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Old 11.03.2012, 18:11
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Buying Property in Seller's Market (bargaining)

Hello fellow members,

In roughly a year or so we should be on the market to buy property. I am starting to research the topic and have some early questions, hopefully those of you who have gone through the exercise can share some experiences.

1) The market is clearly seller driven, the buyers have limited choice and little say. In these conditions, how does bargaining go? Is the price announced open to discussion? Within what limits? 5%? 10%? More?

2) Financing - we have contributed regularly to our 3eme pillar - when buying property are we obliged to withdraw this in favor of the bank or can we use as collateral, i.e. keep them where they are as guarantee?

3) Reading prices - when you see a listing, does the quoted price usually include all fees (regie, notary, transfer of property, etc), or is this net-seller, whereas all fees are on top? If net-seller, what is the typical % one should include in the plans for ownership?

Any other advice or tips are more than welcome.

Cheers!
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Old 11.03.2012, 18:38
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Re: Buying Property in Seller's Market (bargaining)

1. It depends.

How hot is the neighborhood? How many people are interested? How long as that property been on the market?

To give you an idea of how extreme it can get: I looked at one property that was listed for 1 million and change. There were at least 50 bidders, one round closed bidding. We were told that bids under 5 million would be laughable. Don't know the final selling price - rumor has it well north of that 5 million.

This was an decrepit but historic old farm house in the Höfe are of SZ, the kind of thing that comes on the market once in a lifetime. Restricted usage, limited renovation allowed - nonetheless, highly sought after.

I've seen other properties where 'negotiable' (Verhandlungspreis) is listed; unlike in the US, that usually doesn't signal that sellers are willing to go down, rather that you should bid up.

How much to bid up? Who knows - 10%? 50%? There really are few guidelines, you have to assess each property individually. Here your bank can be of help.

In less attractive areas, you may well get the property for the selling price - or less if there are no others interested.

If you think the asking price is ridiculous, go with your gut feeling and offer something lower. Worst case you'll be told to go away. Which might not be such a bad thing - as it's far too easy to get caught up in the emotion and competition, and make hasty decisions.


2. Sorry, no idea. But you should nail down your financing quickly - as the sellers may not wait while you try to do so. Start by having a discussion now with your bank so that you understand how much you can borrow, and what the process is. Then when you find something - be prepared to move fast.


3. Usually price listed is the sale price only. Fees will vary by canton. Here again you should speak with the bank so that you understand what is normal in your area. The Gemeinde notary can also give you a rough idea.

Be aware also of the reservation deposit. This also varies by canton. In SZ you will be expected to put 10% of the sale price into an escrow account when you sign a 'Vorverkaufsvertrag', a promise to sell/buy contract. Some sellers are now asking for an additional reservation fee, usually 5 figures, even before the Vorverkaufsvertrag. The rest of the selling price is payable when the sales contract is signed. Both should be done with a notary. So figure that into your necessary-cash-on-hand discussion with the bank.


Good luck - and keep a cool head. When in doubt - walk away.
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Old 11.03.2012, 18:39
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Re: Buying Property in Seller's Market (bargaining)

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Hello fellow members,

In roughly a year or so we should be on the market to buy property. I am starting to research the topic and have some early questions, hopefully those of you who have gone through the exercise can share some experiences.

1) The market is clearly seller driven, the buyers have limited choice and little say. In these conditions, how does bargaining go? Is the price announced open to discussion? Within what limits? 5%? 10%? More?

2) Financing - we have contributed regularly to our 3eme pillar - when buying property are we obliged to withdraw this in favor of the bank or can we use as collateral, i.e. keep them where they are as guarantee?

3) Reading prices - when you see a listing, does the quoted price usually include all fees (regie, notary, transfer of property, etc), or is this net-seller, whereas all fees are on top? If net-seller, what is the typical % one should include in the plans for ownership?

Any other advice or tips are more than welcome.

Cheers!
Talking from our experience only:

1) Bargaining ! We always offered 10% more than the price requested hoping the seller would pick us, and we lost 5 houses before we bought our current place which we ended up paying 15% extra cause we loved it so very much and really wanted to buy it. If you are looking for a charming place with a view , well connected and not less than 150 sq.m renovated kitchen and toilets then your offering more than requested !! usually 5-10% unless it`s really a great place then you can go up 15-20% (if your bank agrees) . If your looking for a new place built as part of those huge new projects , they are usually first come first buy , then you might bargain on the price of 2 garage spaces for the price of one or something within that range but really not much ! (I`m speaking about ZRH don`t know much about other cities in CH)

2) yes, you can do that ! We did that with UBS and got the offer showed it to ZKB and they matched it.

