For everyone out there that is intimidated by negotiations of any kind, this should be a help to you, especially if you are looking for real estate. Some of these real estate negotiation tips will be basically negotiating tactics, while others will be very specific to getting the price down. Often, real estate agents are the primary negotiators, and frankly, I haven’t seen any good ones yet. All I have seen is this typical scenario:
Buyer’s Real Estate Agent:
“Mr. Buyer, the seller has said they won’t go below $X. What do you want to do?”
Great negotiating tactics huh? My thought exactly. And yet, this is very often the case for most buyers. Again, this is another testament to how bad realtors are, as a whole. But if you understand some basic principles about negotiations, you can use them to turn the tables your way. Let’s look at some of these principles:
Knowledge is Power
No, I am not talking about “The More You Know” commercials on TV. However, this principle is the most powerful principle in real estate and in any other negotiations. It demands listening and research, to understand what is motivating the seller to sell, what the property is worth, what repairs need to be done, etc. Let me just quickly touch on a few tips you can use to gain the advantage in your negotations:
- Have your realtor generate and comparable list of properties for the neighborhood you want to buy in. Make sure that it includes details, and in particular, what the lowest priced home sold for. You can then use this information to communicate to the seller that other properties in the area have sold for well below what they are asking.
- Get the tax roll value information for the last 3-5 years. If there is any downward trend in the values, use that against the seller. You can speak of the property’s potential for loss, and that’s why you can’t offer more for it.
- Have an inspection done. Find an inspector that goes for every nook and cranny. A laundry list of repairs is a great tool to use against the seller in a negotiation.
- Find out how long the property has been on the market. If it has been out there for 90 days or more, it is likely that you can offer substantially less, especially if the seller has marked the price down one or more times.
- Find out what the seller’s real motivation is; this is the most important piece of intelligence you can acquire. If you can find out that the seller is in a divorce, is moving away for a job, pending foreclosure, or otherwise, you have a prime chance to get the property for significantly less than market value.
Avoid Realtors at All Costs
If you possibly can, go for properties that are for sale by owner, government owned or bank owned properties. These properties will likely not have a realtor that is a boy scout trying to get the top dollar for their client. Also, with these properties, you have the opportunity to talk directly to the owner about the property. I really dislike the whole premise around realtors, and the whole “You have to go through me to make a deal.” mentality. So again, if you can avoid realtors, do so.
Always Balk Every Offer/Counteroffer
Regardless of what the seller offers, even if it is a good deal, always balk the offer. This is a rule, you should always buy on your terms. Set your high number, offer significantly less than your high number, and work back and forth with the seller until you approach the high number. Always give bits of intelligence that you have gathered with every offer. Statements like “I don’t know, according to the repairs list, it could end up costing me more overall to fix the house than what I am paying for it.” are great to reinforce your unwillingness to go higher on your bid, while confirming with real information that you aren’t just making it up.
Do Everything in Writing, and Have it Ready Beforehand
Any offer that you negotiate over the phone or in person must be backed up immediately in writing. And don’t wait either. I’m talking about as soon as you finish the negotiation, you type up the offer, and you send it. Once you have sent it, call the owner back and ask to drive over and pick up the signed contract. If possible, do the negotiations face to face, and have your contract documents ready. If you give someone a chance to get cold feet, you’ll find out just how fast the weather changes.
So those are just a few strong tips to help you in your real estate negotiations. If you liked this article, please leave a comment below. ‘Til next time…