Category Archives: Buyer Tips

Tips To Help You Purchase the Home of Your Dreams

5 Questions to Ask Homeowners When Looking at a Home to Buy

Posted on March 1, 2010 | 4 Comments
  1. Ask them how long they’ve lived in the home. This gets the conversation going and starts the process of you gathering information from the homeowners. (“It seems like this is a nice area to live. How long have you lived here, in this house?”)
  2. Ask them if they plan on living in the same area when they sell their home. The reason for this question is that it gets them to tell you what their future plans are. Knowing what their plans on are huge so you know what to focus on when it comes to negotiation time. They may answer that they may be going to another state, another country, moving back home with parents, or moving in with a spouse or boyfriend/girlfriend. There could be positive reasons or negative reasons associated to the area – for example, they may be divorcing and want to leave the area, which lets you know they are in a hurry to leave. (“I noticed a few shopping malls nearby, seems pretty convenient. Do you plan on living in this same area once you sell your home?”)
  3. Ask them when they plan to get the house closed by. If they give you a specific date, then this tells you a lot about their situation, whether personal or financial. They may tell you they need to close on April 1st because they need to pay tax liens on the property. They may tell you there’s no real fixed date in mind to sell and they’re just looking to see what the market offers. The answer to this question gives you insight into how motivated they are to close by a certain date. (“Is there a time-frame in mind for when you’d like to get this closed by?”)
  4. Ask them if they have a bottom-line price on the home. By getting an answer to this question you’ll gain insight quickly on what the seller has in mind in regard to price and whether you’re on the right track to getting a deal done. (“A lot of sellers I’ve seen recently, instead of doing the whole haggling-price thing, put a final and best price on the home and then put it on the market. This can often make the transaction process much more stress-free. Do you have a bottom-line price on this home?”)
  5. Ask them how much they owe on the property. Not all owners will answer this, but if you can get an answer to this question it allows you to follow up by asking them that if you can offer them their price if they can let you assume payments on the house for a period of a year or 2.

When asking these questions, don’t just ask the sellers one question after another, rapid-fire style. You don’t want to be an impersonal robot, you want to connect with them on a personal level. You want to engage the property owner in polite conversation, gaining rapport and gaining their trust. You want them to be comfortable with you – this allows them to open up to you and answer your questions truthfully.

If you notice the questions I’ve written for you above as examples, you may see that none have easy “Yes or No” answers. You want to ask open-ended questions. You ask the questions and then stay silent – let them answer, don’t fill the silence with chit-chat! You ask the question and then wait. By asking these open-ended questions you’re leading the conversation, but they’re the ones talking. Generally, you’re looking for a 70%-30% conversation split, with them being 70% of the conversation. Why would you want to blabber on and on – what good does that serve you? A hiring manager for a company would never dominate the conversation of a hiring interview, they ask questions and then let the applicant speak. Always remember that your outcome in this initial process is to get information on the property and on them as homeowners.  You don’t want to blabber on and on about how great you think the tile is and it’s your dream home or other nonsense like this.

As a final note, always have your contracts and paperwork with you when you go to look at any property! You never know what can happen – you always need to be ready to take action if the opportunity arises.

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Posted in Buyer Tips, Real Estate Investing

How to Handle Hopeless Real Estate Negotiation Situations

Posted on November 25, 2008 | 1 Comment

Let’s say you’ve been negotiating hard. You want to buy a home, for example, but the seller is getting hard-nosed about accepting your offers.

If you’re submitting offers on a property that have included inspection contingencies – this means you have the authority to inspect the home and ask for repairs to be done by the seller – try submitting your next offer without this clause and say that you’ll take the property “as is”. Always remember to keep your right to inspect the property before closing though. You want to have the ability to drop the deal if there’s something very wrong with the property.

Let’s say it’s the opposite situation. You know the house has been vacant for a while. There isn’t much competition going after that property. The mortgage is low or it’s been paid off in full. Tell the seller you’ll accept his offer but only if you can push back the date of the closing by three months, plus having full right of possession and access to the property – this means having the key to the home. If the seller accepts, this is a perfect opportunity to flip this house within those three months and make a nice profit.

In your real estate investing experiences you’ll undoubtedly come across that seller that just doesn’t want to negotiate with you and you know the price is too high to make a nice profit on. What you want to do is tell the real estate agent that you’ll submitting a new counter-offer in a week. When you submit this new offer, add $100 to what you originally offered. If it’s not accepted, add $100 to the offer the next week. Keep doing this, adding $100 each week. This may just hook the seller into reopening negotiations with you.

If there seems to be absolutely no budge, remember what I mentioned about being willing to walk away from any deal and do exactly that – walk away! The seller may just sense that you’re being real about closing all negotiations and can sometimes agree to your terms.

Like I’ve said before, if the deal is unbelievable then why waste time negotiating a slightly lower price and let some other investor take it out from under you? Don’t negotiate and get it done now! However, if the deal isn’t that amazing or if you think there really isn’t going to be any other buyers making offers, then it’s time to bring out the big negotiation guns. Negotiating is one of, if not THE, most highly paid per hour careers available. You can make thousands of dollars by using negotiating techniques. When doing real estate investing or any other type of negotiations, remember that all good negotiators walk away from more deals than they close. Don’t think you have to close on any deal or opportunity that pops up on your lap. It’s better to pass on 5 average deals and hit on 1 amazing deal than to strike out on potentially financially catastrophic deals.

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Get in Control: The Nickel and Dime Approach to Negotiating

Posted on November 5, 2008 | 2 Comments

Today’s lesson is on the difference between a nickel and a dime.

