Property development needs the art of negotiation throughout all its processes. One of the critical areas in which negotiation helps in locating and purchasing a lucrative property development opportunity.
At The Collaborative London, we apply three stages of negotiation, to hunt for a rare uncut gem of a property, to develop.
Prepare for negotiation
Preparing for negotiation allows you to identify the potential value of a property. That's why it is imperative to research, and understand the housing market. Research the area and understand the risks and strengths of making this purchase. For instance, know that if you buy a lower ground floor flat, the risk of this, is that a particular segment of the market will not even consider looking at this type of property.
2. Information exchange and validation
This is an important stage, between you and the person you will be negotiating the property purchase with, which in most instances, is an estate agent. Though this may be a given, ensuring you have a good relationship with the estate agent is vital. The following four key aspects to building a relationship with an estate agent need to be considered:
Trustworthiness - will you deliver on what you say? It's all about being honest and dependable. When you offer on a property, ensure that you can fully carry out your commitments.
Competent - do you have the ability to promptly purchase property; are you able to understand any legal issues, that may arise during the conveyance and overcome these? For example, when a property has not obtained specific licences over many years, you will need to get an indemnity from the seller. Knowing when you have a valuable property, all comes through your competency.
Likeability - it's always a major element in any negotiation as we are more likely to do things for people we like. Having good interpersonal skills with estate agents, means that you are more likely to strike a good deal.
Alignment of Interest - this is essential to every relationship. Generally speaking, estate agents want to sell property, and you will be looking for a property to purchase. However, it's important to bear in mind that although you both want to reach the same goal, estate agents are incentivised to sell you a property, that will make them a greater commission.
3. Bargaining
Now that the relationship with the agent is strong, it's time to make an offer on the property. It is essential in negotiations to manage the concessions you make while bargaining. This is so that you can secure real value in the transactions you do. So, for example, if you make an initial offer that isn't accepted, that doesn't mean you just walk away. On the other hand, if the numbers simply don't work, don't force the deal.
Another way of looking at this is, to first seek to understand, and then to be understood, when making an offer on a property. It is always good to ask why is the property being sold? What are the motivations of the seller? In doing this, you can formulate a win-win offer, that gives the seller what they need, and gets you what you need. An example of this is a probate property that needs a quick sale. Here, your ability to act swiftly can mean, you can secure an excellent price.
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