the offer to purchase will first be forwarded to the professional. He is a strategic ally in drafting the counter-proposal. He will be able to defend your interests and make a proposal consistent with market prices.

    Negotiation by a notary

    When a notary acts as an intermediary in a real estate transaction, he may collect a trading fee. 

    Through his activity, the notary acquires an infallible knowledge of real estate contracts, as well as market expertise. As a result, it may be in its place in the role of real estate sales intermediary, connecting customers and sellers. This so-called negotiation activity is framed by a mandate, simple or exclusive, given by the owner.

    Once mandated, a notary is entitled to advertise the property, and when seller and purchaser agree, the same notary may receive the pre-contract and then the deed of sale. He will then collect a trading fee, like any real estate transaction intermediary.

    Attention! Negotiation fees should not be confused with notary fees. These relate only to expenses related to the administrative execution of the sale and taxes collected by the public treasury. They are broken down into transfer fees and notary emoluments. These are two very different expenditure items, even if they are both collected by the notary.

    The bargaining fees or fees are framed by the decree 2016-230 of February 26, 2016 governing the rates of notaries. To apply, the notary must have a written mandate given by the seller, that he has connected the two parties (buyer and seller), that he has allowed the purchaser to discover the property, and that he receives the deed of sale or participates in its drafting.

    When these three conditions are met, the purchaser must pay the bargaining fee. They must be paid to the notary at the time of signing the deed of sale.

    Since the 2016-230 decree of 28 February 2016, the negotiating costs are set freely by notaries. Each notary can therefore set his own rate which applies to the price of the property. In use this percentage is generally quite close to 4%.

    Trading costs are sometimes misunderstood by buyers or sellers. They believe that notaries are already paid by what is called notary fees. However, it is a misunderstanding: a small part (about 1/8) of these fees are actually collected by the notary. That’s why their exact name is actually acquisition fees. In short, the costs of negotiation are justified by the work of advertising the property, visiting, supporting the file… Like any real estate sales intermediary.

    in Buy
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