Hello, It's Greg Harrelson here, with Century 21 The Harrelson Group, and I just wanted to send you a quick little video, discussing "Negotiating with the Seller".
One of the key ways of getting a better deal is making sure you have a strong negotiation when it comes to presenting an offer to the seller. The way that it's negotiated has a major bearing on the type of price that you eventually convince a seller to accept.
So let me just go through 3 things or 3 ways to get a better deal from the seller. We'll run through that real quick and then you can feel free to call me or any of my agents at the Harrelson Group if you feel like you have any questions that we need to address.
Number 1 - You've got to remind the owners how much it costs to carry the property. In other words, what are the expenses that, them continuing to own the property will have on them on an annualized basis, or over the next five years.
So here's what I want you to remember. Number one - They probably paid twice as much for the property as you're going to buy it for.
Number two - Their mortgage, a lot of times, is higher than what the real value of the property is. So if you just think about that, they paid twice as much. Their mortgage is extremely high compared to what a mortgage would be today at today's value.
What that means is their carrying costs are out of balance compared to the value of their property.
So let me just say it this way... Right now they may own this property, and pay their mortgage, because it's so high based on their original sales price - that it might cost them, say $10,000 a year in negative cash flow to own the property. Well, over 5 years, if they continue to own the property, in 5 years, times the $10,000, is $50,000 in carrying costs. And very little of that is going to go to buy down the mortgage or at least pay down the principal of the mortgage.
So, if I'm negotiating for you, and we are wanting to buy the property for $10,000 less than what they are currently willing to accept - then I've got to ask them... "Mr. Seller, would you rather take $10,000 less now, or keep it, and take $50,000 less over the next 5 years... You decide."
That is a very, very important strategy, and it works. It doesn't work ALL the time, in any economy. What it works in right now, is today's market. Because today's seller paid usually twice as much as you're going to be paying for the same exact property.
Number 2 is, you know, whenever you're presenting an offer, you've got to build a case. And there's a lot of foreclosures and short-sales that are still showing in the mLS and the courthouse records, because it was just a year ago that all these foreclosures and short-sales were closing.
So it's still data that you can find. What I suggest is that you go in and you present the seller, or the other agent - if there's another agent representing the seller... you present them with a list of foreclosures and short-sales that have closed in the last six to twelve months.
And build that into your case, as to why you're making the offer that you're making, and why you're not offering a much higher price, I should say. What you're going to find is that the foreclosures and short-sale costs are probably much lower than the traditional, the more regular sales.
Now, if the agent on the other side of the negotiating table is smart, they're going to call you on that. And they are going to say, well, but you need to look at this information. Then what we're going to do in return is say, "Hey look, the facts are the facts. Whether it's foreclosures or not, buyers were only willing to pay this amount of money, and I have to judge, or base my decisions on these facts."
So you just want to continue to hold firm, and let them know what the sales of the foreclosures or short sales are, to eventually influence them to soften up, and come down a little bit more on their sales price. It is another very effective tool, and a lot of agents, believe it or not, don't do that. Of course, we at the Harrelson Group pride ourselves on representing the client, which in this case is going to be you. And we want to help you get the best price and the best property.
Number 3 - And last but not least, you have to make yourself look like you are a real buyer. What you don't want to do, is you don't want to go in, make this low-ball offer, and just say "Take it or Leave it".
What you want to do, is you want to make the offer, even if it's low, make the offer. But you remind them of the carrying costs. You show them some comps. But you also let them know, "Hey, I'm not a shark."
"I'm not just some investor, who's trying to steal your property. I'm just a normal human being, a regular buyer, who plans to use the property for family events and any personal enjoyment that I can."
"At at the same token, I need to protect my down side, and I need to make sure that I don't overpay for a property."
So what you can do, is you and your agent can actually orchestrate an email, that you can send to the other agent representing the seller. (Which by the way, 9 times out of 10 they will forward to the seller) but what we will do is we will create an email and kind of explain our position - how we came up with the offering price that we came up with, and just let them know what we intend to do with the property, and that we're going to take care of it.
You may even acknowledge that, "Hey, you've taken great care of the property, and we appreciate it, and it's why we chose yours over many others that were listed for sale." And that little compliment will a lot of times go a long way. And it will make you seem real. A shark, someone who's just a savvy investor, that's trying to steal a property, will never take the time to do that.
So if we can be real in the eyes of the seller, then they are more likely to compromise!
So, I'm Greg Harrelson with Century 21 the Harrelon Group, and you've just got to remember - Remind them of the carrying costs. Use foreclosures and short-sales as evidence as to why you're making the offer you're making, and make sure you appear in the eyes of the seller to be a "real buyer" and not just some savvy investor or shark.
I'm here to help you. All my agents at the Harrelson Group are willing and able to help you. So give us a call, and we'll talk to you soon.