Tips for negotiating your real estate deal

[Collin Hays]

I visit fairly often with investors looking at a certain vacation rental property to make an offer on.  I am not a realtor, so I cannot give advice as though I am one, but there are some guidelines that I have used personally over the years, with great success. Maybe these will help you, too!

You’ve found the property you like, and the numbers seem to work, but it’s more than you can afford or want to pay. Here is the Collin Hays method of buying the property at what you want to pay:

1. Don’t ask the seller what their best offer is. They’ve already priced the property. This puts both you and them in an uncomfortable situation, as you are inferring that they didn’t already price it fairly.
2. Don’t make a list of the flaws of the property and use that to try to talk the seller down. They know they ins and outs of their property, and you bad-mouthing the property isn’t going to going to endear you to the seller. If you want the seller to accept a lower offer, you can’t offend them.  
3. Consider the possibility that the property is already priced quite fairly. I have given asking price several times with no quibble, particularly if I really liked the property and the numbers worked well.  
4. If you really like the place but you feel that it is priced too high for your budget, instead of saying “it’s priced too high” and insulting the seller, simply say “I absolutely love your place; it is exactly what I want, and I’d really like to buy it. It’s just more than I can afford, and I don’t want to offend you with a low offer.” If the seller says, “Oh no, feel free to give us an offer”, then there is your invitation.  
5. Find out what the seller has invested in the property if you can. In many states, this is public information. You can find the most recent sales price for the property on the local tax records website or by doing a quick search on Zillow. If you are trying to buy a $ 1 million home, and they bought it 20 years ago for $250,000, it’s likely they have a whole lot more wiggle room – and less price sensitivity – than someone who paid $1.2 million for it last year. Of course, what they paid isn’t going to take into account the money they have spent on renovations or remodeling, which can be substantial.  
6. Finally, even with a substantial discount, the house may not be worth it. Do your due diligence and make sure the numbers work for you. It may be that it works quite well at the asking price.  It may be that the price needs to be substantially less for the numbers to work.  You do not owe the seller any explanation on this.  They already made their investment using their own reasoning; now it's your turn.

Happy Hunting!

[Marcus Auerbach]

A lot of buyers have a psychological issue with #3. They benchmark list price and feel they got a good deal if they were able to negotiate a discount. What they are not seeing that a "great deal" 20k below list may still be 30k overpriced. Milwaukee is still one of the hottest markets in the US, we see on average offers at 102% of list price, so understanding fair market value is key.

And then of course you have the fact that most deals are negotiated by agents. And sorry to say many agents are absolutely lousy negotiators. Here are a few tips for agents I can think off:

1.) Call the listing agent and build report, let them see you are a pro and easy to work with

2.) Don't try to one-up your co-broke. Top producers are always very pleasant to work with (which does not mean they are soft)

3.) Don't get into an argument with the listing agent over how their price is wrong or over inspection issues

4.) Before you write an offer ask: other than price, what else is important for your client? And then shut up until they talk. Uncomfortable silence will get people to talk.

5.) Help your clients write smart offers based on #4. Price is often not the main or the only concern for the seller, they have other needs. You want to hit those points. 

5.) Don't be afraid to present a low offer, but have a conversation and provide a solid case for why this is a fair offer

6.) Follow up with an email to the agent and bullet point your case, which increases the chance that the owner will actually hear them

7.) Detach yourself from the outcome. That is a mental state you can't just pretend. Your job is to serve your client, not to "make" the deal. Not getting an offer accepted is part of the journey.