How Low can you Go?

To the casual observer, the Tenerife property market at the moment may seem like a placid sea with not much happening, but don’t let this fool you.  Beneath the surface is a seething turmoil of offer and counter offer as bargain hunters and vendors do battle over sale prices.  But for many, the hard fought day ends in disappointment as buyers go home empty handed and sellers settle back to wait for the next offer.    

In today’s market, every buyer wants to come away with a bargain, but only a few manage to do so.  The most common reasons for failure come from how buyers approach the thorny question of “How low can you go?” when they make an offer.  You might think that most buyers would approach the question logically, relying on qualified advice.  But the reality is quite different.

The Magic Number

The Magic Number approach to putting in an offer for a property relies on the buyer having ‘read something or other’ or ‘heard on the grapevine’ that prices are overvalued by a particular percentage.  This percentage is the Magic Number, and the buyer will apply it indiscriminately to whatever the price of a property is.  He doesn’t really have an idea of the value of a property, or even if the selling price is already a good one, he just has the idea that it should be that much cheaper than the asking price.  If he actually manages to stumble across a property that is advertised at a bargain price, more often than not he will simply put the vendor’s nose out of joint with his Magic Number offer.  Many property owners will take it personally, and will be too insulted to even counter offer.  The remaining vendors simply won’t take him seriously.  The only time that the Magic Number approach will work is if the property has been overvalued in the first place.  An owner with a property that was priced 30% above the market value may well accept a Magic Number offer of 20% below the asking price.  But Mr Magic Number certainly has not hooked himself a bargain. It is important to bear in mind that some of the best ‘deals’ that buyers have snapped up in Tenerife recently have actually been at the advertised price.  When a seller makes a big reduction in their property price, they will often have reduced it to the bare bones, leaving no room for further negotiation.  It’s a tactic to generate interest, and often works well in creating a quick sale.  It’s just the sort of bargain the Magic Number buyer is looking for, and exactly the type of deal he will always miss.

The White Knight

The White Knight thinks he is coming to the rescue.  He assumes that every seller should be dying to sell him their property at any price because they are all so desperate to sell, and he is their saviour.  So he offers very low.  When his offer is rejected, he feels insulted.  Overestimating the urgency of a vendor is one of the most common problems. Every seller has different circumstances, and many are seeing the pressure to sell starting to relax.  Not only are declining interest rates easing the pressure of repayments for many, but banks are becoming less keen to foreclose: none of them want to increase their bad debt ratios or increase their stock of foreclosed properties.  But perhaps the most important issue is that many sellers believe that the bottom has been reached, and if they hang on for longer, they will get a better price.  The White Night approach requires research and working closely with your Estate Agent to find sellers who are highly motivated.  Nobody is going to willingly lose money, so the offer cannot be below their outstanding mortgage and here again, your Agent will be able to help you pitch the offer at the right level. 

The Poker Approach

The Poker approach involves keeping your cards close to your chest and not revealing a thing.  Because he mistrusts everything he is told (believing it all to be bluff), the Poker player won’t want to discuss issues with his Estate Agent like the prices that similar properties have been sold for, whether the buyer is highly motivated to sell or even how long the property has been on the market.  The Poker player considers himself too cunning to be bogged down with such trivialities, leaving it all to the cut and thrust of the bargaining.  Like Magic Number man, his initial offer is often too low to be considered as serious, and he generally will not even get a chance to display his superior skills of feint and parry.  The key to making an offer is to understand the role of the Estate Agent.  They want to make a sale, that’s the only way they get paid.  Therefore, they will try hard to make offer and counter offer meet somewhere in the middle, searching for the compromise that will please both parties.  This is almost impossible with the Poker player because of course he will not have revealed what he wants anyway.

Clearly buyers that have successfully purchased a bargain in recent weeks have been those that have worked closely with a well informed Estate Agent.  Understanding the market, recent sales levels, how much the seller might have paid, how much a mortgage might be, the motivation of the buyer, how banks are reacting to arrears and all sorts of other factors are vital.  The Agent must also see you as a serious buyer, because they will present your offer to the seller.  If you have been making offers willy nilly well below asking prices, or your offer seems ill considered, then the agent will take it with a pinch of salt, and so will the seller.  Property sellers are not automatically turning up their noses at offers that come in below their asking price these days, but it takes a bit more than plucking a random number from the sky to know how low you can go!

If you are serious about finding a bargain property in Tenerife, then choose your agent with care.  Advice based on a lack of real information from an informed Estate Agent prevents many of today’s buyers even recognising a bargain, let alone successfully making an offer.  The more respected an Estate Agent is, the greater weight your offer will carry and the greater your chances of success.  Tenerife Property Shop has 22 years of experience to call on and incomparable market knowledge.  Call them to discuss the property you are looking for on ++34 922 714 700.