Many people find this to be one of the most stressful parts of the whole project.

However, if you approach it with the right attitude, then negotiating a “purchase price” for land or property can actually be a very interesting “activity” which, if you get manage to get a good result, can leave you feeling “rather pleased” with yourself!  

Good negotiating can also mean the difference between making a good profit at the end of a job, and making a loss.

One thing you should make NO mistake about is the fact that this IS an important part of your project. – Many people think that the project begins when you start the “Planning” work. – It doesn’t! – It starts when you either stand face to face with the seller of the land or property to discuss a price, or, when you sit down and decide what figure to tell the Estate Agent you would like to offer.

Every penny you can save by these negotiations is REAL MONEY! – People tend to see the figures which you go through in negotiations as somehow being “just figures”. They are not! - They are REAL MONEY! - Money which you could take and spend at the restaurant or the pub, or on a holiday or car!

 How many times have you (or someone you know) discussed the price they paid for a property?

The conversation sometimes goes along the lines of: “Well they were asking £250,000 but we had a chat and haggled them down to £220,000”. – BRILLIANT! – Those people just made as much REAL money in a 5 minute negotiation as they may usually earn in a year! - But they often don't realise it!

A standard negotiation for a property with an initial asking price of £250,000, but which has been on the market for 6 months, could go along the lines of either of the following:

 OR, it could go like this:

“No problem”.

 

The strange thing about that conversation is that, at the end of it, both sides actually think they have won! - But in reality the guys who just paid £27,000 less than the people in the first example, won BIG TIME!!! – £27,000 is a lot of money! – Pile it up in “fivers” and look at it sometime!!

If those people had not taken the trouble to “haggle and negotiate” (which many people don’t) they would be literally throwing £27,000 - into the bin! – That money, negotiated in less than 5 minutes, could now buy them a beautiful kitchen, two lovely bathroom suites, and re landscape the garden! – Possibly actually having the effect of adding £40,000+  to the value of the finished property! – So in fact they win TWICE!

Also, our brains somehow just tend to see that figure of, say the £27,000 as A “£” sign, a 2, a 7 and some zeros”.
We don’t think:  “Good grief” (or words to that effect) - “That’s next month’s salary, - and the following month, and the month after that, - and the one after that ...... and so on!

How many times have we had to get early in the morning, get ready - and go out into the cold or wet, to spend a day in work, facing all the pressures that come with our jobs, - to earn £27,000? – Normally quite a lot!!

So, the first thing I am obviously trying to get over here is that the financial negotiations are VERY IMPORTANT, and you need to try to see the figures that you are negotiating with, as what really they are: NOT just figures, but REAL MONEY, and more importantly, YOUR REAL MONEY!

 You may think I am labouring a point here, - but after many years in dealing with Self Builders and Renovators, and seeing how they approach negotiations, I think it’s worth labouring the point a little to make sure it hits home!

 

I was acting as a Project Manager for a client, advising him through the whole process of finding and buying land, then building the house.

We found some nice land for £200,000. – Very expensive in those days, but the area was good and it was about “market value”. - My client asked me what he should offer?

I had seen this land for sale for around 5 months and it was still there. - Maybe no one who had that sort of money had seen it, or maybe there was a problem with it that was making some people nervous.

I suggested that if he wanted to make an early offer, he should “start very low and work up” (I didn’t get the feeling from the Agent or the seller that we were competing with anyone at that time).

He suggested £180,000, but I said “Let’s try £130,000 to start. - It’s been here for a while, and the owner might be starting to need the money. - You can start with £130,000. - The agent will make the call, get it turned down, and you can raise in £10,000 increments up to maybe £180,000”.

I made the offer for the client, and it was accepted in 10 minutes! – We saved £70,000 on the asking price!

The house didn’t cost him much more than £70,000 to complete, so by me and him standing and discussing for “literally” a couple of minutes, how we can try to get the best deal for the land, - we basically got him his house pretty much free of charge! – THAT is how important price negotiations can be!

