[thezorbster]

Seen a house we really like but feel it's over priced in comparison to others. We find it quite awkward as it's a private sale so we are dealing with the actual owners who are a really nice family. Would feel a bit embarrassed putting in a pretty low offer as we don't want to insult them whereas if we were dealing through an agent it wouldn't feel so bad as you don't have that third person in the middle. We definitely don't want to pay what they're asking but are unsure how to start negotiating. Anyone else been in this position?

[Tia Maria]

We haven't bought privately but some negotiating ideas:

1) Get a professional inspection and valuation done as a starting point to establishing the correct price.

2) Point out they are saving on estate agants fees (4% round our way)

3) Make your offer attractive in other ways, quick sale or at their pace etc

4) Play good cop/ bad cop, one of you makes the offer and says, 'sorry my husband/wife won't go any higher', its easier to blame it on someone not there!

5) Let them know which other properties you quite like the look of, hopefully they will go an see what else is on offer in their price range and realise they are overvalued.

6) Ask them how they came to the price - did an agant value it or a valuer? Check out the CV and if its a lot above, ask why?

7) See if they can add value for you, which makes paying extra, worth it - white goods, quick sale, drapes etc Also check carefully what is included already, before you buy and get this confirmed in writing.

8) Most people will consider your first offer as the start of negotiations and not your final offer, so factor that in to any initial offer. We didn't do it that way, we went in with one offer, take it or leave it, but that is quite unusual.

Good luck!

Cheers

Tia

[victoria]

Tia is spot on with her suggestions. The first offer is always a starting gambit here. No need to feel embarassed & as you say, they're nice people. Good luck.

[Moorf]

Hi - can back up Tia's suggestions.

We've bought both our houses here via private sale - one via Homesell and the other via TradeMe.

We found the hardest thing was being face to face with the sellers during the process and, as they were both lovely couples, being somewhat coy about offering lower than they wanted (as a starting point).

As Tia said - both purchases were smoothed along by us being as co-operative and quick as possible in the process. We also had a great solicitor (same one in both cases as he's so thorough) who advised us through the process.

We also did the "good cop/bad cop" scenario, I would keep out of face to face $$ negotiations after it was "official" and Warren would go round to talk face to face (I get too emotional!) and he'd ring me while with them and I could then say what I felt and he'd relay his "picky wife's" thoughts!! Worked well....

We got very friendly with our first vendors which was a bit of a mistake if I'm honest - we went round to dinner with them etc, - subsequent house reports were done on the house and and we had to go back and negotiate based on some work that needed doing. It was sorted amicably as we were open and showed the reports to them etc and discussed how they'd get it done etc.

Stand firm, stay professional yet friendly and remind them of the saving's they're making selling it without an agent ;)

Good luck
Moorf

[thezorbster]

Thx for your suggestions. OH will definitely have to be the negotiator. Viewing a couple of other properties in that price range this week just to compare what each has for the same asking price but properties are all so different it's very hard to make comparisons. Watch this space!

[uk_munros]

Hi
we have just done exactly what you are about to do - hope its not the same house LOL!

My advice, get evidence to backup your offer. We got an agreement signed at near the asking price but it was subject to building inspection, lim and finance (which includes a valuation for the bank). Then once you have those reports in place you can use them to renegotiate the price. Also you get a better idea of whether your feeling that it is overpriced or not is realistic.

We were dealing with a really nice family and it felt awful to negotiate, but you have to do it to protect your own interests - especially in a falling market.

[PeterNZ]

I am on the other end. We are selling privately and I always wonder why people would behave differently! Why would it be an insult if you put your offer on the table in their own kitchen so to speak or if you would put it on the desk of a Real Estate agent?

One note about the GV. Tia said "Check out the CV and if its a lot above, ask why?". I guess she meant GV (Governmental Evaluation). And even this is now incorrect since it changed in 2005 to "Rateable Value" RV. Sorry, but most people do not know what the GV is! It is a statistical value based on the average house sales in your area. It does not take into account the improvements you have done etc. It takes your property size, the number of bedrooms etc. and compares it to other houses in your area. Nobody will come and inspect your property to calculate the GV. You might have some run down houses in your street which sell really cheap. They will lower the GV in your area. Or you have very high priced properties selling for a lot of money and you GV goes up. And usually it goes up because the rates are based on this statistical evaluation.

Here is a good web page which explains the RV: https://www.qv.co.nz/faqandsupport/valuationfaqs.htm

There it says:
How are RVs assessed?

By reference to all of the sales that have occurred in the district prior to the valuation date, and with regard to current building costs. QV Rating is notified of all transactions and we inspect and analyse many sales prior to setting the rating valuations. This process involves researching low or high sales to determine whether or not they are true market sales.

