How To Negotiate Successfully In Real Estate Investing
Making offers that get accepted is the first and most important step of real estate investing. Unless you can negotiate a price that makes you profit, you cannot succeed as a real estate investor.
These tips will help you make offers that get accepted when buying houses.
If you are a home owner looking for your dream home, these tips will also help you. Making offers that get accepted is the first and most important step of real estate investing. Unless you can talk the price down to a profitable buying price, you may not succeed as a real estate investor.
These tips will help you make offers that get accepted when buying houses.
If you are a home owner looking for your dream home, these tips will also help you.
Obviously the seller determines how you negotiate. You will approach negotiations differently when you are buying houses from motivated sellers than when you are buying from a bank.
Let's look at each scenario.
1) Buying from motivated sellers
This one is easy. When investing in real estate, you must know the after repaired value, rehab costs, mortgage balance and asking price.
These four factors determine your offer.
The seller's asking price could be higher than you can offer even if the mortgage balance could be low. Before talking to the motivated seller, it is important to make sure the offer you have in mind can work if accepted.
I find negotiating on the phone preferable. Say they want $65,000 on a $100,000 house that needs repairs. Even though I have the asking price already, I will ask:
"What is the lowest price you can accept for this house?"
"$65,000 dollars?? Hmm"
I can pause for at least 1 minute. This works like magic.
Then I'll ask "is that the best you can do?"
The motivated seller will then talk his way down on his own. Never sound excited even when it sounds too good. By the end of the conversation, I will still tell them I need to look at my numbers and will get back to them later.
I will then make my offer when I call them back. Or I can make my offer in writing. If their asking price is still too high for me, I will still make a lower offer, while still looking at the needs of the seller.
Most of these offers will get accepted.
2) If motivated seller has a Realtor
Sometimes motivated seller have properties listed with a Realtor. As a real estate investor, I never make offers through a Realtor. I'll tell the motivated seller that even though the numbers sound good, I cannot make my offer when the property is listed because it does not include a Realtor's commission. I ask them to give me a call when the listing expires.
Usually they will call their Realtor and ask them to cancel the listing. Then I would make my offer as described above.
If you are a home owner buying a listed property, then you must make your offers through your Realtor. Unfortunately you don't have clear information such as mortgage balance, etc.
3) Buying REOs
When buying REOs, it is important to make sure your contract says you are buying "as is, where is" and you have a clause that covers inspection.
Most likely, the bank will counter your offer. The inspection reprt will help you negotiate lower.
Remember all REO offer have to go through the listing agent, usually through your Realtor.
In order to be a successful real estate investor, you must attract motivated sellers, convince them to sell you their houses, make offers that are acceptable and close deals that make you money. Learn how you can achieve this with a real estate investor web site for buying houses .
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