3) Requested price usually is only for the price of property! and it really depends where you are buying ! One of the houses that we almost bought the notary was around 4% !!! crazy ha!! The place we ended up buying was 4 francs for each 1000 francs of the price ! So really it depends where and from who you are buying!


Last advice, I think it`s a bad time to buy.

Good luck,
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Old 11.03.2012, 19:26
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Re: Buying Property in Seller's Market (bargaining)

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Hello fellow members,

In roughly a year or so we should be on the market to buy property. I am starting to research the topic and have some early questions, hopefully those of you who have gone through the exercise can share some experiences.

1) The market is clearly seller driven, the buyers have limited choice and little say. In these conditions, how does bargaining go? Is the price announced open to discussion? Within what limits? 5%? 10%? More?

2) Financing - we have contributed regularly to our 3eme pillar - when buying property are we obliged to withdraw this in favor of the bank or can we use as collateral, i.e. keep them where they are as guarantee?

3) Reading prices - when you see a listing, does the quoted price usually include all fees (regie, notary, transfer of property, etc), or is this net-seller, whereas all fees are on top? If net-seller, what is the typical % one should include in the plans for ownership?

Any other advice or tips are more than welcome.

Cheers!
Speaking as someone who recently sold our property (in Jan) I can tell you what I did to make sure that people did not go under the asking price and could understand why we were asking what we were asking.

We got a valuation done - these are less use than you may think - the lowest and highest figures were 120 000 Chf apart! Now I know it is common to claim a, say, 5% either way, but this was a huge variation.

We got the bank to look at what they too would value it at .. because most buyers are buying with a 80% mortgage, so if the bank thinks it is worth less than you are selling it for, you need to be prepared to reduce the price if you only have buyers who are buying with the maximum mortgage. A bank won't lend more then they think it is worth.

Finally, I worked out how much the house had cost to build (it was built only 10 years ago) and how much had been spent on it since then. Believe it or not, this is a quite commonly used tool for assessing valuation! So even though it makes no sense to me, it sure rings bells with a lot of buyers out there!

So, turning it round for you as a buyer, I would ask the seller how they fixed the price. I would ask the seller how can they support the price they are wanting (valuation/comparisons in the area etc). I would have done my homework with my bank asking them for an indication of whether they would lend on a house at this price. And if the house was new, or relatively new, I would be asking for sight of the amount the house cost (or at very least a verbal indication) to build and indications of subsequent expenditure.

As a buyer, I would always have my bank on board before I viewed a property. We had 3 people offering the same price on the viewing OpenDay and went with the couple who had the bank all lined up.

At the end of the day, it depends where you are as to whether you can get away with much bargaining, if any. Here in BL I would not say we are a property hotspot, but our house sold in 3 days and we had 3 parties bidding for it. We also had 2 other parties asking how low we would go, so we were very glad to have got all our documentation sorted out demonstrating how we had calculated the price and also glad to be able to say "even if you don't think it is worth that much, 3 other people do and this is the price we are sticking to". It was clear these 2 parties could not afford the asking price but had come along hoping to buy for a reduced price. Those days, even in Baselland, are over for the timebeing.
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Old 12.03.2012, 11:06
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Re: Buying Property in Seller's Market (bargaining)

I would check out on say comparis.ch for how long the object has been on the market (and google around for it, sometimes ads are removed and then re-inserted later to "break" the history). Checkout the median prices for the locality on comparis.ch. Also, involve your bank, in particularly if you're trying to get a 80% mortgage. In Geneva you have to add ~5% of notary/state/registration fees on top of the price.

I would not over-bid unless the price is clearly below market prices. You may regret it later. (And your bank may not follow you). Keep in mind that you're liable for the full buying price despite the fact that you may be only putting a 20% capital down.

I completely agree with the previous poster that it's a bad time to buy... really bad time to buy anywhere near Geneva. Later this year, and as requested by the SNB, the federal council will consider measures for driving down the real estate overheating... this may have a significant impact on the price evolution. (I've read that increasing the minimum amount of capital and decreasing the age limit from 50y to 40y for 2nd pillar retirements are two of the options being considered.)

Last edited by gva; 12.03.2012 at 11:17.
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Old 12.03.2012, 12:02
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Re: Buying Property in Seller's Market (bargaining)

Where are you trying to buy, Geneva? Vaud? In my area (la cote) in the 1-2M range negotiation is around 5%, sometimes more if the property has been unsold for morethan ~1-2 months. More than that is unlikely.

