While buying real estate, it is important to pay the right price and finalize deals quickly. In some cases, it may be better to finalize quickly at the sellers price. While in other cases, the buyer may walk away if they find that the price is very high. If the buyer is able to win a majority of the negotiations, they may be able to get residual revenues from the deal once finalized. This residual revenue generated over a period, can add to the profit of the real estate investor over years. Here are some tips to help the real estate buyer negotiate the best possible deal.
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Respond quickly
A buyer should not dismiss any offer which he receives without researching it properly. Often a property may not be attractive initially, yet there are some advantages. It is also important to make an offer to the seller quickly. The seller will usually negotiate with the buyer who makes the first offer, due to psychological reasons. The seller will often feel that the person making the first offer is more interested in the property. Though due diligence is recommended before making an offer, it should be done quickly for the property a buyer wishes to purchase.
2. Understanding demand and supply
The buyer should understand the demand for the property and make his offer accordingly. If a property is listed for sale for many months, it is easier to negotiate and get a better deal. The buyer understands that he has not been able to sell the property quickly, and is more flexible. On the other hand, more people will be interested in a property owned by a bank. There will be a large number of people making offers for the property, and only if the buyer is willing to offer the best price he will get the property, or else the offer may be ignored.
3. Multiple financing options
The buyer should not assume that they are aware of what the seller wants, and they should offer multiple finance options to finalize the deal. Usually sellers can make a cash offer, and close the deal quickly within a week or fourteen days. Alternately the buyer can offer a down payment, with the remaining amount financed through a lender, at a higher price. This will give the seller the option to decide whether he wants cash or a higher price and reduce the negotiations. More options will increase the possibility that the seller will finalize the deal.
4. Walking away from a deal
A buyer should remember that his main goal is making a profit from the property acquired. If the seller is not willing to negotiate and lower the price, it is better to walk away from the deal. Though the buyer has invested effort and time for deal negotiation, if the buyer does not lower the price, it is better to look for another property. If there is no competition, the seller will usually reduce the price.
5. Reduce contingencies in contract
Many sellers face problems caused by lenders who use the contingencies in the contract to cause problems. Hence the buyer should reduce the contingencies to the extent possible, only incorporating inspection contingency since this will help get a better deal.
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