Negotiation, Negotiation, Negotiation

UK Property Investment news and comments from Mark Harrison of YourPropertyExpert.com

It’s a buyers’ market?

Posted by markharrison on April 16, 2007

I was speaking at an event a couple of weeks ago, and someone asked a question.

“How can I get a property cheaply when there are 5 buyers for every seller?”

I was faced with two different approaches to answering the question:

  • Tell them that the “buyers to sellers” argument was flawed
  • Tell them the “buyers to sellers” argument was irrelevant

On the day, I took the second approach:

It doesn’t matter that there were a lot of buyers out there – if the vendor is holding out for the best price, it doesn’t matter whether there is one buyer prepared to pay more than you, or fifty – they will get a higher price than you’re prepared to pay.

On the other hand, if the vendor is wanting a sale very fast and you can offer that, then it doesn’t matter whether there is one other buyer who would take 8 weeks to complete, or fifty – none of them will be fast enough…

… or if the vendor wants to sell and rent-back from you, it doesn’t matter if there are 50 other people who would like to buy the house to become their home.

The key to buying Below Market Value (BMV) is that you have to find vendors whose situation means that they are looking for something other than the best price, and then be flexible enough to offer that.

As for the “buyers to sellers ratio” – that’s fundamentally flawed – by definition there is one buyer per seller (co-buying excepted of course, but co-selling often comes up particularly in divorces).

Counting potential buyers is fraught with problems, since it’s not a “number” – it’s a “function”. The “input variable” to the function is the “price desired.” Namely, in my street, there is a six-bed house for sale with an asking price of £485k. At that price, it will take a couple of months to sell, since there aren’t many buyers wanting houses that big who are prepared to pay “market value”.

Were the vendors in a hurry, and to drop the price to £385k, then there would be a queue of people down the road, and they’d have to make viewings a tickets-only event – heh, at that price, I’d consider buying myself and flipping…

… but it’s not on at £385k, it’s on at a fair market value, with a vendor under no time pressure. So, I won’t be buying today…

2 Responses to “It’s a buyers’ market?”

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