Negotiation skills determine whether you make money calculate your potential returns on a real estate deal before you even own it. Here are the techniques seasoned investors use.
Know Before You Offer
Never make an offer without understanding: days on market, price history, seller motivation (estate sale, divorce, relocation, financial distress), comparable sales, and any deferred maintenance analyze cap rates on comparable sales. Information is leverage. The more you know about the seller’s situation, the better you can structure a compelling offer.
The Power of Cash and Certainty
Sellers accept lower prices from buyers offering speed and certainty. An all-cash offer or a pre-approved buyer with minimal contingencies commands a 2-5% discount over a conventionally financed offer in competitive markets. Eliminate financing, inspection, and appraisal contingencies when you can afford the risk.
Creative Deal Structures
- Seller financing: Seller acts as lender, often at better rates. Avoids bank qualification.
- Subject-to: Take over existing mortgage, keep the seller’s low rate.
- Lease option: Control the property with an option to buy later.
- Master lease: Lease the property and sublease it, capturing the spread.
When to Walk Away
The best deals you make are often the ones you don’t do. Never let deal enthusiasm override the numbers. If the price doesn’t work at your required return, walk. There will always be another deal. Overpaying on entry is nearly impossible to overcome.