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Counter-Offer Strategies
The art of the deal is negotiating. The goal, when you’re countering a buyer’s offer, is to get the highest price and best terms possible. Once you reject the initial offer, you must decide how much to counter. The answer is easy when the market is hot. You will counter at full price or more.
If the market is normal, you may receive less than full price for your property. In this case, one strategy would be to set your asking price higher than normal. How much lower than your asking price will you counter-offer?
Beware of Setting a Minimum Counter Price.
Setting a firm minimum counter price is a big mistake that some sellers make. Depending on the deal and the buyer your counter offer should be flexible. For example, after investigating the market, you set your asking price at $350,000. Your minimum price may be $320,000. If you are offered your minimum, you sell. If you are offered lower, you don’t sell. It sounds simple.
Unfortunately, in this mindset, you box yourself into a limited deal. You want to be flexible when negotiating. Let us review our last example. The buyer offers $300,000. The seller rejects and counters with the minimum of $320,000.
The buyer counters with $305,000 again. Where do you go from here? You have already offered your lowest minimum counteroffer. The only recourse would be to repeat your same offer.
One strategy would be to counter lower at $315,000. Or what if the buyer is willing to pay more than your minimum?
The buyer might be willing to pay $330,000. You will actually have lost money again by countering too low.
There are housing situations where you are just lucky to be paying off the mortgage, commission, and closing costs. You might be offered a little less but you accept to some cash to save your credit. In this case, setting a minimum price would be reasonable.
If you do feel the need to set a minimum counter price, don’t set it in stone.
Try to Get a Sense of the Buyer
Your counteroffer is not the final transaction. It is one step in the negotiating process. You counter. The buyer will counter your offer. You will then counter back. This process will repeat until the a deal is made.
Therefore, your counteroffer should not be your best and lowest. The buyer’s first offer is usually a low-ball offer. A seller’s first counter is a high-ball offer. Both parties are testing to see how the other will respond.
Let the buyer know you are willing to negotiate. You ask $340,000, the buyer offers $300,000. You counter $335,000. You must also send the message that you are not willing to drop your price too much.
Some buyers will cave and accept the counteroffer and others will not. Anytime you reject and counter, you are opening negotiations but you are also taking the risk of losing the deal.
There are some buyers who are just looking for a desperate seller. They make a lot of low-ball offers until they find the property. You are not going to find a good price with that type of buyer.
Others will counter with close to what they originally offered, in this case say $305,000 (now you’re still $30,000 apart).
What if You’re Close Together in Price?
After a few counters, you are only a few thousand dollars apart. You countered at $335,000 and the buyer countered back at $330,000. Now you’re only $5000 apart. Should you accept the buyer’s counter?
You can simply accept the deal. Another strategy would be to tell the buyer or the agent that you want to split the difference. They accept. You will then have sold your property at $332,500.
Splitting the difference can be an effective way of closing out negotiations to bring about a win-win situation.
What If You’re Far Apart?
You counter at $335,000 and the buyer counters at $305,000. You’re $30,000 apart. That’s serious money.
There are only two ways of handling this situation. You could hold your original counter. The buyer would understand that this is your final offer. This could be a deal breaker. If you were highly motivated to sell, a steep decline of your price would get the ball rolling again. You counter at $320,000 saying this is your best but last offer.
This action could spark the buyer’s interest. He/She could accept or at least make a higher counteroffer.
Is There a Time to Walk Away?
There are only two reasons to walk away from negotiations. You are truly angry and will not lower your price.
The second is for effect. You are willing to take less, but you want the buyer to think you’ve made your last, best offer. You say, “Take my last offer or leave it. I’ll give you an hour to decide.”
As a tactic, walking away can start negotiations. You could get your price or lose the deal.
There are no guarantees when negotiating real estate. The final outcome is often determined by the following percentages:
10%–how good you are at negotiating
45%–how motivated you are to sell
45%–how motivated the buyer is to purchase
100%–luck
EXPOSED! Don’t Waster Your Time Trying these old tactics.. They don’t work anymore. Join us today to find out what does work!
