5 Negotiation Secrets Smart Buyers Use to Get Better Deals
1. Know What You Want
Successful real estate negotiation begins by knowing what you are looking for exactly. For example, are you looking for single-family homes or multi-family homes or condos? Should the investment property be in a busy city or an up and coming neighborhood? Are you looking for a move-in ready rental property or are you willing to consider a home that requires renovations? Having a detailed list of what you are searching for will help you find properties that fit your criteria much faster and negotiate to get what you want.
2. Set Your Budget
Setting a budget from the onset will allow you to negotiate more effectively since the property seller will understand what exactly you can afford. Besides the purchasing price, your budget should also include other costs such as renovations, structural and environmental assessments, downtime during transitions, legal fees, realty commissions, taxes, and contingencies. You should also consider the financing options available for your investment property. If you’re going for a mortgage, getting a pre-approval will strengthen your position in negotiations.
3. Investigate the Real Estate Market
Once you are clear on what you want and what you can afford, take time to investigate the real estate market. Check the sales history for similar properties in the neighborhood over the last six months. Besides the asking price, you should also consider the purchase price of local real estate properties. The asking price is what sellers are looking for, while the purchase price is what the properties are actually sold for. You’ll get a good idea of what is going on in the market and whether the properties fit your budget. Knowing this will allow you to make a reasonable offer and back it up with evidence, whatever the actual asking price is.
4. Assess the Seller’s Motivation
Understanding why the seller is selling is very crucial in real estate negotiation. Ask questions such as “Is the property a real estate investment or a home?” While investors are business-minded, owner-occupiers are usually more attached to their property for sentimental reasons. Secondly, you need to find out how long the property has been on the market. If it was listed recently, the seller might be unwilling to lower their price immediately. However, if the property has been on the market for a long time, the owner is probably desperate to make a sale.
5. Avoid Getting Emotional
A good negotiator should refrain from getting emotional during the real estate negotiation. Does the property bring back memories from your childhood? Are you seeing yourself living in the home, surrounded by friends and family (remember, you’re looking for a rental property, not a home!)? When emotions take control, real estate investors are likely to make offers that are beyond their budget or above the market value. Keeping emotions in check and thinking soberly during real estate negotiation will enhance your chances of getting good real estate deals.