Multifamily Real Estate Investing

The 4 Laws of Negotiating Purchase Price and Terms

By 100 Percent Financed on March, 28 2019
100 Percent Financed

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Whether you are investing in a home for yourself or purchasing an investment property, how you negotiate a deal can make the difference between a few thousand dollars to tens of thousands of dollars in the actual purchase price. In many cases, you will actually come out further ahead by negotiating the terms of the contract rather than the purchase price. For instance, if you are buying a home, asking the seller to make $3,000 in concessions towards closing costs is money that never leaves your pocket, while asking for $3,000 off the purchase price only saves you a few dollars each month on your mortgage. 


When it comes to negotiating the purchase price and terms, here are 4 laws you never want to violate: 

1. Be the Most Educated Person in the Room
A successful investment, like anything else in life, is almost always the result of hard work versus luck. While it may seem like a great investment opportunities just fall into the laps of some people, the truth is, educated investors will often pass up 20, 30, or even 100 perfectly good opportunities before finding one that actually piques their interest. You might say the investors that work the hardest to educate themselves in a broad range of fields tend to be the luckiest. Being a smart investor means more than just understanding real estate or market trends. You also have to know a good deal about financing, zoning, contract law, and even basic psychology. It’s no surprise that the most successful people in any field are often the most educated.

2. Check Your Emotions at the Door
There are any number of ways that emotions can become involved in negotiations, all of which are almost universally destructive. Ego and pride can make you give away more concessions than you should if you get into a bidding war with a competitor and don't want to lose. In many cases, the best deals are the result of sellers that are in dire straits and having pity on them can also make you pay more than you should. While there is nothing wrong with being human and having emotions, it's never a good idea to let them influence your business decisions.

3. Set Your Boundaries and Stick to Them Religiously
Every single deal has a tipping point at which what it costs you to make the deal is no longer worth what you stand to gain. Keep in mind, profits are not guaranteed. Any number of things can go wrong, so investment is always a risk. Higher risk always increases the potential for reward, but it also increases the risk of complete devastation. A smart investment is about minimizing risk at every turn while maximizing profit potential. When the risks get too high, it's time to walk away. This is called your ‘out point’. You need to set those in advance, because the higher the stakes climb, the harder it can be to get out. 

4. Be Ready to Close Immediately
More often than not, the better the deal you end up negotiating for yourself, the worse it is for someone else. That’s business. While there are certainly ethical lines you don't want to cross, the truth is, once people have made their peace with the concessions they are going to have to make, they just want the deal to be over and done with. In addition, once they have made their peace with the offer you’ve made, they are also more susceptible to someone else swooping in and making a fractionally better offer. For your own sake as well as those you are negotiating with, make sure you have all of your ducks in a row before you even start negotiating. The better the deal you negotiate, the more likely it is to fall through the longer it takes for money to change hands.


Are you interested in purchasing a property?  We invite you to download our Letter of Intent (LOI) document to submit to the seller's real estate agent to make an initial offer and begin negotiations.

Download the Letter of Intent (LOI)

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