How Long has the Property Been on the Market?
How Long has the Property Been on the Market?
Before starting any negotiations, you need to find out how long the property has been on the market, that is, has it just been listed or has it been on the market for months? Once you know this, there are many different strategies you can use to negotiate a lower price.
We were asked to buy a holiday house and while doing our homework on the property we found out that it may or may not have been for sale with another real estate agent. We asked for the vendor’s statement and contract and noticed that some of the documents alluded to the fact that it had been on the market for 12 months. While it had originally been listed at $680,000 with the original real estate agent, there was a new asking price of $630,000. We thought the value was probably somewhere between $560,000 and $580,000 and when push came to shove, probably would have been prepared to pay those figures.
We were also aware that the owners were financially troubled: they were concerned at the prospect of a long settlement. We had also found out that during the whole time the property had been on the market they had not received any offers. With this in mind, we put in an offer of $515,000 on a 30-day settlement to open the batting, but indicating to the agent that it was either this property or another one and we didn’t want to get into a ping-pong situation with offers and counter-offers going back and forth. No one was more surprised than myself that the offer of $515,000 was accepted – much to the delight of my client. Clearly the owners had decided enough was enough: there were other issues attached to having the property on the market for so long and they didn’t want to lose their one buyer. If we hadn’t been able to ascertain the length of time it was on the market we probably would have originally offered more.
New Listed Properties
If a property has just been listed you need to think carefully how to proceed. For instance, if you are the only interested buyer the agent will wait for another buyer or interested inspection before they take your offer to the vendor. Therefore, you need to establish the market value of the property. The vendor and agent need to believe they have two options. This can be done by making similar offers which have different terms of settlement. A vendor is more likely to accept an offer if there are two offers on the table than if there is just one.
A large home with a swimming pool and tennis court, close to several schools, was to be sold because the owners were divorcing. The location, the pool and the tennis court fitted a classic supply-and-demand so it was clear there would be a lot of interest in the property. It was important to get the two owners together so that there was a chance to buy the property before auction, or in fact before the property was even advertised. (I actually had the heads-up on this one through a personal acquaintance.) This involved many different aspects, but an offer was made which allowed one owner to stay on in the house for six months. Then, through a third party, we made another offer, which was on a cash basis. The presentation of two offers, with one having more benefits for the vendors than the other, clinched the deal. If the property had gone to auction a premium price would undoubtedly been paid because of the court and the pool.
Clearly if a property has been on the market for a long time, it is overpriced and therefore you need to drip-feed any offers up to the owner. Slowly, over a period of time, you are sending the owner the message ‘I am not really all that fussed’; the ‘I have to have it all costs’ mentality is not there.
We were asked to purchase a high-rise apartment that had been on the market for 18 months with an asking price of $700,000. We inspected the property three times before we made our initial offer, which was $560,000. Three weeks later we went to $570,000; two weeks after that to $575,000. The property was eventually secured for $576,000 with an extended settlement, including the right to settle earlier if we decided to do so. If we had gone in too high, too quickly and responded to the vendor’s counter-offers, we could not have secured the property for such a good price.
– David Morrell
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