As individuals, home buyers cannot negotiate for a better deal since it will not make economic sense for developers. The transaction cost with each individual will be high for developers. Also, an individual home buyer will not have bargaining power in a market dominated by real estate developers. By coming together and forming a group, the individual buyers can increase their bargaining power and hence will be able to bag a better deal!
We all love hot deals but sometimes it can be hard to get what we want at a discount price. Enter the world of group buying. It’s a way of getting a discount when a large number of people commit to the sale. Group buying is typically a good strategy, be it for travel deals or buying consumer durables, as it can help you get discounts ranging from 5% to 25%. This principle is equally applicable on real estate as well. However, not many exercise this option to save money while purchasing a house or any other property.
How it works in real estate
Through professional Group Buying platforms
Potential home buyers connect with one another through a common platform, usually provided by a third party or a group buying company, and form a group. The company then goes to the builder with a couple of orders and negotiates for possible discounts. The builder, sensing a good opportunity to sell a number of his properties, agrees to the discount. Typically, there is negotiation on discount but the discount is higher than what is offered in individual cases. Here are some example:
These companies usually charge a 0.5 to 1% commission from the buyers for facilitating the deal. However, even after paying the commission, home buyers still gets a better deal as compared to open market.
Informal buyers groups or friends groups
When several people interested in same property come together and bargain with builder directly or through a property broker. In this scenario there is usually no commission involved. Such groups are can be formed in following ways:
- People working in same company.
- Family and friends circle.
- Informal groups formed through property discussion forums or social media websites.
Provided that not everyone in your friend or work circle shall be interested in same property, sometimes it gets difficult to bring together significant numbers to strike a good deal with property developer. When a property brokers is involved, you can as for a share from his commission as well.
Why do developers offer such attractive deals
You must be wondering why do developers offer such attractive deals to group buying firms when they are unwilling to do the same for standalone buyers even as a bait during a slump? It’s simple. Group purchasing brings a ready, not to forget substantial, cash flow to the developer. They get a readymade market to sell their properties in bulk without spending anything in customer acquisition and marketing. This reduces their cost of selling. This savings can be passed to the home buyers in the form of extra discount.
Not to forget, developers offer huge commission to property dealers and channel partners for selling their properties. When these agents are not involved in the deal and builder sense a significant number of sales, they pass on the discounts to buyer groups.
When do you get best discounts?
Developers need money at the soft launch stage and they tend to offer maximum discounts. This is the time buyers can get the maximum discounts, ranging between 20% and 30%.
Add-on advantages of Group Buying
Groups can crack a good deal on their home loan since banks and financial institutions welcome group buyers to get bulk business. “Depending on the size of the group, the concessions could range from discounts in certain charges like processing fee to its complete waiver, lower interest rates etc.
Few important things to keep in mind
- Be careful while purchasing soft launch projects.
- Your agreements may be different from regular buyers, read the fine print. Check the cancellation clause and locking period.
- Take utmost care to ensure the credibility of builders, papers, and possession. Don’t this to company or group who is facilitating the deal. Ensure you check following documents carefully.
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