Stay Firm With Your Offer Price
By JD Esajian on November 6, 2013
Walking away from a deal is perhaps the hardest thing to do in the real estate industry. You may come across a property that has everything you want and is in the right location, but the seller will not come down to your price. In this situation, you can either negotiate a lower price or meet the seller’s demands. It takes discipline, but knowing your bottom line and knowing how to walk away will save you time and money.
There are always those who will let their gut determine their actions and others who will follow the numbers. The best investors will have some combination of both, but will revert back to the numbers if everything else proves equal. If done correctly, you spent hours looking at comparable listings and formulating an estimate budget. Be confident in your estimates. Trust that they are reliable in a potential deal.
Once you start manipulating numbers to allow for more spending, you have created a new bottom line. At this point, your budget becomes a slippery slope and you have departed from your original strategy. You will keep on going over until you find comps or work the numbers in a way that you can justify almost any price. While it may seem obvious, getting involved in a bad deal is far worse than not getting involved at all. Stay firm with your offer price. When it gets too high, learn to walk away. If the seller accepts your offer, great, but don’t go chasing deals that aren’t there.
The key to a good negotiation is to know what the other person wants. If you know you have a motivated seller, your offer should reflect their desperation. If the seller is just looking to see what they can get and they have equity, they may not be in such a rush to sell. When you have a desperate seller, you have the upper hand and should never bid against yourself. If you make an offer and the seller rejects it or asks for a counter, don’t. They may not accept your offer immediately, but if you wait them out you will find that yours will get accepted more often than not.
There are enough deals to go around. It is when you are slow that there is the tendency to chase deals and look for opportunities that aren’t really there. It is not always easy to do, but your hard work should result in a fair asking price; stick with it. You may get pressure from the seller or even your realtor to submit a higher offer, but you know your work and should therefore stand by it.
For every deal that you research after it closes and regret you didn’t increase your price, you will find at least 5 more that have gone the other way. All it takes is one or two bad deals to put you behind and possibly out of business. It is not always easy, but stay firm in your offers and let the business come to you.