The first thing to do is to read the previous sections of this guide which give you a rough idea of how to work out how much you should “aim to pay” for the land or property.

The next step is to “come at it from the right angle”.

What I mean by this is that you should try to see this part of the process, Not as “your first step to getting your dream home”, but as a straightforward “Business negotiation”.

Many Self Builders and Renovators tend to get “emotionally involved” with the land or property that they have found. - Once you have found a plot or property which suits you, it’s hard not to start to imagine yourselves living there, - with it all finished and the sun shining, and everyone with smiling happy faces! – It’s quite natural. BUT, when you are negotiating to buy it in the first place you need to try to see it with “different eyes”.

Try to imagine that it is not actually you who is buying the land or property, and that, in fact it’s a good friend of yours.

This friend has asked you to give them advice and help them with the negotiations. – You want to do the best for your friend, and you don’t want them to end up buying “a lemon”, so you try to give them unbiased advice, which is easier for you (as their friend) to do because you are not “emotional attached” to it.

If you can put yourself into that frame of mind, you could well get a far better deal on the purchase, than if you approach it saying “We love it and we’ve just got to, GOT TO have it!” – At any price!

By separating yourself emotionally you will be able to “see” all the factors which you NEED to take into consideration if you want the project to succeed financially.

Then, when you are standing discussing the price with the owner or the agent, you can think more clearly and point out to them the fact that (for example) there is “knotweed” on the site, which you have priced up to remove - and it’s going to cost £8,000.

Or, that you “Checked the position of the building line and in fact it is quite far back on the plot” which means that “no one is going to be able to build a very large property”, and therefore “The asking price as it stands is just TOO high compared with the completed value of the project”.

If you can get the seller to see that they will have the same arguments from anyone with any sense who is thinking about buying the land, they are more likely to listen to you, and maybe lower their expectations for a selling price.

Once you have separated yourself emotionally from the negotiations, you can then bring into your thinking, other factors which may help you to bring the price you actually pay, down:

These negotiations can all take place within an hour or so, even through an agent. If you make an offer, then the Agent will call the seller. The seller may say “No”. - The Agent calls you back. - You increase by £5,000. - They call the seller again. – This process can go on for half an hour or so, and as long as you don’t come over as being stupid, and a time waster, then it can be a very successful half an hour!

If you are in a position where you already have the funds and can start the legal side of purchase straight away, you can also use that to your advantage. - By suggesting to them that they could have the money in their bank in 4 – 6 weeks, “earning interest”, you bring into play a very powerful bargaining tool. – If you have had your mortgage agreed in advance you may well be in a position to do this.

Think, all the time about the “£ notes” which I mentioned at the start of this section.

If you are pretty much in agreement on a sale price that you are happy with, and you know the negotiation is almost over, just try saying: “OK. - Well I think we are nearly there now.-  If you come down another £2,000 we’ll go for it and start the ball rolling on Monday”. – In a conversation for a £200,000 piece “Real Estate”, £2,000 is nothing, and just “rolls off the tongue”! - BUT if they say “Oh go on then, -as long as you will contact your Solicitors as soon as possible.” – Great! – You have, in 10 seconds just paid for a nice new bathroom suite! – If you had kept your mouth closed, you would not have that extra £2,000 staying in your pocket.

1) Try to be professional and emotionally “unattached.

2) Know the facts and use them to your advantage.

3) Try to put yourself in the strongest position from which to negotiate by being able to offer something which other people may not be able to (e.g. quick completion ).

4) Think about every £1 in your negotiations, as being TORN from your pocket!

5) Start low and work up, - as long as you don’t risk losing the deal to someone else who may “nip in”, in the middle of your negotiations.

5) When you think you have got a good deal, - just push for a little extra. – But not TOO hard.
 

 Finally: Try and keep it all friendly. - If the seller likes you, they will be more likely to want to sell their land or property to you. - So show that you are “nice people”, and that you want to come to a “friendly agreement” and “work together” with them.