How I Negotiated a $25k Price Reduction After the Deal was Accepted
I have a deal in Austin right now that floored me. This cute little house in an older area of Austin showed up on the market. You know the area, where the land is worth $200k, and the house is worth about 30k.
Here it was, a cute 2/1 that I wanted to make a into 3/2 - I'm talking a $100k price difference from a 2/1 to a 3/2. This house was in the sellers family since it was built in 1950.
I spotted this house - asking price of $239k. I thought it was too rich for my blood and moved on. Then it went to $219k almost a week later. Do you think the sellers might be a little desperate? A $20k price reduction 1-2 weeks after hitting the market sounds like they are ready to sell.
Looking at the comps, I thought I could add a bedroom and bath and then resell at $330k. Not a bad profit potential. I offered the buyer $205k and they accepted!
Just wait, I haven't gotten to the best part yet.
I brought a contractor out to the house and talked about how to do the add-on without disrupting the charm of the neighborhood. I knew this contractor was probably a little overpriced (he worked on another project of mine, but that's another topic). He gave me a ball-park quote and it blew the wind out of my sales. UGH.
I tried to work the numbers and it just couldn't happen. I told my Real Estate Agent that I was having problems with the numbers. She talked to the seller, just giving the seller there may be some issues based on the contractor visit.
So what happened so far?
We created uncertainty in the mind of a motivated seller.
OK, so I had uncertainty too, being a motivated buyer trying to get another deal done. But THE NUMBERS WOULDN'T WORK - REMEMBER SAFETY, SPEED, THEN MONEY.
After deliberation and much disappointment, I told my agent that I just couldn't do it unless they could lower their price to $180k. Yes, I knew I might lose the deal. But to my surprise, they accepted! WAHOO.
This strategy doesn't always work, I know for a fact because I've tried this with other accepted deals and lost the deal. But here's proof that it is worth a try.
Here's another secret: your hard money lender can be a mentor also.
I always keep my hard money lender in the loop when I'm serious about a deal. After telling him I may have to back out of that deal because of the contractor bid, he recommended "his" contractor. He even called the contractor first to make sure I got the "brother-in-law" deal. Sure enough, I got a lower bid, so not only did I save money on the front end, I'm getting a better deal on the rehab too.
Construction is going on now - look for some before, during, and after videos on the blog soon.
Here it was, a cute 2/1 that I wanted to make a into 3/2 - I'm talking a $100k price difference from a 2/1 to a 3/2. This house was in the sellers family since it was built in 1950.
I spotted this house - asking price of $239k. I thought it was too rich for my blood and moved on. Then it went to $219k almost a week later. Do you think the sellers might be a little desperate? A $20k price reduction 1-2 weeks after hitting the market sounds like they are ready to sell.
Looking at the comps, I thought I could add a bedroom and bath and then resell at $330k. Not a bad profit potential. I offered the buyer $205k and they accepted!
Just wait, I haven't gotten to the best part yet.
I brought a contractor out to the house and talked about how to do the add-on without disrupting the charm of the neighborhood. I knew this contractor was probably a little overpriced (he worked on another project of mine, but that's another topic). He gave me a ball-park quote and it blew the wind out of my sales. UGH.
I tried to work the numbers and it just couldn't happen. I told my Real Estate Agent that I was having problems with the numbers. She talked to the seller, just giving the seller there may be some issues based on the contractor visit.
So what happened so far?
We created uncertainty in the mind of a motivated seller.
OK, so I had uncertainty too, being a motivated buyer trying to get another deal done. But THE NUMBERS WOULDN'T WORK - REMEMBER SAFETY, SPEED, THEN MONEY.
After deliberation and much disappointment, I told my agent that I just couldn't do it unless they could lower their price to $180k. Yes, I knew I might lose the deal. But to my surprise, they accepted! WAHOO.
This strategy doesn't always work, I know for a fact because I've tried this with other accepted deals and lost the deal. But here's proof that it is worth a try.
Here's another secret: your hard money lender can be a mentor also.
I always keep my hard money lender in the loop when I'm serious about a deal. After telling him I may have to back out of that deal because of the contractor bid, he recommended "his" contractor. He even called the contractor first to make sure I got the "brother-in-law" deal. Sure enough, I got a lower bid, so not only did I save money on the front end, I'm getting a better deal on the rehab too.
Construction is going on now - look for some before, during, and after videos on the blog soon.
Comments (1)
Good reminder that negotiations continue, and even escalate after the contract is executed.
Jon Klaus, about 14 years ago