I’m going to debunk a few myths floating around the Internet about what’s required to get your site visible in search engines.
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Use Contingencies Wisely
Everyone is familiar with the conversation where the other person says, “Yes, but..” This person is agreeing with you but only if certain conditions are met.
A purchase agreement is similar in that you are agreeing to buy a property subject to certain things being met. The conditions you set are called contingencies.
It is uncommon to have a purchase agreement without contingencies. In fact, contingencies are an essential part of many offers. In general, contingencies are added to protect you (the buyer) but may also serve to protect the seller.
All of the contingencies of a purchase agreement must be met before the sale can be competed.
What are some Examples?
Contingencies can be virtually any conditions you wish to set. They can be anything such as having your Uncle John approve the central furnace or your Aunt Mary is satisfied with the kitchen sink. The sale is “contingent” upon all of the conditions being met. Contingencies are also called “subject to’s” since the sale is “subject to” something happening.
An important contingency is a financing contingency. It states that the purchase is subject to the buyers being able to obtain a loan for the required amount. If you cannot get the loan you need, the sale is canceled and you deposit is refunded. It is very important to have this contingency since you will loose you deposit if you are unable to get a big enough loan. Making an offer without a loan contingency is very risky.
What are Some Common Contingencies?
There are many contingencies that will protect you (the buyer). Here are some you will definitely want in your purchase agreement:
* You will be able to inspect the property and must approve the inspection.
* The sellers must disclose problems with the property and you must approve of such disclosures.
* You will be allowed to make a final inspection of the property just before the deal closes and confirm that there is no new damage since you originally inspected it.
* You will get your deposit back if the sellers back out.
* You can back out if you are unable to get financing.
Depending on your situation, there are many other contingencies you should add. For example, if you are moving to the area because of a new job. You will want a contingency stating that if you don’t get the job, you can cancel and get your deposit back.
Make sure that you clearly state your needs to the agent or attorney preparing your agreement. If there are any special conditions that must be meet (such as being able to cash in some stocks for a down payment), make sure it is in writing a contingency. Otherwise you may be unable to complete the purchase on time and lose your deposit. In some cases, you may be sued by the sellers for performance. They may demand you complete the purchase or pay associated damages.
Who Writes In the Contingencies?
A contingency is a legal document and must contain the proper language to be legally binding. For this reason, attorneys ideally craft contingencies. However, since this is a normal part of business, many real estate agents are extremely versed in writing contingencies. In fact, agents may be far more experienced in this area than an attorney. In practice, your agent will be more than capable of writing the contingencies you need.
Whom Does the Contingencies Protect?
The contingencies noted so far are intended to protect you (the buyer). They allow you to back out of the deal without consequences if something does not work out — you can’t get financing, you discover problems with the house, you lose you job, etc..
As noted, contingencies may also be added to protect the sellers. Such examples are the sellers may insist that the transaction be completed within 30 days. If you are unable to get you cash together or get your financing, you could lose the house and your deposit!
Some sellers may want you to purchase the house “as is.” That is, no matter what’s wrong with it, the sellers won’t be responsible for it. You may for example find that after making an offer, the septic system badly needs $15,000 worth of repair. If you agreed to buy the property “as is” then you will be stuck paying the difference.
Contingencies Can Become Deal Points
Naturally, you will want to have contingencies that benefit you (the buyer) and want to exclude those that protect the seller. This is therefore a process of negotiation where contingencies become deal points, which you can influence, the actual cost of the transaction.
A deal point is a specific point on which the deal depends. For example, you want the sellers to replace the broken sprinkler system. So you include a contingency stating that the sellers must repair it. If the sellers refuse — perhaps they have been watering the lawn by hand and are unwilling to fix it for the buyers.
Now you have a deal point. What are you going to do?
