Here's how I negotiate for investment real estate. The first
thing that I do is make sure that I am doing my numbers correctly
(see Examining the Real Estate
Proforma or MLS Sheet ). To do the proforma you started with
a price that you wanted to get the property at. You have a goal
in your negotiations. You should figure out what you must get
the property at in order for the property to make sense for you.
That is a need. Another goal might be to get the Seller to carry
a mortgage. A third goal may be to get the closing on the 3rd
of October. A fourth goal may be to get the seller to carry out
some repairs before you take over the property. In addition to
these goals there are some things that you will not negotiate
on. You will probably not want to negotiate on whether you have
a condition on financing and you probably do not want to negotiate
on whether you get it inspected. Now you know what you want and
need out of the negotiations.
The next step is the negotiating before the offer. There are
many schools of thought about how you go about getting the price
and concessions that you need but my way of doing things is to
find out ahead of time what the lay of the land is. If you have
a good real estate agent they can go to the sellers real estate
agent and talk in generalities about how you are thinking about
making an offer but you want to know what's really important to
the owner. In most cases, they'll tell you. Then you can get your
real estate agent to ask what the lowest offer that they'll accept
is. If they don't answer it's okay we know what the maximum we
can pay is.
The next step is choosing a price and terms and writing up the
offer (see Writing up the Offer).
If they've given you a price that meets your price needs. Take
it. If it doesn't fit your price needs tell your agent to thank
them but your research indicates that the maximum you can pay
is x and that maybe you can work together on another deal. If
you've agreed to a price put that price down otherwise put down
a price that is lower than the maximum you can pay. For example,
if the maximum you can pay is 200,000 put down 185,000 that should
give you sufficient negotiating room. (In a hot market, put down
what they are asking if that works in your model) Put down all
your other wishes and needs on the first offer.
If the seller comes back with a counter offer, make careful notes
as to all the changes that were made to the original offer. Did
they change anything you didn't care about? Did they change any
of you absolute needs? Did they change anything that will make
the property unviable? Now you can make one for one trades. I'll
give you your closing date if you give me my 10 business days
for financing. Remember, the goal is to make this a win-win situation.
Everyone in the Real Estate field remembers everyone else. Be
remembered as someone with honour and integrity.
Also remember to walk away if the deal doesn't make you money!!
That is the goal!!
Real-Estate-Haven
