Offer price and transaction price

Offer price and transaction price

What is the offer price and what is the transaction price? Before you buy an apartment, you should familiarize yourself with the industry vocabulary. Thanks to this, you can avoid many misunderstandings and show the seller that you know the item. Two very important concepts are bid price and transaction price.

What is the offer price and what is the transaction price? Before you buy an apartment, you should familiarize yourself with the industry vocabulary. Thanks to this, you can avoid many misunderstandings and show the seller that you know the item. Two very important concepts are bid price and transaction price.

Market value of the apartment

Although these terms may sometimes be the same, in most cases they are not. Theoretically, the price of an apartment should be determined based on its market value (or replacement cost - although this is a rare case), which can be found out by assessing the value of the property. Of course, this does not mean that price equals value or vice versa; cost should only be a starting point for setting price. In turn, market value is determined based on transaction prices (never offer prices!) obtained for similar properties. A similar object is recognized as an object that has as many common features as possible with the one being evaluated, for example, the same location within the city/residential complex, similar technical condition, location of the apartment on the ground floor, etc.

Offer price – what is it?

Price is the amount of money that the buyer must give to the seller in order to purchase a given product. Based on this economic definition, the asking price is the amount of money the seller would like to receive. In the case of a real estate purchase and sale transaction, the amount for which the developer would like to sell the apartment. It can be found in brochures or on websites.

When introducing new apartments to the market, each developer monitors the reaction of potential buyers. The starting price is usually quite high and is confirmed only by the level of demand. If interest in the investment is low, the seller reduces the price of the apartment being sold.

Real estate transaction price: definition

Transaction price – the price of the subject of a transaction concluded by persons associated for tax purposes. In other words, the transaction price is the actual amount you will pay for the purchase - it is indicated in the notarial deed of purchase and sale of real estate. Typically, the real price of apartments is lower than the price offered by the developer - the price of real estate transactions is usually 7-10% lower than the offer price.

Offer price and transaction price of an apartment: differences

Why does this difference occur? There are two main reasons. First of all, individuals estimate the value of their real estate “by eye,” adding a few extra pennies, for example, out of sentiment and completely individual and irrational preferences. Added to this is lack of knowledge of the local market. Often, for these eye-catching comparisons, sellers use the asking prices of houses or apartments that are not always similar to their own. Only a lack of interest from buyers and then negotiations test the agreed price.

The second reason for the discrepancy between offer and transaction prices by several percent is the deliberate actions of developers. They, in turn, probably know the market better than people who sell real estate, for example, once in their life. Offer prices are deliberately inflated to leave a margin of safety for possible negotiations or commissions for intermediaries. If the developer sells the apartments at the asking price, so much the better for him. However, buyers should definitely negotiate!

You can reduce the price by up to 15%, but the higher the offer price, the more percentage you can reduce it by. This is best illustrated by the example of certain districts of Warsaw. Where there is a large selection of apartments, especially cheap ones, the difference is only 1-3% (Włochy, Białołęka, Wilanów, Rembertów), and in Śródmieściu the transaction prices are up to 19% lower than the offer prices.

Contrary to what it may seem, differences between the offer price and the transaction price, even of a few percent, do not reflect the sellers' losses, especially if the developer's offer is taken into account. This margin is a special procedure that buyers should be aware of. Offer prices for apartments reflect the scope of market supply, and transaction prices for houses, apartments and other real estate reflect the scope of demand.

There are two factors to consider.

Firstly, the seller will never want to sell the goods at a lower price than he could get, unless special conditions apply, for example, he must sell his goods in a very short time. Increasing the offer price relative to possible expectations does not entail any dangerous consequences - the price can always be lowered, which can further inspire and make the potential buyer happier.

The second factor is bad market associations with too low (or rather “suspiciously” low) prices. If a developer or private seller reduces the supply prices of apartments and they differ significantly from the prices of other similar products, questions will arise: Why is this so? Why so cheap? Does the object have any disadvantages? Is this some kind of scam?