Well, this depends on how important the sprinkler system is to you. If you feel that you can’t live without it and are unwilling to budge, you can refuse to remove the contingency. The seller can either accept the offer or reject it. If the sellers accept, you’ve got your sprinklers. However, if they reject, you’re not getting your new home.
Often a better way if dealing with this situation is to calculate the cost of repairs and adjust the contingencies to compensate. For example you may retract your contingency for the sprinklers and insist that they leave the ceiling fans you really like. Perhaps the sellers were not looking forward to taking them down anyway and are willing to compromise on this point. In which case, although you will need to get the sprinklers fixed, you have saved several hundred dollars on the purchase of new fans.
You Can Use A Contingency to Get Yourself a Better Deal
The skillful negotiator will use contingencies to improve the deal. And there is really no limit to the type of contingency you can craft. Deal points can be over anything ranging from the date escrow closes to the specific closing costs the buyer and sellers must pay.
A great way to start negotiating is to find the sellers weak point and apply the pressure there. For example, the sellers may absolutely need to close the deal within 25 days so that they can purchase a new home. You agree as long as they fix the septic system, lower the price, repair the sprinklers, and leave the ceiling fans. In this way, they have met their criteria by giving you the superior deal.
Remember, that although contingencies are great points for negotiations, they are there to protect you. They offer you an easy way to back out if something goes wrong.
Avoid Unnecessary Contingencies
Sometimes when buyers discover the great protective value of contingencies, they insist that extra ones be placed in the purchase offer. For example, you insist that the purchase become contingent on you not losing your job before the deal closes. (You pretty much get this protection in any event, since if you lose your job, the lender probably won’t give you a mortgage, and you can back out using the financing contingency.)
Or you insist that the deal be contingent on your not getting ill during the escrow period, or your spouse not falling out of love with the home, or your getting approval of the purchase from you parents. Remember, you can make the deal contingent on anything!
The problem is that each time you add a contingency, you weaken the deal. The sellers ask themselves, “Why does the buyer insist on this?” If the quickest answer is that the buyer is wishy-washy and may not go through with the deal, the sellers may simply refuse to sign. You may squash a perfectly marketable deal simply by insisting on unnecessary contingencies.
As many real estate agents have witnessed, lawyers can ruin an otherwise marketable deal by adding contingencies favoring their clients to the point where the other party simply won’t go along. While legal advice is great, sometimes common sense and human nature play a stronger role.
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What is the Real Offer ?
Often, sellers make the mistake of only considering the price when the buyer makes an offer. Many people’s gut reaction is that the price is “too low” and immediately reject the offer.
That could be a mistake. If you listen carefully, hidden inside the offer may be pearls of information that would make you reconsider accepting less than full price. You don’t want to reject any offer out-of-hand. Let us consider the deal carefully. It almost always consists of two parts. The first part is the price. The other part is the terms.
Price and Terms
First ask yourself what you want out of the deal. A less than full price offer would have to list terms that were appealing.
Good Terms a Buyer Might Offer
– Higher-than-market-interest second (or first) mortgage in your favor
– The buyer will pay for all or part of your closing costs.
– Taking a problem house “as is” (not asking you to fix the problem).
– Quick close (short escrow).
– All cash deal (when other are asking you to accept “paper”).
– Letting you rent back the house for a time (if you’re having trouble finding a place to move to).
Items to Check Carefully in the Offer
1. Is the buyer pre-approved? You want to know how qualified the buyer is to make the purchase. While you may not care about the buyer’s actual name, you’re looking for a strong pre-approval letter from a lender saying that this buyer will get a mortgage sufficiently enough to make the deal. If the buyer is putting down a substantial amount of cash, say 20 percent of the price, you also want to see a letter from a bank, certifying that the buyer has sufficient funds on hand to close the deal. Some smart buyers these days will even come in with a credit report to show you.
2. How quickly can the buyer close the deal? A buyer who’s ready to close in 30 days or less indicates strength. The buyer presumably has all his or her ducks in a row in terms of financing. A buyer who needs 45 or 60 days to close may be stretching, hoping to snag financing. Or this buyer may simply be trying to tie up your property as a kind of fallback position, while looking for other, better deals. Always question why a buyer needs extra time.
