Negotiating is something that we do on a regular basis and in different situations.
At work, we may negotiate salary raises with our bosses, or talk things over to get ample vacation time and benefits.
At home, we negotiate with our families to do certain things, like deciding on the best restaurant to check out for dinner or getting the kids to do their homework in exchange for a slightly extended bedtime.
Simply put, negotiating is all about letting two or more parties talk over an issue and eventually come to an agreement that will satisfy both ends.
This also takes place in real estate, starting with making an offer for the property.
Keep in mind that negotiating is different from gathering information; the latter is all about obtaining information on the property as well as the reason why it is being sold.
Negotiating focuses solely on the property's final price and terms of payment.
When you make your offer, you may have it in writing, which both you and the seller will initial.
It usually happens that the buyer's offer is rejected by the seller or reworked in order to become a more satisfactory deal; in some cases, the seller makes a counteroffer, which usually works in the favor of the seller.
In return, you can always make another counteroffer, and you can tweak and rework the counteroffers until both parties are happy with the conditions that have been set.
Similar to the auction process, you have to conduct some research on the property in which you're interested and determine the market value.
After that, you have to decide what is the highest price you want to pay for it.
Keep this price in mind during your negotiations, because at some point, you have to put the brakes on the negotiations and stop whenever the requested prices is too much for your budget.
You and the property's seller will not always see eye to eye on the price, and if a mutually beneficial decision has not been reached, don't force it.
If the asking price is too much for you, then walk away from the property, and don't feel pressured to purchase it.
Homeowners typically have a very high opinion of what their houses are worth.
This is usually brought about by any upgrades or changes they have made.
Some people also tend to assess their house's value based on the types of decorations and furnishings that they have.
You must be careful in this case and toe the fine, fine line between being honest about what you think their house is worth and giving them a price that will be acceptable to them.
Remember that you shouldn't be blunt about your opinions of their properties.
It just wouldn't do to antagonize buyers.
Besides, it's highly likely that they're very aware of their property's flaws and do not need you to point these out.
You can launch the negotiations by talking to the sellers and finding out why they are letting go of the property, and also how low they can go when it comes to the final price.
Make sure that you get the actual figure they want to have, and not necessarily the amount that includes the house's equity.
After all, you are talking to a homeowner who has been unable to pay to fix up the house.
You can determine this on your own by multiplying their monthly mortgage with the number of months that they have been in default.
Once you've reached that figure, add in the money you will need to do some repairs.
Say the sellers are looking to have $20,000 equity.
If they have to pay $1,000 monthly and they haven't been able to do so for eight months; that already translates to $8,000.
What if the roof requires replacement at a cost of $9,000, as well as any other total repairs that amount to $2,000? Then that already totals $19,000, which means the owner had already used up most of his or her equity.
One of your tasks in this case is to clarify to them that they've basically been living for free during the months that they haven't paid their mortgage.
They might also be aware by now that they've already destroyed their credit rating, and not taking action will only result in a foreclosure that will haunt them and their finances for a long time.
Make sure to explain this detail without offending them.
You can explain things further by making the calculations right in front of them, including the $20,000 they want, as an example, as well as their total unpaid mortgage, the cost of roof replacement, and the price of additional repairs.
Once you total all these, the sellers will then have a good idea how much will really be left to them.
Consider offering them the remaining amount and add a small amount in addition to assist them during their move.
In fixing up the property, you should decide whether you will do it yourself or obtain the services of the contractor.
Just make sure to carefully stay within budget in order earn a solid profit once you sell it.
Homeowners know what type of situation they're in, so make sure that you treat them with respect.
By doing so, you will find that they will be more receptive to you and can also provide you with even more information about the property and the circumstances they are facing.
It's only the right thing to do; just remember that you're not there to be a shoulder they can cry on.
You may also need to do transactions with bank- or institution-owned properties.
Expect the negotiations to be rather tough and keep in mind that for the ones in charge of such properties, this is a business deal.
They will be more concerned about the money lending aspect of the transaction because their main focus is not on the property, so they will be holding out for the best offer.
If you are dealing with a broker who is representing the financial institution, make sure to ask him or her to submit your offer and assist in working to get a deal that is acceptable to both parties.
Part of the process also involves finding and placing offers on properties that are listed by a broker; in working with such properties, things can work to your advantage when you connect directly to the sellers.
However, the broker you may speak with might think twice about letting you work with the sellers because he or she will get the impression that he or she will not benefit from the deal.
Remember that you should develop solid rapport with a real estate broker.
Doing so will ensure that they will be looking out for your interests and may also be more willing to drop their commissions in favor of making a sale in your behalf.
Once you have control of the property, your exit strategy will be entirely up to you.
You might want to renovate the place first or keep it and transform it into a property for rent.
You could also look into seller financing or you can even sell it as soon as you can.
Whichever tactic you choose, at least now you know that you have already accomplished it and that you can give it another shot next time.
It just depends on you and how often you want to do it.