Buying Property with Little or No Money Down Part 6

Negotiating the deal can have more to do with whether or not it's accepted than with the terms themselves. The terms of your offer can be good for the seller or they can stink, but the plate it's served up on can often be the difference of a yea or a nay.

Obviously a bad deal for the seller is a hard sell, but many times a seller will be willing to work with an offer they had no intentions of taking based on the fact that they like you and little more. This is very important to remember and it's one of the basic tenants of selling anything.

You may think you're trying to buy a piece of property but what you're really doing is selling yourself. The seller evaluates the deal based not only on the particulars of the offer but on whether or not you, the buyer, will be able to deliver the goods.

Never Criticize the Property

Never, never, never criticize the property to the owner. They will always take it personally. Count on it. If you're trying to negotiate the price down, get better terms, etc., then use something other than criticizing the property. If you love the property, they'll love you. If you criticize the property, when you leave they'll criticize you. Count on that too.

Things you can say:

"I'm planning on investing money into remodeling and I have to be careful to stay within my budget."
"This home is so beautiful I wan't to put some money into it but I have to stay within my budget."
"Do you think I'll have to fix that crack in the foundation?"
"Do you think it's serious?"

What he thinks, is actually ilrelevant to your decision to buy the property but let HIM criticize his property.

Understanding and Identifying the Seller's Needs

Your needs are obvious to you -- better price, no money down, etc. But what about theirs? The asking price and their initial terms more often than not are not their real needs or wants. Those are usually just the things that would safely take care of their real needs or wants. You have to break through the veil and enter the place where the bottom line lies. This is never accomplished initially because they didn't plan on telling you. And they never will tell you until they first trust you. They will have to like and trust you before they tell you their secrets. It's all personal relationships. Work on building trust and a relationship and the deal will be worked out. Try to skip the relationship and you don't have enough money to buy what they're selling.

What Do They Like?

So how do you get them to like you? Appreciate the things they love. What are they? This is the easiest part. People love to talk about the things they love. Ask for a tour of the house or property, even if you have already been over it with a fine tooth comb. Go very slowly and notice everything. You'll soon see what they love, all around.

"That's a lovely vase Mrs. Jones, is it an antique?"
"I see you collect guns. My dad is an avid hunter. Do you hunt?"
"Is that a tiffany?"

Don't be phony, but rather be very sincere. Get into their lives and they'll usually open up.

Take all the time necessary to build a relationship before you move to the nuts and bolts of the deal. Once you are at the negotiating table, take your time and don't rush it. People get nervous and tense if they are being rushed.

Stay away from an inflexible statement like, "This is all I'm offering." Rather use flexible words like, "I believe I can offer this. Do you think you can work with me?" Be prepared to have the seller tell you he or she needs all cash, because you're going to hear it often enough.

At this point asking the seller what the cash will be used for can open up that inner sanctum of real needs that we talked about earlier. If the seller responds by saying they need it to purchase another home, you now have an opportunity to explain some of the creative financing techniques that would allow him or her to buy the home with no cash.

If the seller responds by saying his or her reasons don't matter, you could then say you would like to give them their cash down payment, but ask if it could be spread out over a period of time, say two or three years.

Whether you are purchasing a million dollar apartment building or a single family home to live in or rent out, your negotiations are going to center around six things:

Terms (interest rate, length or mortgage, etc.)
Down payment
Closing date
Monthly payment
Personal property (appliances to be left etc.)

The more you can learn about the seller's true needs as they relate to each of these areas, the more successful you'll be.

Don't ever argue with the seller. If he is obviously wrong, use the old third party analogy to correct him.

"This house is worth every dime of $50,000."
"You know, Mr. Jones, that's what I thought too but the broker at so and so Realty informed me that houses in this area haven't been bringing quite as much as I thought. I was surprised but he knows more than I do about real estate."

Do your research before you ever get to this negotiating stage and use third party analogies to relieve tension. The seller won't feel that you're trying to argue and antagonize him this way.

Be Prepared

Have a negotiating checklist.

Deal only with flexible sellers.
Build trust and a relationships.
Make sure all owners are present.
Present offers in person, never over the phone.
Make sure all offers are in writing.
Never criticize the property.
Stay away from absolute words and statements.
Stay away from fear words (i.e., use "agreement" instead of "contract").
Present your offer from the bottom up. Discuss contingencies before you mention your offering price.
Always make offers at uneven figures -- offer 8.7% instead of 9%. The seller may think you have a specific reason for doing so.
If offering a low interest rate, state it in dollars rather than as a percentage. $50 per month interest on a $10,000 mortgage sounds better than 6% interest.
Never give a seller more than 24 hours to accept an offer, but be tactful in how you state it.
Use third party stories to overcome seller ignorance. Never try to appear smarter than the seller.
If tension develops, be calm and temporarily change the subject.
When possible, blame your inflexibility on someone else. Let your attorney be the bad guy.
Be a good listener and let the seller talk.
After you make an important negotiating point, shut up and be quite. The silence is deafening and they will always say something. This is extremely effective and their response will often surprise you.
Do not ever fall in love with a property. When you do, you lose your objectivity and with it your negotiating skills.
Let the seller know you are looking at other properties.
If it appears that there can be no agreement, then leave the paper work and give the seller the option to contact you by a certain time that day.
Give the seller two different offers to choose from. He may counter with a combination of the two or simply choose one.
Ask for concessions you do not necessarily need or want. That way you can give him something to get something from him.

Example:

Seller to pay all closing cost instead of just part.
Seller to warrant all appliances for a period of one year.
Mortgage to be amortized over forty years instead of thirty.

Compromising is what negotiations are all about. If you come to the table with a non-abrasive open mind, the seller will most likely have an open mind, and that is fertile ground for a win/win situation.

Part 5: Sublease Income Property For A Profit

Part 7: Distressed Property Opportunities