I’ll give you a million dollars. (good deal)
Terms? I’ll pay you ten dollars a week. (bad deal)
As the real estate market is heating up here in Florida it’s time to review your negotiating skills. Here are some things to consider when you make an offer. Remember, it’s not just about price.
1. Purchase price. Sellers may not want to lower the price, but you may be able to negotiate a credit at closing. This way the price recorded is the higher one, but you still get a deal. Just make sure this is disclosed to the lender.
2. Earnest money. In addition to negotiating the actual amount of the earnest money deposit, consider placing your earnest money in escrow with your own bank? Depositing the earnest money after the offer is accepted, instead of accompanying the offer, makes it easier ton get your money back if the contract is not executed.
3. Extras. Particularly in new homes and condos, this is a bountiful area to negotiate in. Some developers will do many things other than lower the price. Your agent should know how much room there is to negotiate. Upgrades, parking spaces, garages and docks are the big items. On resales, think appliances, warranties and furniture.
4. Condition of property. You may be able to negotiate warranties, cleaning and move-in condition.
5. Additional payments. Consider making additional payments that solidify your offer, especially if the offer is weak in other areas. For example a developer may want 20% earnest money. You may offer 10% with contract and more later.
6. Remedies for not completing the sale. The contract calls for the buyer to lose his entire deposit if he backs out. If you put in more deposit money than required, make sure there is agreement on what happens to that extra amount.
7. Title. Whose name will the title be held in? An LLC? A trust? Can you change your mind prior to closing? Make sure that is spelled out in the contract.
8. Assignability. Most banks will not let you assign a contract, but ask. Most will allow the contract to be assigned to an entity controlled by the buyer (like an LLC owned by you).
9. Condo fees. When do you start paying? This is important in a leaseback for example. The same question applies to taxes and insurance.
10. Access to property. Do you have the right to paint, put in lights, etc. before you close? This is an area that is often out of the hands of the developer, but check into it. Banks will not allow it in REO sales.
11. Closing date. Developers are not going to want to move this, but here again, it doesn’t hurt to ask.
12. The ability to flip. If you are interested in selling your contract before you close, now would be a good time to tell the seller.
Add a few good negotiating techniques to your repertoire such as “The Red Herring” – an item you put in your offer that stands out but you know you are willing to drop. An example would be furniture included. You add this knowing you can negotiate this away. Or try the “Resort to a Higher Authority” technique where you make your spouse, partner or significant other your “bad guy”.
For more information or to subscribe to the free weekly Market America Real Estate & Investments newsletter where you can find more tips like these, contact Gregg Fous at firstname.lastname@example.org