This price deduction is pretty common in Romandie. Sellers and buyers know that.

Btw be warned from unreasonable prices. My neighbour is trying to sell his townhouse for 1.55 M CHF, since 4 months, I know that he would accept an offer for 1.45M but nothing yet received.. For 140m2 it's still a hefty price..

As posted before, checkout comparis!
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Old 12.03.2012, 12:17
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Re: Buying Property in Seller's Market (bargaining)

I have to say that it's refreshing to read a thread about selling/buying houses that's accurate and reflects what actually happens.

There was one a couple of years ago where everyone wrote that the advertised price was always the price that was paid and bargaining was not done in Switzerland.
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Old 12.03.2012, 12:37
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Re: Buying Property in Seller's Market (bargaining)

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I've seen other properties where 'negotiable' (Verhandlungspreis) is listed; unlike in the US, that usually doesn't signal that sellers are willing to go down, rather that you should bid up.

How much to bid up? Who knows - 10%? 50%? There really are few guidelines, you have to assess each property individually. Here your bank can be of help.
Bidding up? Not heard of this over here. Unless you're a money-laundering khazakh princess in Cologny, that is.

Maybe cultural but romands (and french!) keep their negotiation margin priced in the asking price. Which is anyway over-valued by 10-20% these days, thanks to the low Libor...
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Old 12.03.2012, 13:12
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Re: Buying Property in Seller's Market (bargaining)

Guys, first of all - thank you all for the great input!!! So many good tips (special thanks to @ecb)!!!

As mentioned, we are at least a year away from actual purchase, so I am very much hoping the prices improve until then - c'mon FedGov, do your thingie and drive those down

I have a meeting booked with our bank this week - hopefully the perfect credit history with zero delays, full payment on time, always + balance, etc will give me brownie points.

We have long given up the idea of a "hot" property or location - especially those with lake view, commanding 20-30-40 and more % premium for a glimpse of the lake. Right now, I am seeking the exact opposite - if we can have "zero lake view", but good neighborhood, infrastructure, access to public transport and the likes, would be nice.

Spoken to a colleague, he implied that "the regie is your best friend" in the sense that 99% of sales go through these leeches. Is that really the case?

Another follow-up question I have (which is on the list of Q for the bank nonetheless) is - in case we decide to buy a smaller apartment as an interim step - do you think this is a wise step? Imagine this scenario - rather than a house which will just do, go for an apartment which is normally 20-30% cheaper than a house. Then, keep saving for the coming 5 or so years and sell apartment + add savings towards a house to our liking. We should have more moolah in the bank, no pressure to find house and already have track record on our apartment mortgage to show to our bank. The idea behind is really simple, in case the market keeps climbing, we actually have something that (should in theory) climb in value with the market. Assuming this is true, we would in a sense be investing or rather, protecting the savings we have.

Would be great to hear your thoughts on above solution

Again, thank you for the comments and tips - much appreciated!
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Old 12.03.2012, 13:46
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Re: Buying Property in Seller's Market (bargaining)

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in case we decide to buy a smaller apartment as an interim step - do you think this is a wise step? Imagine this scenario - rather than a house which will just do, go for an apartment which is normally 20-30% cheaper than a house. Then, keep saving for the coming 5 or so years and sell apartment + add savings towards a house to our liking. We should have more moolah in the bank, no pressure to find house and already have track record on our apartment mortgage to show to our bank. The idea behind is really simple, in case the market keeps climbing, we actually have something that (should in theory) climb in value with the market. Assuming this is true, we would in a sense be investing or rather, protecting the savings we have.
I think it's a bad idea.

I don't see how prices will sustain over the next 5 years at present levels. They are reportedly stagnating in Geneva area after the hike in 2010-2011. Given that interest rates are at the floor, they only can climb up which will impact pricing. Also, don't forget that you have to pay 5% notary fees not only over your capital BUT the total loan amount.. and not to forget the capital gain tax (if any) which can be hefty.
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Old 12.03.2012, 13:56
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Re: Buying Property in Seller's Market (bargaining)

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I think it's a bad idea.

I don't see how prices will sustain over the next 5 years at present levels. They are reportedly stagnating in Geneva area after the hike in 2010-2011. Given that interest rates are at the floor, they only can climb up which will impact pricing. Also, don't forget that you have to pay 5% notary fees not only over your capital BUT the total loan amount.. and not to forget the capital gain tax (if any) which can be hefty.
You are right, we'll have two times the buying 5% fees, so in essence any savings we would have done will vanish in fees.
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