Being able to make offers that get accepted when buying properties is mandatory to successful real estate investing. Unless you can negotiate low prices when buying houses, you may be unable to succeed as a real estate investor.
Follow these tips to negotiate low buying prices for your houses.
Similarly if you are buying your dream home, these tips will help you.
The style of negotiation depends on the seller. If you buy houses from motivated sellers, you will negotiate differently than when you buy from a bank.
Let’s look at each scenario.
1) Buying from motivated sellers
This one is easy. As a real estate investor, before making any offer, you must know the fair market price after repairs, repair costs, mortgage balance and the asking price.
These four factors determine your offer.
Even if the mortgage balance allows it, the seller might be asking for more than you can offer. 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. Suppose the seller wants $65,000 for 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 continue to lower the price, sometimes on his own! Don’t get visibly excited even when the deal 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.
Then I will call them back and make my offer. Or my offer could be in writing. Most often, I will make an offer a little lower than what I negotiated, while still considering the needs of the motivated seller.
Most of these offers will get accepted.
2) If motivated seller has a Realtor
Sometimes motivated seller have properties listed with a Realtor. For my investment properties, I never make any offers to these properties. 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 ask their Realtor 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 bank owned properties, make sure your contract says you are buying as is, where is, and that you have a clause that covers inspection.
The bank is likely to counter your offer. You can negotiate lower with the inspection report.
Remember that all offers have to be written and go through your Realtor to the listing agent, who then submits it to the bank.
Successful real estate investing not only demands buying houses efficiently, but also selling them quickly. Learn how you can quickly sell your houses even in a poor market using a real estate investor website for selling houses.