In my last article my focus was on how one may dispose a property in the present market conditions and in this instalment I would like to go further to explore another critical aspect, that is having the knowledge to make the right purchase.
Those with large sums of money to invest will do well by taking advantage of investment opportunities in real estate at the moment as history has shown that the market does not remain stagnant forever.
Opportunities tend to arise at different periods. For instance, while some people made the most of opportunities that arose during the Zimbabwe dollar era others are still ruing the missed opportunities during that era.
There is an illusion that prevails in a buyer's market that all sellers are desperate to sell.
As a result most potential buyers fail to fully exploit the opportunities presented by the emergence of a buyer's market and end up buying properties for prices above or equivalent to those found in a seller's market.
This presumption of desperation on the seller's part often leads to potential buyers making unconscionable offers in the vain hope of attaining a ludicrous bargain, often in the process missing what can potentially be a great opportunity.
A buyer's market simply occurs when there is an increase in the number of houses on the market coupled with a declining number of buyers, resulting in longer listings of individual properties on the market during a given period.
The offer process has to start at the house hunting stage, one can never over emphasis the benefit of identifying the right agent to collaborate with for the bargain search.
Once this is done, it will make the rest of the process much easier for one can benefit from the wealth of knowledge the agent will possess on the market trends.
The next step will be to identify the property one can offer low. It is advisable at this stage not to target new listings on the market because the sellers traditionally are at this stage hard negotiators and hopeful of achieving their desired price.
Identify properties that have been on the market for a month or more and ask your agent to find out the reasons why the property is still on the market. It is best to be armed with as much knowledge as possible, especially the attitude of the seller. After identifying the properties that have been listed for over a month, identify the properties that have had a price reduction at any stage of the listing process.
This in most cases is a good sign that the seller is flexible and might be agreeable to a lower offer. Internet listings in some cases are not regularly updated to show price fluctuations, it is best to further contact the agent and find out more on the target property.
At this stage half of the job is done, one is already equipped with the knowledge of the seller's propensities and the next stage is making the offer. It is important to be honest with the agent and yourself about the reason for wanting that particular property.
If the reason goes beyond just investing and flirts with sentiment, such knowledge will help assist the agent to make informed offers that will not make one gullible at the negotiation stage. One can give a two-pronged offer where the seller is put in a position to make a decision.
It will be a double offer with an option for one method, it can be drafted in such a way that the first offer on the form will involve a payment plan of a deposit and balance payable within a certain period.
The second offer will be lower than the first, but involve a once-off payment. How this is drafted will depend on which method the buyer really wants to use, that is, the one that they make more attractive.
This technique will give the seller options and normally gives way to open-mindedness on the part of the seller.
Another technique is to write an offer asking for something that one clearly knows the seller does not want to let go off.
If the property comes with something the seller insists will not be included in the sale, write your first offer contingent upon that aspect being included in the sale.
When that is expectedly refused, then write a second lower offer excluding it from being part of the sale.
Normally at this stage, the seller will be more receptive to your new offer, as the mind will now be focused on the victory of retaining the thing that was not supposed to be included in the sale. Write offers that have a short acceptance period, it is important to both parties to realise that when it is a buyer's market, the buyers have more options.
An offer with a short acceptance period prevents the seller from seeking advice from the uncles who always think that a higher price is achievable.
Vengai Madzima is a property investment consultant and analyst with Wisdom Properties Real Estate.