Monday, July 4, 2011

The delicate art of price negotiation

At some stage in the process of buying a French property, there comes a time when vendor and purchaser must agree on a price, which may be below that advertised. It can be a difficult moment and writing in the English Daily Telegraph property specialist Christopher Middleton has described the process of buying and selling as 'a war, both psychological and financial. We don't so much purchase a house, so much as prise it out of the hands of the people who own it. We don't so much as sell a house, as surrender it to invaders. And right up to the last minute, the deal can be sabotaged by an act of panic or greed on either side'.

Middleton was writing mainly about the British market, but here in France I have witnessed acrimonious exchanges between vendor and purchaser, largely because neither has mastered the delicate art of price negotiation. And the occasional collapse of a deal for want of a little leeway, when neither side would concede over a matter of two or three thousand euros on a property typically costing a hundred times that sum.

Principal errors on the buyer's side include:

- assuming that property prices in France have dropped dramatically everywhere. They have not and in most areas they are going up.

- assuming there is a magic figure - 5%, 10%, 15% - that the vendor has tacked onto the asking price in order to enable hm to drop the price in negotiation.

- assuming that because a property you like is beyond your budget the owner will reduce the price in order to help you fulfill your dreams.

- you want to add a fourth bedroom or a swimming pool on the back lawn, assuming the owner will help finance these for you by reducing the price.

- making a verbal offer during your first visit; this puts the owner on the spot and your offer is likely to be refused. Difficult then to repeat the same offer this time in writing (the correct procedure, allowing both sides time for reflection).

Common errors on the vendor's side include:

- pricing the property not on its market value but on the amount he wants to receive to pay off his debts or finance his next project.

- not emphasising the property's hidden plusses - a quiet location, ready-to-move-into condition, scope for alteration or expansion, garde or terrace not overlooked and/or with plesant views.

- in a co-ownership building, such as an apartment block, not listing works recently completed (outside painting, interior decor, new lift etc) and paid for by the vendor, which the new owner will enjoy for many years to come.

- announcing in advertising that he is 'open to offers' - a clear sign of incorrect valuation and desperation.

- turning down a verbal offer immediately. Better to ask the vendor to submit a written offer for consideration, preferably through his agent.

Prior research by both the vendor (state of the market, prices of similar local properties) and the buyer (the same but including a maximum budget not to be exceeded) will help ensure that both parties enter into negotiations armed with accurate information to back up their offers and counter offers. An unemotional, business-like approach can go a long awy to reduce the stress of buying and selling French property.

Source: Christopher Middleton, Daily Telegraph,  02 July 2011 See also "101 Things an estate agent should tell you" Greene & Co.