February 5, 2020
Negotiation is a big part of the real estate business. Whether you are a home buyer or a real estate investor, there is big money to be saved (or made) in negotiations. While you may think of negotiating as something you do at a yard sale to save a few pennies, in real estate it can be so much more. When you negotiate in real estate the scale is bigger and the stakes higher. Skillfully negotiating in real estate has the potential to save you thousands. But how do you negotiate as an investor? Let’s look at some tips for successful negotiations that can leave you coming out on top.
Tip #1: Have a Bottom Line
Before making an offer, it is important to know the maximum amount you are willing to pay. It is easy to get caught up in the back and forth of negotiations and end up paying more than you comfortably are able. Having a firm number in mind before even making an offer is a good way to limit overspending on a property and overextending yourself.
Tip #2: Offer Low
Negotiations often go back and forth several times before an offer is accepted. Because you expect them to come back higher than your offer, you’ll want to start lower than what you perceive the property’s value to be. You want to have room to come up in price, without surpassing your bottom line. By offering low off the bat you’ll have more room to go back and forth in negotiations.
Tip #3: Back Up Your Offer
If your max price for the property is significantly lower than the seller’s asking price, let them know why. Rather than just offering a low amount, back up your offer with sound reasoning. Is the property overvalued compared to similar properties? Is there a glaring issue with the property that you feel isn’t reflected in the price? If there is a strong reason why you feel your offer is more accurate than their asking price, let them know what that reason is.
Tip #4: Offer Cash
Making an offer in cash often allows investors to negotiate a lower price. Cash offers are more likely to close, and after months of a property being on the market, the sellers are often highly motivated to sell. While they may have other offers on the table with other kinds of financing, those offers don’t give them the same sense of security that a cash offer would, making your offer look more appealing.
Tip #5: Don’t Look Desperate
There are so many tricks when it comes to negotiation that can help one side manipulate the other into accepting their offer, but one of the most important tips is to not appear desperate for the property. While the seller doesn’t want to appear desperate in hopes they get the most for their property, the investor doesn’t want to appear desperate either. By showing the seller that you need the property, you’ve given away any leverage on the price that you had.
Work with a Hard Money Lender in MD
Investing in real estate is a great way to earn a living, but negotiating can be the difference between a good investment and a bad one. At Maryland Private Mortgage we specialize in all types of loans including hard money loans in Maryland for real estate investors. If you are looking for the perfect loan to fund your next investment, give us a call today!
The Maryland Private Mortgage Lending Team