Negotiating a property to the best possible price is one way to build instant equity into your property. Remember that buying the property right is the key to your real estate investments. So, how do you get a seller to take less than they should?
1. A Market Expert
Not consulting with a market expert:
Without the most relevant information regarding property values, market trends, upcoming development etc. you can't be fully informed. Knowing the ins and outs of the local market is the only way you can make the best decision. I'm a full time agent, and I'm working the market every day and have a knowledge base that extends beyond the actual property, as well as the potential pit calls that could surround a home that looks good on the surface but may cost a new buyer as yourself, thousands in the future.
2. Plan for Purchase
Not having a plan for your purchase:
Buying without a business plan for your property is like purchasing your car because of it's color and wondering why the dumb thing is such a money pit. Many buyers make decisions based off of everything EXCEPT their plan for the home. In order to make the best purchase choice, the property should fit your plan. Your plan should include variable such as, HOW LONG WILL I OWN THE PROPERTY? WHAT IS IMPORTANT ABOUT THE PROPERTY IF I RESELL IT SOONER THAN I THOUGHT? WHAT TYPE OF FINANCIAL PERFORMANCE DO I EXPECT FROM THE PROPERTY? (Future appreciation, income potential, etc).
3. Keep with Your Plan
Not sticking with the plan you made:
In my experience, many people will have a plan for their purchase up until the point they start looking. And a plan doesn't really mean you're asking Santa for all of your favorite features. It means, plans for the future. Because there are always so many choices when you're buying, you can be tempted to abandon logic. Rarely will a property's performance change if it didn't already fit what you were trying to accomplish.
4. Setting A Limit
Not setting a limit when you choose a home:
It's human nature to become emotionally attached to a home that you like, especially if it's something you're going to spend a lot of time enjoying. It's important to establish your top dollar, before we begin negotiating. That top dollar will be based on LOGIC. If, during the negotiation you determine that you want to abandon the logic and spend more, at least your decision will be a conscience decision. If you get caught up and pay too much without prior analysis, you may find out in hindsight you overpaid for for that home. Depending on King County's market appreciation and the value of the property, this could mean an additional several years to make up the difference in price.
5. Over Improving
Over-improving for a short-term hold:
Whether you are flipping or only planning on staying in your home for a couple of years, it's important to make improvements that you will enjoy but beware of things you will spend excessive cash on that will not affect the re-sale value. Consulting with me, before you make improvements will get you necessary information regarding resale value, before you make the investments. Again, you may still choose to make the changes but now it's an informed decision.
6. How "Agency" Works
Not understanding how "Agency" works in real estate:
The #1 financial mistake that you can make, is not understand who is representing who in a real estate transaction. Unless you are in fact the market expert and have negotiated for multiple properties, it's a good idea that you have someone like me represent you in the transaction. Many times I find people learn to late... Remember, when you go out and talk to just any agent about a home, you may compromise the bottom dollar value. If they know what you're willing to do to make the bid, you'll overpay, even if you have representation. Make sure I know your concerns, and I'll explore them without pipping your hand.
7. Time The Market
Trying to time the market:
I've heard sellers use the phrase, "I'm waiting for the market to come up." And buyer's will say, "I'm waiting for the market to crash." The reality is, no one can predict, with certainty, what prices will do until we are looking at them in hindsight. When you have the information that proves to them that the market has bottomed out, it's too late. You're going to pay more for the property. Waiting is the answer that every one will do when they, don't have a plan. If you have a plan, you can simply figure out if the plan works right now. If it does work, you buy. If it doesn't, then don't buy. You dictate terms, if you don't wait for the market to make the decision for you.