In terms of inspections, emphasis is given to hotspot areas i.e. those where there is significant movement or where special features may influence property prices, e.g. beachfront properties.

In general, capital value is assessed by comparing the property to sales of similar improved properties, while land value is assessed by considering sales of similar unimproved properties. The value of improvements is assessed by subtracting the land value from the capital value i.e. capital value - land value = value of improvements. Depending on the market situation, the value of improvements may vary substantially from the cost, or cost less depreciation, of the improvements.

I am always getting a bit inpatient if people say "But the GV is only x$, why is the price so high?" Well because the GV or RV or whatever has nothing to do with the real value of the property!

Cheers

Peter

[Tia Maria]

PeterNZ, from the North Shore City Council website:

Capital Value Is an assessment of the probable price that would have been paid, including land and buildings, for the rating unit if it had been sold on September 1, 2002(date of last revaluation).
It is not the market value for a rating unit.
The Capital Value does not include chattels, which will need to be added on when estimating an appropriate sale price.
Previously known as the Government Valuation.
You can object to the value recorded during the period specified on the notice of valuation.

I agree it doesn't always reflect the price the property the house should sell for, there was a thread about it recently:

www.emigratenz.org/forum/showthread.php?t=14242

I would always ask an agent to explain why there was such a difference, if the asking price was a lot higher than the CV, as it often is round our way! In the same respect the agent always uses it as a selling point if the price is close to the CV.

Whether, you like it or not, from a buyers perspective, it always feel safer to not pay a lot over the CV. I was talking to an agent the other day who explained that you can have your CV re-assessed by the council if you have completed building improvements, ther upside being you will find it easier to sell, the downside being you will pay higher rates.

PeterNZ wrote:

We are selling privately and I always wonder why people would behave differently! Why would it be an insult if you put your offer on the table in their own kitchen so to speak or if you would put it on the desk of a Real Estate agent?

I think most buyers are aware you are buying someone's home from the owner, as opposed to buying a house from an agent. You might want to say how much you hate the kitchen and therefore, will need to put in a new one and that your offer reflects this. This is very easy to say to an agent but not so easy to say to the person who installed the kitchen!

Also, as you mentioned yourself:

I am always getting a bit inpatient if people say "But the GV is only x$, why is the price so high?" Well because the GV or RV or whatever has nothing to do with the real value of the property!

However, this kind of question wouldn't bother an agent, so that's why people behave differently.

Good luck with your house sale, a friend of ours sold privately recently and got a really good price with no agent fees!

Cheers

Tia

[james the mechanic]

Hi there,
We considered several houses for sale by owner, I think Tia,s negotiating tips are excellent, & so is munros, bluff is the king of negotiation! all I have to add is the following…
You want to buy their house, not their friendship, they need you to feel that they are your friends in order to sell their house to you, that’s how the game works. Unfortunately in order to buy their house for the keenest price, it is in my opinion unlikely that you will do so without insulting them to some degree. However if they are sensible people, they will understand that its just business and you might end up as friends to boot! In my experience (&imho) its far easier to thrash out a deal without a lying, cheating agent in the way.
Best of luck
James

[PeterNZ]

Well the problem is, that house prices are based on market prices. Our property is around NZ$200,000 over the GV! So if you would ask me now why that is, what can I tell you? House prices went up? We did improvements? Would I have to explain to you in all detail what the GV is, what it is based on and why our listing price is different? And wouldn't you still think "He wants to rip me off!" I would wish they stop using the RV or GV or however it is called. And of course you could say now it is my perspective as a seller. But honestly, I don't give a damn about GV when I am buying. The GV is a tool for the regional councils to define the rates. That's all it is to it! To determine the value of a property it is absolutely useless in my opinion!

Another example, our neighbor farm sold for double the GV recently! Why? Because dairy prices are going up, people want to buy dairy farms. Market price!

So what is it worth to talk about GV?

Cheers

Peter

[IanW99]

Sorry Peter, not sure that I agree with your argument?

The RV is effectively the price that the council thought that your property was worth when they did the assessment. If they set this value too low because you have done improvements then you could have got this value revised (of course if you did, then you would have to pay more rates).

Although they obviously use statistics to determine prices, they will visit a property if the owner reports that the valuation is wrong and adjust the value if they agree.

The RV is still a reasonable indicator of the properties worth, if similar houses in the same street have all risen by 20% above RV and the sale price on your property is above or below this value then there must be a reason.

Agreed that you shouldn't use the RV to determine the price that the property is worth, but it is still a useful guide, before you have a valuation.

Your example of a farm doubling its RV, I would assume that all dairy farms have increased by a similar amount, so again if the one I was buying was much more than this, I would want to know why?

RV is also useful so that you know how much the rates are going to be on your new house.

Ian