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Social Aspect Being A Barrier To Real Estating
If you are a freshie who has lost count of the number of sellers who has ridiculed you , you may think that you are not meant to be fiddling with properties and that sellers see you as the joke of the day providing the comic relief that their ego desires. Sellers thrive on enticing you to make low-ball offers and then smash your self-esteem into a pulp. They make fun of your radical offers like the bully who pull down your trousers in Primary school. They will put you in your place in front of all observers just to make themselves look like the almighty powerful property owner who holds all the cards. It their personal propaganda to ruthlessly win the eternal battle between buyer and seller.
Well maybe it is time you get over the sour taste in your mouth and stop generalizing sellers. It’s currently a sellers market after all. If you feel that way about the sellers that you have engaged in a battle of wits with, it is because you got found out. Not for being a newbie, but for going about things like a newbie as fresh as a grouper from a wet market.
You have to work on your conviction. Sellers are not as evil as you might think. Sellers most of the time are just as fresh as you in properties. But because of meeting a lot of potential buyers, they can just be that little bit more experienced than you in negotiation.
Sellers have a fair price in mind that they are willing to accept even though they might announce an outrageous price that will send your grandmother laughing in her OSIM uDivine. Have you ever heard of a seller that sold at his quoted price? It’s a probability of like 1 out of a hundred.
So if you still think that the underlying reason for a seller to send you packing is because you are unable to meet the asking price, go do yourself a small favour. Call up your beefiest friend. Ask him to grab you from behind with a patented chokehold and squeeze the senses out of you until you wake up and smell the coffee.
On the topic of price, it is always negotiable. But instead of going with a low-ball offer, perhaps next time, you can try a slightly better offer but ask for more favourable terms in the transaction. As sellers do not want to lose face in front of their family members and real estate agents, they will want to get a respectable price on their properties on record. So as long as you can meet that price, they will be willing to compromise on the terms of transaction.
On a number of occasions the number one barrier preventing deals from happening is the fear of looking like a fool. From a buyer’s perspective, this is about paying too much. And from a seller’s perspective, this is about accepting too little. If you would just hold onto your ego for just a little bit and make a better offer, you will be able to eliminate this obstacle of “face-saving” from the seller’s perspective.
The thing is… we live in a competitive world. And somehow we have internalized the feeling of being scammed when one party appears to have the better end of the deal even though both parties reap considerable benefits from a deal.
Let’s just say a property owner bought his condominium at $500k a number of years ago. You then make a $1m offer for his property. A transaction like that will effectively make the owner $500k in profits. A 100% return. Is that a good investment or what? But hold on to that thought for a moment. What if the property has a value of $1.1m? in this instance, even though a 100% return is a finger licking windfall for the owner, by theoretically missing out 9% from $1.1m to $1m is akin to being a carrot that just got scammed by a con artist. How is the seller going to face his wife who will give him an earful over the dinner table, his friend who will dramatize his embarrassment over social media, and his property agent who just lost out on additional commissions?
So other than the big factor of price, there is a social aspect of every transaction that affects whether or not a deal can happen. And since it is now a seller’s market, the only thing that can fulfill this psychological need is to sell at a price that friends and colleagues will not have a laugh over at lunch time.
You might then think that if all that matters to a seller is a respectable price that clearly shows that he did not lose out, does that mean he can throw in his wife as a bonus as long as you fork out the cash? Well that is a tad extreme. But as long as you can put in a respectable offer, a seller will be favourable to compromise on the transaction terms that you want. The key is if you go in for the kill like an unleashed pit-bull, even if your offer is acceptable to the seller, he may not accept it for fear of appearing like a loser who just got preyed.
You job as a rookie property player is to let a seller feel safe from predatory buyers. Even though you are not one, just the simple perception of being one is detrimental to your chances of closing the deal. And when you are a rookie, a seller losing out to you just makes him look even more of a wimp.
This social play could be a psychological reason why buyers are snapping up new launches like durian puffs. If you are not aware, some 99 year lease hold mass market launches are selling higher than resale freehold properties. Since developers are selling uncompleted units at prices they set without having a reference point of historical price, buyers do not feel like the one that lost out in a price battle between buyer and seller. If anything, developers set their own reference point by indicating a price and later give considerable discounts to make buyers feel like they have a good deal as the final price is below the “market value”. It still remain a puzzle how anyone can value a property at ridiculous levels when it has yet to be built. But snapping up a unit at below “market value” give buyers the assurance that they have something about a big discount to boast about to their friends and relatives.
So next time before you decide that a seller is never going to sell, think about how the social aspect of the deal is going about at that moment. Things can totally change if you pull him to a corner away from the pressure in the spotlight, and make an offer with total conviction that you are not preying on his home.