Negotiation. It is an art. A learned skill. And like any skill, at its core is an accumulation of knowledge. To an investment property negotiator, there is no greater satisfaction than a complete understanding of local markets, real estate law, and the general status of the seller.
This last part is important. To effectively negotiate terms of a property sale, you ought to understand the position of the seller, his underlying reasons for selling. Is the house approaching foreclosure? Are there other factors contributing to his or her motivations? And, if so, what sort of bargain is he or she willing to provide?
Ask questions. Find out how long the property has been on the market, how many competing offers are presently on the table, the current bid. Be weary of properties that have been passed up for extended periods of time. That is, unless you conduct (or contract) a thorough inspection.
If possible, inquire about outstanding debt on the property, whether or not all payments are current, and so forth. Most sellers will volunteer all sorts of information if you inquire appropriately. There is technique involved here (you must be able to draw information from near-strangers). It is a skill that will only strengthen through practice.
You will already have gathered information about the condition of the house, and the market factors that led it to its current value. Check online, or consult a broker. Know the value of comparable properties BEFORE negotiating.
Speak with neighbors to help sharpen your comparison. And pay close attention to the condition of neighboring homes. Neighborhood is an extremely important selling factor, and it would be wise to steer clear of those which appear in a process of deterioration.
Prior to negotiation, assure yourself adequate financing. Get pre-approved. Cash-in-hand is a persuasive tool. Make accurate bids. Don’t suggest round figures. Ambiguity is a sign of poor negotiating skills, and a lack of familiarity with the process. A specific figure shows character and confidence. Be direct.
Be certain, also, that your offer is fair, and consistent with current market value. Low-balling will not motivate the seller. A bid that is too high leaves you with nothing to bargain.
Remember: there are many items up for negotiation. Property cost is only one of them. You can negotiate over closing costs, who is to pay what percentage, insurance, realtor fees, title costs, and so forth. Be realistic. You can’t have everything, but there are certainly some items to remain firm on.
Be sure to have adequate on-hand legal and accounting advice. Review any written documents before signing. If the fine print doesn’t meet your criteria and expectations, negotiate, or walk away. It is invaluable to locate the right property, and perhaps even moreso to buy it under the right conditions, on your terms.