After you have submitted your first offer, and know some common real estate terms, then it is on to the negotiations. Now if you know a little bit about real estate, every piece of property is different, and every owner is different. Therefore every offer you make is going to be different is some way, shape or form then the previous offer you made. And I am not just talking about price. This is one of the distinguishing features of the real estate industry, and why I find it so appealing. Every deal you make is different, therefore each day you are getting to do different things. But there is one prevailing law when you are dealing with people – they want the best deal for them. Therefore perception is everything. So when you are negotiating, always make comparisons to other things, preferably other properties and things that are better than the one you want to buy, thus making the subject property inferior. With that in mind, let’s look at the two keys to successful real estate negotiations:
1. Set a High Price, and Stick to it
This is the most important point in real estate negotiations, and really any type of negotiations. The concept implies an absence of emotion, this is business. If you cannot work out a deal that is financially beneficial to you, don’t do it. Don’t get caught up in wild dreams, or trying to prove that you can buy the place no matter what they throw at you, etc. Work out the numbers, what you need to make for the deal to be feasible, start low and work toward that high number.
Just a hint – most investors that are looking for rental property shoot for at least 1% of the purchase price being obtained in rent. So if you buy a $100,000 house, you would need to rent it for at least $1,000 per month. I generally like to get more than 1%, but it usually works for most investors. But you have to determine what level of profit is acceptable to you.
2. Always Get Something When You Give Something
Do not, I repeat, do not give away anything in the contract. If they ask for you to pay for a survey, ask them to pay for an appraisal. On the flip side, if you are selling, and they ask you to pay for some repairs, ask them to cover part of it, or ask for them to pay for some part of your closing costs. The point is, always get something when you give something. At the very least, ask them to meet you half way on an expense to the deal. You’ll find in real estate that the seemingly “small costs” of doing business end up eating your lunch.
This may seem harsh, but it can really save you a lot of money in the short and long run. And anything that saves you money is the same as earning money. This is the real estate investors’ motto. The key to making money in real estate is buying right. Buying low and selling at market value. We will talk more about this later. But if you are getting something when you negotiate, you aren’t a good negotiator. This is another reason why I don’t like realtors; they don’t really have any incentive to fight for you as a buyer, because it lowers their commission and they are in it to make a much money as possible, not to do whats best for you (some of them, anyway).
So setting a high price and getting something when you give something are your two keys to successful real estate negotiations. If you have any questions for me, leave them at the bottom of the page and thanks for visiting me at RealEstateGeek.net.