3. Are there any sweeteners? A sweetener is a term or condition that makes the deal sweeter for you. Usually, these are the first things that agents point out. For example, you want to stay in the house an extra 2 months while your kids finish school and the buyer is willing to go along with this. That’s a sweetener.
4. Are there any cash incentives? Is the buyer offering to pay you extra interest on a mortgage you’re willing to carry back? Is the buyer willing to pay for any of your closing costs?
5. Is there another property involved? Some buyers are cash poor. Instead of offering a cash down payment, they may offer a mortgage on another property, or even that property itself. This complicates the deal, but could be a real boon. Be sure you have a realistic appraisal of the other property as well as a title report listing any liens so you can judge the value of the offer.
6. Are there any negative terms? A negative term can be anything that makes the deal less attractive to you. Contingencies that favor the buyer are negatives. Some you can expect, such as demands for a professional inspection and disclosures. Others, such as a demand that the sale be contingent on the buyer not losing his or her job or that interest rates not climb beyond a certain point, may weaken the offer. Yet others, such as a demand that the offer be contingent upon the buyer’s great uncle in North Dakota coming through with a promised gift of money, may make the offer frivolous.
7. Is the price acceptable? Note that the price is last on this list. You won’t really know if the price is acceptable until you’ve read the entire offer and understand it. Only then can you make a determination about whether you’ll accept the price. Don’t let the price deter you from considering the overall deal. Again it is only one part of offer.
Take Your Time
When an offer is presented, a time limit may be attached to it. For example, a “Cinderella” deal is good only until midnight of the same day. You might receive it at 9 p.m., which leaves a window of three hours to accept, reject or counter.
The idea behind this strategy is to force a seller to act swiftly. Most buyers will allow enough time for careful consideration. The important point here is to not be pressured by a deadline. You need to have enough time to feel comfortable with your decision. In other words, TAKE YOUR TIME! It is better to lose an offer than accept a bad one.
Always take enough time to fully consider the offer.
“ Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness concerning all acts of initiative and creation. There is one elementary truth, the ignorance of which kills countless ideas and splendid plans: that the moment one definitely commits oneself, then providence moves too, all sorts of things occur to help one that would never otherwise have occurred. A whole stream of events issues from the decision raising in one’s favor all manner of unforeseen events, meetings and material assistance which no one could have dreamed would have come their way. can do or dream you can, begin it. Boldness has genius, power and magic in it. Begin it now!”
~ Johann Wolfgang von Goethe,
19th century German writer and scientist
One of the fastest ways to generate traffic is get to know the most popular or the powerful people in the social networking community. Find out below how easy this is to do online by using a few simple techniques. Continue reading Use Social Media Networking To Build Your Lists And Generate Traffic
Launching a new website takes lots of work. Building Traffic will take some work but you should know that whatever traffic building efforts you’ve done serve as a foundation for all your future marketing.
Continue reading How to Create Traffic for Your New Websites
Ready to learn how to put together deals with sellers and then selling them in just a few hours… sometimes minutes? The people who are following my methods and building these lists are doing exactly that. None of this is rocket science, My Eight year old can do it. You just do the work, follow the below methods and your business will grow. And the best part is… you can put it all on autopilot!
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This report will also cover How to Make more money when selling, everything we do is interconnected. Everything has multiple profit centers. For example, when you bring in a buyer, they can buy your house, they can buy a house that you don’t own but control, they can make you money from a mortgage broker or from a realtor, they can become investors and they can buy more houses from you in the future. We even have been developed a “referral” program to make sure they send us all their friends.
“Flipping” is the buzzword in real estate. I believe its the fastest way to make money as a beginner. What is flipping, how does it work, and how you can profit?
Continue reading Flipping, QuickTurn, Wholesale.. Whatever.. Here are 7 ways to profit