Real Estate Investing Facts

To obtain the greatest return on your investment on a new house, you need to prepare for negotiations by putting in the time and effort to understand the underlying details of the transaction. Work with your real estate professional to create a list of the requirements that you need to have addressed before you can consider closing a deal.

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Once you are prepared to begin discussions on a home, make sure you comprehend the current state in the residential housing economy. Find out if you are working with a “buyer’s market” where the homeowners are eager to offer their property for sale or if you are in fact facing a “seller’s market” that allows limited room for negotiating. Focus attention on the nearby neighborhood home sales numbers and determine if similar houses are selling for the same price, and if not, find out exactly. Areas such as the real estate market in Hamilton Ontario will have very different home values for similar homes that are only a few blocks away.

To get an even deeper understanding of the forces that influence the regional real estate sector, review the cost per square-foot for properties, and determine if the gap between high square-foot prices in small homes is a lot greater than larger homes. Evaluate the asking price for properties similar to the one you are interested in and compare it to the actual closing price to get a benchmark of the limits of negotiation offers that are being aaccepted locally.. For instance, taking into account what level Toronto condominiums listings are on will assist in determining the value of condo.

If feasible, find out as much as possible about the property’s history, beginning with the price the present homeowner paid and if there is any balance left on the mortgage.. As well find out how many days the property has been on the market – known in the industry as the DOM.. A smart bargaining strategy can be established with a good grasp of the owner’s bottom line so you are able to prevent rejections by keeping your offers realistic. This is where relying on your realtor can save you a lot of time since they frequently have real estate marketing software that can obtain these figures.

If you are comfortable with the background information and want to proceed with the sale, the next step is to present a purchase offer that includes delivering a security deposit to the deal. This step gives you a chance to take the home off the market while you and the seller explore the finer points of the transaction.. At this juncture in the discussions, the purchaser can make requests for repairs and improvements.. This step also starts the process for the loan approval process, and can inform you early on if factors like low appraisals will compromise the deal.. 

Bargaining tactics should leave the door open for compromise, and you should be ready to make multiple offers if your first one is rejected.. It is important, however, not to attach yourself emotionally to a home that is up for sale to avoid making emotional decisions at this point in the game.. At al times have a few of homes in mind even while engaging in closing proceedings in the event you unable to finalize the deal to your satisfaction.

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Master property buyers guard against making five critical mistakes during negotiations. By avoiding these mistakes you will buyer more properties, make better deals, and feel more comfortable about the process:

1. Do Not Defend or Attack- Be open to understanding the seller of the property. Instead of getting defensive, consider their proposal as an option. Say “That’s one option or way we could do it,” then ask “What else might we do? What other options do we have?”

When you get defensive or attack the seller, you not only lose credibility in the other person’s eyes, you lose the sale. Instead of responding emotionally, focus on alternatives for closing the purchase. If the seller attacks you, seek to understand their intention. What do they expect to gain by attacking you? What are they trying to protect themselves from?

When someone attacks you, they expect you to defend or counterattack. With either approach, you risk damaging the relationship and losing the purchase. Responding in kind and attacking the other party usually only makes them more defensive. When we attack sellers, they will defend untenable positions rather than risk seeming weak by giving in to you.

Bottom line: Defend or attack and you lose the deal.

So what do you do? Surprise them by NOT offending or defending. How do you do this? By becoming curious. Curiosity is a valuable state to cultivate as a property buyer and as a master negotiator. When attacked, respond by saying, “I’m sure you have good reasons for saying that. Could you help me understand them?” Become curious and you may find ways to make the purchase.

2. Avoid Insults-
Stay focused on your outcome – closing the deal. Do not try to gain leverage by putting the other person down. If the other person insults you, do not respond in kind. Refrain from insult or attack and use it to your advantage. Treat it as an attack on a problem you are both facing. Say “I can tell how important this issue is to you. Let’s explore how we can work together to find a solution.”

In the real world, you have to buy properties from people who do not have good people skills. Do not get sucked into the trap of exchanging insults with them. Insults damage the relationship, sidetrack the negotiation, and cost you deals.

3. Avoid Blame and Do Not Accuse-
Placing blames seldom helps resolve conflict and never helps you make a deal. Once a problem occurs, blaming someone else does not help you find a solution. When you make accusations, the seller will likely become defensive and not sell to you. So be clear about what your goal is. Do you want to find a workable solution and make a deal, or do you want to force the seller to admit he or she is wrong or at fault? The result is very different outcomes. Would you rather be right or do you want to make the deal?

4. Do Not Give a Lot of Reasons-
Give a few reasons for your proposal to offer, not many. Most people will not listen to lengthy justifications. We live in a generation of 30-second commercials. People have short attention spans.

Hold on to some of reasons in case you need additional justification.

The “rule of three” applies here: Give one to three main reasons for your proposal, then let the other side evaluate your reasoning. Present your most compelling reasons first. If they agree with you, move on. If they disagree, try to understand their objections before offering additional arguments.
5. Avoid Poker Tactics

We have stereotyped master negotiators as poker-faced combatants trying to manipulate or trick the seller into agreeing to something that is not in their best interests. When you are in the “buying mode” you are not playing poker. Master sales negotiators do not use tricks or manipulation. Avoid bluffing or misleading your prospect. Do not try to use emotional outbursts to manipulate the other party. Be honest and sincere.

The Real Test: If your purchase is to be successful, the deal must work for all parties.

Happy hunting.

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10 Biggest Mistakes to Avoid in Negotiations

By Jim Camp

Everything you will ever have will come from a negotiation.

You are constantly negotiating: buying a new house or car, getting a new job or raise, deciding