The Art of Negotiating

No better feeling than getting a great deal! No worse than thinking you just got screwed... It's funny because some will fight for every cent at a tag sale and then pay full price for a piece of real estate while others never check their credit card receipt but will only bid half price on a property. People are weird!

Deals are out there to be gotten, here's how:

1) The final Sales Price is on average, 87% of the final List Price. Important to note, the final list price might take a few price reductions to become the FINAL list price. A $1 Million Dollar mansion might sit on the market for 24 months and reduce it's list price $25,000 each month. On the 20th month it'll be listed at $500,000 and then get snatched up for 87% of that list price. The final sales price ends up being $435,000.

2) But you can't offer $435,000 when it's listed at $1,000,000! This insults the seller, gives you a bad reputation and causes agony for your real estate agent... We all have to patiently wait until that list price gets down to where it should be.

3) Know who the seller is. Short-sales and foreclosures may represent the best overall deal but if you don't know where in the process it is, you might be missing the big picture. If the bank has already taken the property back, it will be priced to sell! That means it is not time to negotiate for a half priced sale... Someone is going to snatch it up, and quick (possibly for MORE than the listing price)! When the owner still owns it but the banks are contemplating a foreclosure and the whole process of a short-sale starts, it's time to negotiate a real deal. Half priced offers might work in this scenario because the seller (who is most likely desperate just to get out of the situation) will take anything! A normal sale - it all depends on the seller's motivation. Ask the questions, find out what their situation is. If they don't have to sell, you won't be able to negotiate a sweetheart deal. See rule#2 - be patient.

4) Comparative Market Analysis (CMA): Get your Realtor to do one for you. He doesn't know what you're talking about? Get a new Realtor! A CMA puts it in black and white what has sold and for how much. Market values are always moving - up, down, sideways. Currently, values are dropping 1.25% a month so figure that in. Knowledge is key.

5) Don't blow your spot. Got a pre-approval letter for $500,000? Did you submit it with an offer for $350,000? The seller will make a counter offer. See if you can get your lender to furnish a specific pre-qual letter for exactly what your offer is. A nice letter from your real estate agent saying "My buyers are offering as much as they can possibly afford..." It goes a long way. DO NOT, under any circumstances tell the selling agent how much you REALLY can afford! It's like a game of poker, the less info the other guys got, the better.

6) No such thing as a free lunch... Cash buyers, especially, this means you! If you low ball the heck out of a property and win the bid but the seller has changed your contingencies to no longer include a home inspection? You might not be getting as good of a deal as you think you are. For those that brag about getting a deal 50 cents on the dollar - it's probably just not true. That house was probably worth half as much as it was listed for and you bought it for 100 cents on the dollar!

Always remember the 87% SP to LP ratio. Get a CMA, figure out what the property is worth (what would an appraiser say it's worth) and then offer 80-85% of that. Expect a counter offer and go from there. Work with an agent who speaks and communicates clearly and concisely. Don't fall in love with any one property and happy hunting!