Madrid Property Negotiation: What to expect?
After the crisis, from 2016 the situation took a rapid U-turn and now 95% of all interesting properties have realistic prices which cannot be negotiated as much. Now property prices reflect their true value more and the buyer has to decide whether to buy a property at full or reduced price. For the best properties for their price range, which are the only ones we are interested in, the Madrid property market is a seller’s market now.
Some buyers think that real estate negotiation is like a property bazaar in some countries in Europe: you just turn up, name your price, bargain and might get lucky. This is not so in Madrid now. However, values are right and therefore there is reason why there is less negotiation possible – we are the right pricing levels in most cases to make a sound purchase.
1. Do not expect to negotiate 20 % down
We work in the real estate industry, here in Madrid every day and it is always the same. You never get a special or unique property all of a sudden with a 10-20% discount.
What you think is a “hidden gem” or “lucky find” is normally already widely available with a 10-30% bigger budget. There is no hidden gem.
Hoping for negotiation is also an illusion. Buying a property that is overpriced by 20% with a 15% discount is not really such a juicy deal. Buying full price, but at market value can be.
This is also a regional phenomenon: in certain countries negotiating is a must, a tradition almost. In others, it does not exist and is a somewhat uncomfortable process.
2. Look for property with real value, not fake discounts
Buying a property that makes no business sense unless you get a 15% price reduction is not realistic in a seller´s market. Buyers use valuations and analysis as tools to reduce doubt about the property´s real value. Contact us now if you need help finding out the real value of a property in Madrid, just ask us for a free consultation
Our objective is to maximise value and return. The portfolio of properties we have for our clients has an average 10% gross return, 40% after resale. Most of these are apartments with a negotiation margin of up to only 5%.
Mainstream buyers go after discounts. Experienced buyers and investors know how to recognise value where others do not then seize the opportunity anybody else does.
3. You can expect to negotiate up to 5 % discount on great value flats
Remember to expect up to 5% negotiation margins. We buy 8 out of 10 flats at full price because the price is great. A huge discount does not always mean that you will end up with a good price. The best bargains are advertised and sold within 2 weeks without any discount at all. But this is not a fixed rule either. So, if you see a flat on the market for 2-3 months, it does not mean that the property is absolute trash.
The price of apartments gradually lowers and when it reaches its target price it is usually sold. This maturity process can take months.
If a property is on the market for 3-6 months, the sellers are more willing to negotiate. However it means there is a defect the market does not appreciate, that you have to accept.
4. Do not always start negotiating with a 20% lower offer.
If a property is really great then you are likely to buy it at full price, 2 weeks after it was advertised. If you are after a real tasty titbit, go ahead and full on negotiate the leftovers of other buyers.
The first 2 or 3 offers for the 3 properties we are going to negotiate will be rejected. Set your target price and create 2 or 3 decremental offers from that. Decremental means that each new offer has a lower increase than the previous one. So 10,000 more, 7,000 more, then 4,000 more. This is a general rule, always increase 15-30% less than your last bid. For example: a property is listed at 130,000 Euro and you want it for 115,000 Euro. Start at 98,000 Euro then 105,000 Euro, then 108,000 Euro and then 110,000 and see how they react. Note: start a touch below an obvious price; do not use nice round numbers.
Win-win, always. If the seller feels like they are losing at any time, they might not only fail to reduce the price, but could walk right away from the negotiation table. This is the worst thing that could happen. For a clear overview of the whole buying process check out our 5 Steps to Buy a Property in Madrid.
Think! Do not negotiate for negotiation’s sake. Seal an intelligent purchase instead. This could mean buying a property at full price without a single cent discount. Evaluate each case and don’t let experience create patterns that don’t really exist. Each case, each property, each seller is different and unique.
5. CONCLUSION: Get ahead of mainstream buyers and seal an intelligent purchase
Spain´s property market has really changed since 2016 and is more and more a seller´s market. But there are still of course plenty of opportunities for buying great value properties at reasonable prices. The key to effective negotiating is understanding the true value of a property and carefully aiming for the best price possible.
If you´re looking for a property in Madrid and need help with the whole negotiation process, contact us at firstname.lastname@example.org or request a free consultation.