(Part 1 of a two-part series. See Part 2: Real estate negotiation tactics ensure profits.)
Whether you are a home buyer or seller, a “rookie” real estate agent dreaming of your first sale closing, or an “old pro” real estate investor or sales agent, we always need to learn more about real estate negotiation tactics to become super-successful.
Having bought and sold dozens of properties over the last 37 years, both as an investor and as a real estate broker representing buyers and sellers, I’ve discovered it’s never possible to know too much about real estate negotiation tactics.
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NEGOTIATE WITH PEOPLE WHO REALLY WANT TO NEGOTIATE
Longtime real estate investors and sales agents will tell you it is best to negotiate with people who are highly motivated to buy or sell. Otherwise, you are wasting your time.
Some home sellers, for example, are just “testing the water” to see if they can get their dream price. They aren’t serious negotiators and can be time wasters because they don’t care if they sell or not.
Similarly, many home buyers aren’t serious, but they enjoy spending Sunday afternoons touring Realtor open houses and occasionally making a “low ball” purchase offer. But they are not serious negotiators and rarely make a purchase unless they find an incredible bargain.
However, the most successful negotiations involve home sellers and buyers who have a good reason for selling or buying, such as a job transfer, death or birth in the family, foreclosure, illness, unemployment, divorce, marriage, or retirement.
KEY QUESTIONS TO ASK TO LEARN THE OTHER NEGOTIATION PARTY’S TRUE MOTIVATION
In a typical house or condo sales situation, buyers, sellers and their real estate agents can’t ask too many questions to discover if the buyer or seller is truly motivated. Of course, the questions should be asked in a polite and friendly manner to avoid offending the other party.
For example, some time ago as an investor I tried to determine why the seller was selling a house I wanted to buy. But the listing agent was more of an obstacle than a help. I politely asked, “Why is the seller selling this lovely house?” The agent rudely replied, “It’s none of your business.” Then I sweetly replied, “Well, I just want to make a purchase offer to meet the seller’s needs.” “Cash is what the seller wants,” was the agent’s nasty reply.
I was so turned off by that listing agent I didn’t make a purchase offer. Later, I learned the seller was moving to a retirement community and he financed another buyer’s purchase to provide for his retirement income by carrying back the mortgage financing.
Here are the key questions home buyers should ask to learn if the seller is truly motivated to sell:
1–WHY IS THE SELLER SELLING THIS LOVELY HOME? Most home sellers and listing agents will give you an honest answer. However, sometimes it is not in the best interests of sellers to fully disclose their situation, such as when the sales reason is a divorce.
An answer such as “The sellers are moving to another residence” is a sufficient reply so prospective buyers don’t take unfair advantage of the situation.
However, occasionally the answer is critical for the buyer. I recall one house I bought as an investor was being sold by its owner because the lender had scheduled a foreclosure sale in three weeks. Fortunately, I was able to close my purchase quickly. The happy result was the sellers walked away with cash for their equity, the foreclosure sale was averted, and I bought a bargain fixer-upper house.
If the reason for the home sale is the seller is moving to a retirement community, for example, that can be a great opportunity for the buyer to make a purchase offer involving seller mortgage financing. The result can be a high-yield seller “carryback” mortgage, which will produce excellent retirement income for the seller, secured by the seller’s former residence. For the buyer, such a mortgage means easy financing.
2–HOW MUCH DID THE HOME SELLER PAY FOR THE RESIDENCE? In most states, when a property title is transferred, the sales price is also recorded. This information is vital for many purposes, such as property-tax assessments. But the sales price is also available to the general public.
If you are a serious buyer, before you make a purchase offer, your real estate buyer’s agent should be able to provide you with the seller’s purchase price for the residence, either from public records or MLS (multiple listing service) records.
Why is it so critical for the buyer to know how much the seller paid? The reason is the buyer (and their buyer’s agent) then knows if the seller has a huge negotiation leeway or practically zero negotiation room if the purchase price was close to today’s market value.
3–WHY DOES THE BUYER WANT TO BUY MY HOME? When a buyer makes a written home purchase offer, the seller should ask the buyer’s agent, “Why does this buyer want to buy my home?” The answer can show the seller if the buyer is highly motivated to purchase, or is just a “bottom fisher” bargain hunter.
In other words, the home seller then learns if it’s worth seriously negotiating with that buyer and making a counteroffer if the initial purchase offer isn’t acceptable.
4–WHAT TIME DEADLINE DOES THE OTHER PARTY HAVE? Time deadlines are a key component of any negotiation.
Does the prospective home buyer have a deadline, such as starting a new job, getting the kids enrolled in school, or other pressing reason to buy a home?
Does the seller have to sell their home by a specific time, such as to avoid a foreclosure sale or because another home has been purchased?
The answers to real estate deadline questions can provide powerful negotiation motivation information. Unless you ask, you will never know what time deadline motivates the other party to your negotiation.
5–HAS THE SELLER OBTAINED A PROFESSIONAL HOME INSPECTION REPORT? If the home seller has already obtained a professional home inspection report, that is a very good signal of a motivated home seller.
However, even if the home seller has not had the listed home professionally inspected, every home buyer should always include in their purchase offer a contingency clause making the purchase contingent on the buyer’s approval of their own professional inspection report.
The results of the buyer’s professional inspection report might provide additional reasons to negotiate with the seller if there were undisclosed home defects.
6–WHAT ADDITIONAL INFORMATION SHOULD I KNOW BEFORE BUYING THIS HOME? This is an open-end question to ask your buyer’s real estate agent.
A superb realty agent will, without even being asked, disclose to prospective buyers where the best school districts are located, what local developments are planned, what zoning changes are expected, how long the property has been listed for sale, and if there are any adverse outside factors affecting the property the buyer is considering for purchase.
CONCLUSION: Successful real estate negotiators can’t ask too many key questions before becoming involved in a purchase offer for buying or selling a property. The goal is to determine if the other party to your negotiation is truly motivated to buy or sell. More details are in my brand new special report, “How to Become a Super-Successful Real Estate Negotiator,” available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com.
Next week: The five key real estate negotiation tactics.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
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