X. Negotiate the price of the land

A. Make Necessary Preparations

The negotiation process should be a drawn out process. By nature, nothing happens quickly in Lombok. The process is similar to buying a car from a used care dealer. Foreigners must not get frustrated with this long delay on coming to a final price, in fact you must use it to your advantage. If you race to make a deal, you will pay a much higher price than fair or necessary. Remember two points: 1) extended bargaining is a way of life among the Sasak people - they never pay the first price that is offered, 2) a lot of your money is on the table - so be very slow in giving any of it away.

Prior to entering into serious negotiations with the landowner, you will first want to determine the usual selling price of land in the area. This can be awkward and difficult if you are with an agent who is showing you land and trying to maintain full control of the situation. The moment you express interest in a piece of property, his first inclination will be to quickly seal the deal. To avoid this situation, it is far better not to reveal your true feelings about the property to anyone until you have had a chance to do some research about the price in this particular area. You should know by now a few local people or expatriates who you can give you an independent opinion about price. Nearby shop owners also may be able to give you an e ucated guess about the price of land in the area.

Never rely on advice from the selling agent for the property who will earn a large commission if you buy the land. Anyone with a vested interest is not thinking in your best interest.

It is vital that you have someone you know is familiar with the negotiation process and hopefully a competent negotiator. Someone must take control of the conversation on your behalf. I prefer to let my partner do the talking and never make a firm commitment during the negotiations. That gives me the power to reject the price, make a counteroffer, or offer some changes to the deal after I have had a chance to think things over.

B. Establish the Proper Atmosphere for Negotiations

You are the one with the money, and yo have the power to establish the ground rules. Just because you are in Indonesia and maybe surrounded by many Indonesians, does not mean you must be forced into situations where you are uncomfortable. As a foreigner, you will be regarded as someone who commands respect. Make certain you maintain this strategic advantage in small, but significant ways. For example, giving someone money to go to the store to buy a bottle of water for you.

Another key point is to hold veto power over where conversations will take place. Acceptable places include your hotel lounge or a quiet restaurant. A lawyer's office or real estate office are places to avoid - you loose a lot of bargaining power in these places. The most common place to hold conversations is in a gazebo-type sitting area c lled a berugah. Conducting business in a berugah at the landowner's house is a sign of courtesy. It sends a message that you understand and hold to local customs. You will be offered coffee or tea to drink as a sign of hospitality. Make yourself comfortable by using a corner post to support your back - you may be sitting for quite a while.

Insist on conducting the negotiations in private, and control who is in attendance. A quaint tradition on Lombok is the concept of "listening money". Anyone who is sitting around listening to the negotiations, smoking and occasionally shaking his head yes or no, is entitled to listening money. This apparent stranger can be as innocent as someone who just happens to be in the area at the time; or, he may offer quips about how generous you were to the street vendors or paid too much for your hotel room. In other words, public negotiations invite gossip about how rich you are. Therefore, keep the negotiations private as possible.

C. Conducting the Negotiations

Never conduct negotiations without all interested parties present, especially the land owner. Anyone who is going to get paid money should be at the negotiation table. Exactly how much commission is everyone getting? To whom will your money be distributed and for what purpose? Often you can reduce the price of the land by cutting commissions. It is only reasonable that you pay a 5%-10% commission one time. If several middlemen agents are involved, they can split up the commission fairly between them. The money they receive should be commensurate with the amount of effort they have exerted to sell the land.

Often an extra set of charges may come up after negotiations are concluded. For example, you must pay some mysterious tax, or a neighbor is claiming part of the land and must be paid. The list is endless. Settle, in advance, exactly who is going to pay for "extra charges". Otherwise, the extra costs will automatically become your responsibility.

Cultural stereotypes can be extremely misleading. People may be look poor, but they have survived in life by being clever. You may have a Masters Degree in Rocket Science, but you have never worked with anyone as clever as these people. They will tell you long stories about their culture and how much they enjoy working with you. A favorite phrase is, "Don't worry, you are part of our family". Long periods of silence, quips from others sitting together, drawn out discussions, a single point that is said repeatedly, and a prolonged reluctance to make any decisions may lead you to believe the negotiations will never end. Just remember, discussion like this have been going for time immemorial. They are very good at wearing down an opponent.

If you get tired or frustrated, often it is best to just say, "I am tired and need to take a shower - I will talk to you again soon." This is a perfectly polite way to excuse yourself. When you come back, bring cigarettes for the men, and 3 kilograms of sugar for the wives. Take a night to think things over and talk to your group of trusted friends.

