4 Main Factors that Will Influence Your Negotiation Potential

MonopolyKings
Aug 9, 2017 · 4 min read

“Details create the big picture”
— Sanford I. Weill

You already took the time to do your due diligence and properly assess the potential investment.

You have carefully inspected price and rental trends, and you are convinced it is the right time to invest.

Now you finally decide to approach the seller for negotiations.

Having reached this critical step, here are four main things to consider that will help you estimate how much of a discount you should negotiate for.

1- Know what type of seller you are dealing with

Get to know the seller you are dealing with. Information is power, and the more you know about your seller, their needs and why they are selling their property, the better you can negotiate.

If it is a financially distressed seller that you are dealing with, then you have the upper hand when it comes to negotiating.

Other types of sellers that are considered a great catch are ignorant sellers that are not yet up to speed with the latest changes in the market. They might not be aware for instance that prices are back on the move again, that rental levels are about to start climbing again, or of any other major change like future infrastructure projects that will greatly improve the area the property is currently located in.

On the other end of the spectrum there are those sellers who are just in a rush to relocate or move. They might have already guaranteed a better job position somewhere else in the world and selling their property is getting in the way of their bright future. They too are willing to provide a large discount to speed up their exit from the market.

It is usually hard however to directly reach out to the seller, especially in the case of Dubai when most sellers use agents to market their property for them and represent them in negotiations.

You can still however look at certain indicators that will give away some of the seller’s intentions. It would be very likely that a seller falls in one of the above categories if their agent:

  • Has immensely lowered their asking price from the initial asking price they had set on their property within a short period of time
  • Is agreeing to price concessions and their property hasn’t been on the market for more than a month

On top of the above indicators, if there’s also a current lien on the property. This shows that the seller is already heavily leveraged and is looking to quickly liquefy their asset.

Try to understand the seller’s intentions so you can set a reasonable negotiating range in mind.

2- Your financing will affect your persuasive abilities

Cash is king. Sellers prefer to deal with cash buyers since they can close on a property much quicker without the hassle of going through bank procedures.

If you are a cash buyer you have the upper hand in negotiations, especially if you feel your seller’s agent is in a rush to sell the property.

Mortgage transactions could easily take around a month before the title deed is finally transferred from the seller to the buyer as the process is much more complicated.

3- When buying off-plan, find out the absorption rate

In case you’re looking to buy an off-plan property, make sure to look at the current absorption rates.

What does this exactly mean? Let’s say you are looking to buy a 2 bedroom apartment in Mada Residences in Downtown Dubai months after the launch of their sales.

Before you start any price negotiations with the developer, take a look at how many 2 bedroom apartments are available and how many actually have sold since the launch date.

In the case of Mada Residences there are 150 two bedroom apartments, of which till date only 25 have sold. So the absorption rate for two bedroom apartments is 25/150 = 16.7% i.e. more than 83% of the developer’s inventory still remains unsold.

In this case, you should be able to demand a large discount when approaching the developer to buy a two bed apartment.

With MonopolyKings you will be able to know the absorption rates of every off-plan project on the Dubai market, giving you great insight to be able to estimate your negotiation potential.

4- If you are buying a unique property, you are what is ‘unique’

Luxury properties are meant for a scarce type of buyer and this is precisely how you should treat yourself.

The price tag on luxury properties is much higher than other property types and therefore the barrier to entry is much higher so your competition is likely to be very small.

In Dubai’s current market (2017 Q2), if you are looking to buy a luxury property, you should be able to easily negotiate down to a 20% discount.

Do not settle for less.

Final Words

Negotiating can make the world of difference from an “Ok” investment to a “great” one.

Always remember:

“Profits in real estate are made in the buying not in the selling.”
— Robert Kiyosaki

Take your time when approaching an investment and make sure to:

  1. Carefully analyze the investment.
  2. Keep in mind the factors we spoke about in this article
  3. Strategically approach the negotiation table.

We want to share with our readers tips on the Dubai Real Estate market, as well as investment strategies, investing basics, case studies, market reports and insights.

Check out our blog for yourself at http://blog.monopolykings.com

MonopolyKings

The future of Real Estate Investing

MonopolyKings

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The Future of Real Estate Investing

MonopolyKings

The future of Real Estate Investing

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