It’s better, of course, to lower the price later as part of the negotiations - and you can negotiate about anything. There can be many ideas, and each one is good to get a discount.

Price negotiations in the real estate market: setting transaction prices

Each client has the right to individually negotiate the price. Developers know this, so in the prices of sold apartments they leave a margin for price reduction (about 5% - 10%).

Bargaining is not an innate characteristic of Poles, as is common, for example, in Southern Europe or eastern countries. If negotiating the price in a local store or shopping center is indeed an exaggeration (although Polish law allows it), then in the real estate market we can and even should afford it. It's just "on"!

Find out how long the supply has been on the market

Before you start negotiating price, it's worth gathering some information. It is necessary to find out how long the investor has been trying to sell this apartment. If an advertisement for the sale of an apartment has been hanging for a long time, it means that there are few buyers and/or the price is too high. Then the chance to reduce the transaction price increases significantly.

Compare prices in your nearest area

It is also important to know at what price a square meter was sold in a similar room in a nearby location. For the curious, a non-obligatory visit to real estate agencies is offered, where you can get information about transaction prices in the area of interest to you. If they were lower than what the seller offered, you have a strong argument. Some developers post on their websites information about already sold apartments along with the prices received - if possible, you should read this information, and not the price list of offers “on the first page.”

Check the investment environment

Before buying an apartment, you should carefully look at the investment environment. If a major renovation of the house or construction of a residential area nearby is planned in the near future, you can also try to reduce the price, citing the fact that noise from the construction site will significantly disturb the peace of the apartment. The infrastructure of the complex is also important - the lack of shops, access to medical services and other services will “benefit” you, i.e. it will also reduce the price of the apartment. The characteristics of the room also play an important role during negotiations. Location will matter: apartments on the ground or top floor in a building without an elevator should cost less than apartments in better locations. Sunlight and window views will be important - especially if it is blocked by another building from the same or a different developer. The price reduction may also be influenced by the fact that this is one of the last apartments in this investment and you do not have a wide choice.

Offer price and transaction price: summary

To summarize, the difference between the transaction price and the offer price can, on average, be approximately 7% - 10%. Sometimes, when demand is very high, the transaction price turns out to be higher than the offer price, i.e. you can pay more for the premises than is offered in the ad. However, such situations are rare (for example, when many people are interested in a given apartment) and the difference in price is usually very small.

The transaction price is influenced by supply and demand in the local market, as well as the individual characteristics of the premises being sold. The prices found on developer sites or advertising sites represent only the offer price, which is the starting point for the client. This gives you the opportunity to familiarize yourself with the offer and find out in what price range the apartments are located. However, transaction prices for apartments are usually lower than offer prices.

The price per square meter of apartments is often indicated without taking into account their location in the house, which gives you the opportunity to bargain. However, before you start haggling with the seller, you need to get strong arguments, find out how things are on the real estate market, how apartments or houses with this investment are selling and whether the seller wants to rush.

Bargaining with the seller is the right of every buyer. The developer does not want to incur losses, so when setting the price for an apartment, he leaves himself a margin for negotiations. As a rule, the asking price for apartments offered for the first time is the least realistic. Only time will show their true value.

We talked in more detail about whether it is possible to bargain for housing in Warsaw in this article on our website: https://okeask.com/en/category/poleznaya-informaciya/1700199314-is-it-possible-to-bargain-for-housing-in-warsaw

On the website https://okeask.com/public/en you can purchase any real estate. We will help you bargain and reduce the price. You can find real estate offers in Warsaw and its suburbs here:

Apartments for sale: https://okeask.com/public/en/property-category/kupit-kvartiry

Houses for sale: https://okeask.com/public/en/property-category/kupit-doma

Business sales: https://okeask.com/public/en/property-category/biznes_prodazha

Land plots: https://okeask.com/public/en/property-category/zemelnye-uchastki

Materials used from the site rynekpierwotny.pl