D. The issue of parcel size

You probably will negotiate a price on a "per are" basis. I have never once purchased a piece of land where the land size was even near the stated size. So mark the corners as the seller points them out to you. As soon as you can, have a surveyor come out and check the size of the land. Often the true size of the land will exceed the stated size. You didn't plan on putting out more money, and the seller doesn't want to sell his land at a discount price.

During the negotiations I always ask (but don't always get) a provision that says if the land is larger than the stated size, the total parcel price stays the same. If the land is smaller in size that originally stated, then the price will be reduced to match the per acre price. This is becoming common practice.

However, if the land owner wants to be paid for the extra land, be mentally prepared to negotiate this issue. Excuses like "This portion of the land has more trees, closer to the road, etc." often will result in a lower per are cost for any extra land.

E. Money is Not the Only Issue

The price of the land is only one issue to be discussed. Buyers frequently do not think about intangible issues. You may need to permission from the landowner, or someone else to build an off-property access road. Often you plan on bringing electricity to the area, or making improvements to an access road. This may benefit other people, including the landowner.

Payment terms are subject to negotiation. Sometimes the land can be paid for in installments (interest free). A separate document is prepared by the Notaris detailing the terms of payment. In the past, most land local land owners where reluctant to transfer the Land Certificate until 100% of the money has been paid. More recently the timing of when the new Land Certificate will issued is a matter for negotiations.

The question must be settled regarding who will process (and pay) for the land certificate and other incidental fees at the Notaris Office.

Look for these intangible issues and use them to your benefit.

F. Giving a Deposit

After negotiations are complete, you may be asked to make a small deposit to hold the land while you conduct due diligence. You will receive a receipt confirming the price of the land. This is the traditional practice with foreign buyers. Remember that any deposit paid is money lost if you do not buy the land.

I have learned over the years from selling my land to local buyers, that most local buyers do not pay a deposit. This reason is that after everyone has gone through the negotiation process, the land owner is not likely to be actively looking for a new buyer. The landowner is likely to by patient while you are in the process of completing a sale.

You do risk loosing the land by not putting down a deposit, but you also risk loosing the deposit if the deal doesn't go through. The number one maxim regarding money in Indonesia at any time is, "any money that goes out of your pocket is never returned to your pocket." This holds true whether you are buying a bracelet, loaning somebody money, or buying land. If you are going to put down a deposit, I suggest you keep it as small as possible.

"..show me the money"

Guide to Buying Lombok Property

I.Important Facts to Consider

A.Is ownership risky?

B.Lombok: A Different Culture

C.Living on Lombok

II.Summary Steps to Buying Land

A. Get familiar with Lombok

B. Choosing a Partner("Nominee")

C. Find a parcel of Land

D. When You Find a Parcel

E. Negotiate the Price

F. Comprehensive Due Diligence.

G. Initiate Title Transfer.

H. Issuance Land Certificate

III. Visit All Lombok First

A. From Tourist to Resident

B. Explore the Hidden Lombok

C. Starting a Checklist

IV. Legal Issues

A. The Issue of Ownership

B. Foreigners Solve the Problem

C. The Nominee Method

D. Foreign Direct Investment(PMA)

E. One Final Option

V. Choose Partner and Team

A. Start Looking Early

B. Wide Variety of Skills

C. Other Trustworthy People

D. Check if Trustworthy

VI. Places that Sell Land

A. General Warnings

B. Real Estate Companies and Websites

C. The Local Tour Guide

E. The Local Gossip Mill

F. Miscellaneous Sources

VII. When You Find a a Parcel

A. Initiate Early Discussions

B. The history of the land

C. Get to know the Players

D. Slowly Get to the Price

VIII. Through an Engineer's Eyes

A. Clear access

B. Public facilities

C. Everything Belongs to you?

D. Check the Drainage

E. Check the Stability

F. Double Check Everything

IX. Settle Price and Terms

A. Necessary Preparations

B. Establish Proper Atmosphere

C. Conduct the Negotiations

D. The Issue of Parcel Size

E. Money is Not the Only Issue

F. Giving a Deposit?

X. The Written Agreement

A. How do I Pay Money?

XI. Due Diligence and Research

A. Risk versus Benefit

B. Due Diligence

C. Checking Public Records

D. Digging for the Unwritten Truth

XII.The Notaris Office

A. Settling the Final Terms

B. Notaris - Initiate Title Transfer

C. Sign the Nominee Agreement

XIII. Finally a Certificate