Well, not literal nickel and dimes. We know that obviously nickels are 5 cents while dimes are 10 cents. But it’s time to learn to apply this to negotiation strategies.

If we’re negotiating with a seller, then we want them to drop their price for us by a dime for every nickel that we’re moving up in price for them. Let’s put this into a concrete example so we understand each other on this buying tactic.

When we make offers to purchase, let’s say on a real estate investment purchase, a response from the seller may come back quickly. If the property in question has a listing price of $200,000, you might make an initial offer of $170,000. The counter-offer might come back to you for $195,000. The average negotiator may just split the difference. Then they keep splitting, and keep splitting, and keep splitting. They’ll find the middle point between $195,000 and their original offer of $170,000 and come up with $182,500 as the counter-offer. The seller then typically counters with a price that’s in between their original counter ($195,000) and the buyer’s counter ($182,500) which would be $188,750. The negotiation usually ends at this point. The typical seller only does two counter-offers, with the rare third counter-offer, but almost never more than three – the reason is that sellers get sick of this predictable and boring back-and-forth split-down-the-middle negotiating style! This is not an efficient way to do negotiations – so we’ll use a different strategy – a smarter strategy.

Instead of just splitting the price difference, increase your offer each round, but by less dollars each time. For example, you offer $170,000 and they counter with $195,000. Raise your original offer by $4000 and offer that ($174,000). They may counter with $184,500. Your next counter should be $177,000 – this means that instead of raising the offer by $4000 as you originally did, now you’re only raising it by $3000. Each of your offers comes by you giving less each time you make a counter-offer. You’re giving yourself a major psychological advantage over the seller by using the strategy. The seller, by noticing you’re offering less each time, feels like you’re getting near the max amount you’d be willing to pay for the property. This “max amount” never is verbalized – instead this is a subconscious reaction on the part of the seller to feel a twinge of fear. This will help end negotiations quickly in a positive way for you. The sellers get worn down and nervous by this style of negotiating. After a round or two of this they feel like they’ve negotiated hard but this is the best price they can get from you. In our example, the seller may accept that second counter-offer you make of $177,000. If you compare this new counter-offer of $177,000 to the traditional counter-offer of $188,750 this means you’ve saved $11,750 – all from smart negotiation strategies that save you money.

You might be asking: “Well Mike, what if the seller doesn’t counter-offer and they feel like the initial offer I made isn’t worth a counter?” One of the most important concepts to learn in any negotiation is to always be willing to walk away. I’ll say it again because this is so important: Always be willing to walk away. If you aren’t willing to walk away from a deal, no matter how badly you want that item, you will lose. Guaranteed. Want to know another little secret? Being willing to walk away works in any negotiation – in any aspect of life. The one that is willing to walk away almost always wins the negotiation – the other one almost always loses.

If you’re doing real estate investing and you come across a property with a price that’s too high to make a profit on and the seller doesn’t want to budge on the price and terms, then you just have to walk away from it. If the seller is unwilling to negotiate with you and work with you to drop the price or improve the terms significantly, then just walk away from the deal – it’s not your deal, it’s not meant for you. If you really like this property though, you may want to wait 4-5 days and then make another higher offer. Perhaps contact the real estate agent directly and ask the agent if the seller would be willing to do a counter-offer. Sometimes a seller is more willing to make verbal counter-offers and will ignore written ones. I’d always advise written offers but if the opportunity is there then this may be an option for you.

When using the nickels-vs-dimes strategy, timing plays a big role in your strategy. Let’s say the seller makes counter-offers, but you counter immediately upon hearing from the seller. The seller is now in control – this falls in line with never falling in love with a property and always being willing to walk away from a deal. The seller wants to prolong the negotiations as long as possible because all the negotiation stress is being carried by you. The seller feels that you need this property. The seller gets the vibe that you’re desperate to get this deal done for whatever reason. When this happens there’s no incentive for the seller to stop; the only incentive is for the seller to continue to negotiate because of the knowledge that you desperately want this deal so bad that you respond immediately to all counter-offers.

You want the seller to feel anxious about the deal. You want to seller to feel like there’s a possibility that the deal will fall through if there’s too much haggling over the price. If you feel like there’s not tons of interest in this property on the market and it won’t be sold out from underneath you then get back to the seller at your leisure – make sure to wait a minimum of six hours before responding to their counter-offer. When talking to the agent, say you really have to think about this deal – you have to think about it long and hard. Say you also want to start looking at other compatible properties – ask the agent to email you or fax you other properties available in the area. Say that it’s going to be difficult for you or any other real estate investor to go as high as what they’re asking. Say that you’d like to close the deal quickly if the seller could only just bend a little. This will cause the agent and seller to get freaked out that this deal may drop out – likely causing them to bend more easily to your wishes.

The agent, although legally working for the seller, is also worried about their own financial well-being. Subconsciously, agents know that in the end, they work for themselves. If an agent working for a seller feels that the seller will be more likely to acquiesce and cave in to deal pressure than you would, then the agent will likely push on the seller to hopefully take your offer.

The nickels-vs-dimes strategy and the anxiety strategy all work in your favor to get you the best deals possible – whether you’re investing in real estate or purchasing a car second-hand. These are negotiation tactics that will work to your favor – but you have to be willing to use them! Some would-be investors and buyers read about negotiation strategies but when push comes to shove, they bend over backwards to accomodate the other negotiating party and forget everything they learned. If you apply these tools, you will get a negotiating edge. Practice these tools whenever possible and they’ll become second-nature to you – helping you save major money on your investments and negotiations.

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