Negotiation Strategies when Price Doesn't Work

[Jeremy Stepanovich]

Hi everyone,

I'm wondering what I can do to help level the playing field with a seller when we can't agree on a price. Here is some quick background on the property:

• This is a 3-flat that I am looking to house hack
• Two 3-bed/1-bath units and a 1-bed/-bath
• Building started on the market at $487,000, dropped to $475,000 after the first month
• Has been sitting on the market 80+ days

Currently, the rents are about 70% of their market value and only 2 of the 3 units are rented because the owner lived in one of the 3/1's.

Even if this was fully rented at market rents the asking price is way over what the market is dictating. We came in and offered $400k thinking our cap would be at $425k to take the place as is. The seller is persistent on getting at least $450k for the place and we are at a standstill.

This is a great property, we have run the numbers multiple times to ensure that it can work and $425k is what we feel comfortable paying unless we can negotiate the terms of the agreement.

I really want this property. It has everything I'm looking for in my first house hack.

Here's where I need your help - what kind of terms can I negotiate with the seller to help insure that my investment is still solid? Have any of you had success with things like tenant placement, increasing rents, etc. that you agreed to in order to close the deal?

Any input is greatly appreciated. If more information is required I'm happy to provide it. Ideally I'd like to have some ideas ASAP as we aren't sure how long until another offer comes to the table. Thanks in advance!

[Ryan Canfield]

@Jeremy Stepanovich  Hi Jeremy, that's a tough situation.  I've been there before and I know how frustrating it can be and how badly you want it to work, especially if it's your first property and you're planning on house hacking.

Personally, I would make your offer and if you cannot come to common ground, walk away.  If the property has been on the market for 80+ days, at some point you have to say that the owner is testing the waters and may not want to sell that badly.  The first property my wife and I ever offered on, we were going to house hack it as well was already on the market for 8 months and had never been under contract. 8 months!  It was listed for $475 and we offered I think $390.  We even wrote the seller a letter telling him our story of why he should sell us the house for our price.  The seller came back with I think it was $460 and we countered at $410.  His final offer was $450 and we walked away.  10 days later we were under contract and ended up buying another 3 flat 10 minutes away for about $100K less.  This property was originally listed on no joke - August 13, 2014 and expired on June 30, 2016.  We offered in April 2015.  It never went under contract.  This owner obviously never wanted to truly sell the property.  It seems that some people want their price and will wait until they get it, there's nothing wrong with that but sometimes you just have to recognize that you may have to pay more if you really want the property or to know your limit and walk away.  There are other properties out there.

If your numbers do not make sense at anything higher than $425, walk away.  Maybe the seller comes back to you in a few weeks/months when they do not get any better offers and now want to talk about your offer for $425.