Have you found it intimidating or difficult when it comes to negotiating real estate? Many have, and I would like to give you some solid tips and ways of handling the negotiation, so that you can get a great deal on your next real estate project.
Before I begin, I just want you to understand one thing. When you are negotiating any deal, you must detach your emotions from the negotiating process. You see, if you get rapped up in emotions while negotiating, you’ll either end up paying way to much for a piece of property, or you will end up selling at too much of a discount. Regardless of which side of the fence you are on (buyer or seller), you need to be aware of the negotiating process, and some tips and tricks that can increase your bottom line.
Knowledge is Power
This isn’t a TV commercial, however it is a power precept to understand when negotiating real estate, or anything else for that matter. You see, to effectively negotiate real estate, understanding things like what motivates the seller to sell, what the property’s market value is, what renovations are required, etc. are all valuable pieces of information that can dramatically change the end price and terms of the negotiation. So here are a few things you can do to gain the advantage when negotiating real estate:
1. Search Out the Market Value of the Property
Talk to your real estate agent, and ask them to generate a list of comparable properties in the area. Ask them to include the last 6 months to 1 year of data, and get the selling prices of the homes, how long they were on the market, bedrooms, bathrooms and age of the homes. This will give you great insight into what the property should sell for, and you can then use that information to scale your negotiation.
2. Find Out How Long the Property has been on the Market
Longer times on the market means a greater opportunity for a buyer to negotiate the price down. In general, I might look for properties that have been on the market for 6 months or more, and offer significantly less for the homes, just to see if a seller really needs to sell. On the flip side, if a seller has only had the home on the market for a little while, he could contend that there is a lot of interest in the home, and if the buyer doesn’t like the price, someone else will be along shortly to snap up the property.
3. Find Out the Tax Roll Value of the Property
Finding property tax appraisal values isn’t hard, and often can be found online. If you can’t find the tax appraisal district online, contact information and ask where the county clerk’s office is located. Once you locate the property on the tax rolls, look at the trend over the last few years. If it is a downward trend, that is great news to the buyer, and you can use it to suggest to the seller that the property is decreasing in value, thus your lower priced offer is justified. For the seller, if the property is increasing in value over time, then you can use that to substantiate your unwillingness to lower the price.
4. Get the Property Inspected
An inspection is a good idea for both the buyer and the seller. For the seller, it alerts them to any potential problems that need to be addressed. If there aren’t any problems, or very few, minor problems, then you can use that information to hold the price up. For the buyer, it protects them against unforeseen expenses after the purchase, as well as giving them a position to negotiate if there are lots of repairs that are necessary.
5. Find Out what is Motivating the Other Party (***this is the most important bit of knowledge***)
For the buyer, understanding why the seller is selling can give you a great chance to come in with an extremely low offer. Things like divorce, moving away for a job, pending foreclosure, etc. put the buyer in the driver’s seat. For the seller, if you have a high paying job and aren’t in any rush to sell, then you are driving the negotiations.
Stay tuned for Negotiating Real Estate, Part II…