I liked very much when Jesus Encinar (CEO of idealista.com) explained in his blog the process he followed when buying a house. Yesterday, I thought “I could share my buying decision process in my blog to help others” (maybe there are even some valuable ideas!).
The situation is:
- I am moving to France, staying in the same company which gives me a limited allowance to pay the flat.
- A services company (SC) helps me with finding houses according to pre-defined criteria of my choice (2 bed-rooms, central location, garage, etc…).
I was told that in France it is not the custom to rent furnished flats, nevertheless, I asked SC to look for some fully furnished flats (even if the price was slightly over the allowance limit) and some un-furnished ones (at a slightly lower cost than the allowance limit). SC presented me with 5 un-furnished ones and only one furnished flat. Between Tuesday 9th and Wednesday 10th October we visited them all.
Once we arrived at an un-furnished flat for the visit, I would always pose the same value proposition to the agent of the owner side to start a negotiation; here is the rationale:
“say that your monthly price is 50€ cheaper than my allowance limit, I’d take your flat at an increased price, just the allowance limit (that is, 50€ more expensive than their offer) if the owner spends 1,200€ in equipment (e.g. washing machine, oven, sofa…)”.
I explained: the result of 2 years x 12 months x 50€.
I justified that I would be at least 2 years in Toulouse and that, once I left, they would own the equipment that would have been bought at no cost to them.
That is a typically win-win situation. What do you think the outcome of the negotiations has been?
- One agent gave an outright “No”;
- another one gave a day-delay “No”;
- other asked commitment to their house before saying yes (?);
- one committed to the purchase of a fridge without quoting a final prize (a fridge is not worth the 1,400€ this owner was asked to invest; also this flat was the most equipped of the un-furnished ones); and
- the final one had not given a response after a day.
The decision up to this point was clearly the 4th case (I had discarded the 5th due to the state of the flat and the 1st who gave an outright “no”).
Then, we visited the furnished one.
This one was fully equipped, fully. Since I also liked it, the decision process, all other things being rated equal, then was the following:
- Furnishing costs: How much do 2 double beds, plus a sofa, some tables and chairs, a TV, washing machine, etc… cost? I started asking my fellows as I am completely unaware of prices: each bed about 600€, leather sofa ~1,400€, oven ~400€, microwave ~400€, fridge over 600€… I started getting dizzy…
- In the less equipped one I would need to spend over 4,000€; in the medium equipped over 2,600€; in the furnished one, nothing (but I wouldn’t own the stuff).
- The furnished one would cost me 100€ more each month, 1,200€ a year or 3,600€ in 3 years. This amount, 3,600€, is in the order of what I would have to spend in the un-furnished ones.
- In the furnished flat I would defer the payment of the equipment and spread it among the 3 years, permitting me to initially invest those 3,600€ and gradually dedicate 100€ per month to the rent… (just this deferral, I calculated, could generate over 400€ in 3 years if invested in stocks performing as the general index… meaning: cash for the next move).
- The one with the heating of gas instead of electricity (I was advised) would save hundreds a year.
- Not owning the furniture would give me freedom…
… by now, I guess you already know which was my final decision: I chose the furnished flat (I hope everything goes well, and in fact I can take it).
Once you have gone along with me during the reasoning above, I wanted to leave you with the following video of a TED talk in which the speaker, Simon Sinek (at TEDxPuget Sound event in WA, USA), explains how buying decisions are indeed gut decisions taken in seconds (~6’00”), while the rest of reasoning is just we trying to convince ourselves that we have taken the right decision (he uses Apple products as example):
I guess I took the decision once I viewed the leather sofa in front of the flat screen… Did I convince you with my rational reasoning?