Madrid Property Negotiation: What to expect?
Read this article to learn what to expect in your Madrid property negotiation and the best strategy to secure your investment property in Madrid.
Current Madrid real estate property market trends
After many years of decline, Madrid real estate prices rose 31.68% between fourth quarter 2016 and fourth quarter 2018. They stabilized in the first half of 2019. Heading into fourth quarter 2019, all the interesting properties are priced realistically, meaning there is little room for negotiation. Now property prices reflect their true values. For the best properties in their price range, which are the only ones we are interested in, the Madrid property market is now a seller’s market.
Madrid property negotiation in 2019
Some buyers think that Madrid property negotiation is like shopping a Middle Eastern souk: you turn up, name your price, bargain and will eventually get lucky. This is not the case. Properties are fairly valued, so little negotiation is needed, or even possible. In most cases, the pricing is right to make a sound purchase.
Moving2Madrid’s expert tips for negotiating on Madrid property purchase
1- There are no hidden gems
We work in the real estate industry, here in Madrid. Every day we see the same situations. No one suddenly gets a special or unique property with a 10-20% discount. What you think is a “hidden gem” or “lucky find” is normally widely available, but only if you increase your budget 10-30%.
2- Do not expect to negotiate the price down 20%
Hoping for negotiation is also an illusion. Buying a property that is overpriced by 20%, and negotiating a 15% discount, is not actually a good deal. Buying full price, but at market value, can be.
3- Beware of cultural differences
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. The later is true in Spain.
4- Look for properties 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. Sophisticated buyers use valuations and analysis as tools to determine a property’s real value. To put it another way, mainstream buyers go after discounts. Experienced buyers and investors know how to recognise value where others do not, then seize the opportunity others fail to see.
Contact us TODAY if you need help assessing the real value of a property in Madrid. Simply book a free consultation and we will get started!
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 carry a negotiation margin less than 5%.
5- You can expect to negotiate up to a 5% discount on great value flats
Remember: in Madrid property negotiation, expect negotiation margins up to 5%.
We buy eight out of ten 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 two weeks without any discount at all. But this is not a fixed rule either. So, if you see a flat on the market for two to three months, it does not mean that the property is absolute trash. The price of a flat gradually lowers until it reaches its target price and then is typically sold. This maturity process can take months.
6- Look for properties with defects
If a property is on the market for three to six months, the sellers are more willing to negotiate. However, this means that if the property has a defect the market does not appreciate, you will have to accept it.
7- Negotiate in increments, not all at once
If a property is really great then you are likely to buy it at full price, two weeks after it was advertised. But, if you are after an apartment with a defect, there is more room for Madrid property negotiation. However, we recommend you do it with finesse.
We typically choose a short list of three properties for our clients and negotiate them simultaneously. The first two or three offers for the three properties will be rejected. Then, we set our target price and create two or three decremental offers from that.
Decremental means that each new offer has a lower increase than the previous one. For example, the first offer from the target price would be 10,000€ more, then 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€ and you want it for 115,000€. Start at 98,000€, then offer 105,000€, then 108,000€ and then 110,000€ and see how they react.
Finally, we recommend you start a touch below an obvious price- do not use nice round numbers.
8- Always make the seller feel like they are winning
If the seller feels like they are losing at any time, they might not only fail to reduce the price, but could walk away from the negotiation table. This is the worst thing that can 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 past experiences in different markets create patterns that don’t really exist. Each case, each property, each seller is different and unique.
CONCLUSION: Get ahead of mainstream buyers and seal an intelligent purchase
Spain’s property market has changed greatly since 2016 and is now a seller’s market. But there are still plenty of opportunities for buying great value properties at reasonable prices. Remember, the smart money doesn’t negotiate for negotiation’s sake. The key to effective negotiating is understanding the true value of a property and carefully aiming for the best price possible.