Bargaining power
One of the essential aspects of purchasing a property is knowing whether there’s room for negotiation and how much below the asking price the seller would accept
Buyers should not be misled by reports about bargains because, even in this market, well-priced properties are selling the full asking price or close to it. This is especially true in the market below R1m where buyers are benefitting from an exemption from transfer duty, the low interest rate, and a favourable bank lending climate, but can extend to about R4m, depending on the area, says Samuel Seeff, chairman, Seeff Property Group. “When there are discounts, it’s only about 5% to 10% and it’s only really above the R4m price band where there’s some room for negotiation, but this is highly area dependent,” he says.
What’s a reasonable offer below the asking price?
Never assume that the seller will take a lower offer, even in a buyers’ market, says Seeff. “If you’re unable to afford the full asking price, it’s best to shop around for properties more aligned to your budget.” Factors leading to a seller considering a lower offer include the seller’s own needs and urgency, especially if there’s a shortage of buyers or the property has been on the market for a while.
When to offer 5% below the asking price
If you are a cash buyer or don’t have to sell a property first, the seller may well be willing to accept a lower price as it means that the transaction can be wrapped up quite quickly. “Likewise, if the seller has already put in an offer elsewhere, they may be willing to accept a lower offer to speed up the process,” Seeff says.
When to offer 10% below the asking price
For older properties with seriously dated finishes, a 10% discount could be considered, especially if the property has been on the market for a while. Another reason could be seller urgency due to relocation to another city or emigration. “A property that’s overpriced compared to peer properties in the area may also offer the opportunity for a 10% discount if the seller is motivated to sell, or if the property has been on the market for several weeks without much interest,” he says.
When to offer 20% below the asking price
Such a significant discount is rare in the primary market below R1,5m, but more prevalent in the market above R20m depending on various factors including the motivation of the seller. “Reasons why a seller may accept such an offer include the need to make a quick sale, or if the property requires significant work, or if he really just wants the property off his hands.” Another could be where the price is significantly higher than that of comparable properties because the seller wanted to “test the market” and it has now been on the market for some time with no offers.
Higher price bands
In Plettenberg Bay, Kevin Engelsman, Seeff licensee, says the market is robust. There’s been an influx of buyers looking to escape to the coast during the Covid-19 pandemic and sellers are achieving excellent prices. There have been two sales above R40m, both at full asking price. Engelsman warns buyers to be realistic. A recent buyer, for example, put in an offer of R35m on a R44m property, then upped it to R38,5m but still lost out to a buyer who paid the full asking price. Luxury areas such as the Atlantic Seaboard, Cape Town Southern Suburbs, Sandton, Pretoria East, KwaZulu-Natal North Coast, and coastal areas such as Plettenberg Bay, are all reporting an uptick in activity. Cape Town has seen a renewed interest from foreign buyers with about R175m in sales recorded over the last month, says Ross Levin, MD, Seeff Atlantic Seaboard and City Bowl. “Buyers are predominantly from the UK, Germany, the Netherlands, and other Northern-European countries such as France and Belgium, but also from Russia and there has been quite a few Zimbabwean buyers this year.”
When to offer more than the asking price
When there are multiple offers on the table, the seller will typically accept the highest offer. “If the property is in a great location and well-priced, your best chance to secure the property would be to offer more than the asking price,” Seeff says.