New Home Owner – Negotiating

New-Home-OwnerNew Home Owner – Negotiating

New Home Owner – Please bear in mind that this is a negotiation between you and the new homeowner. Do not let anyone convince you that you are the best, or that you are asking for the price of the home. You are not. Of course, you want to get the most for your home, but the new homeowner is going to have a different view. They want to get a lot more. Your job is to do your homework upfront, and make sure that you and your family, or perhaps a close relative, are OK with the final price of the home.

Whether you are selling your home via FSBO or using a real estate agent, one thing is guaranteed. You are going to have a lot of people who want to sell you their home. You can deal with these people, and try to negotiate the lowest price that you can, but remember that the new homeowner is going to have their back against the wall, and will be using their negotiator. There is no way you are going to last forever in this game. When you start to talk shop with different real estate people, make sure that everyone is on the same page. Do not start with something like, “I have a $1000 deposit that I would like from you.” Because if someone else has made a verbal offer you cannot turn around and make a verbal offer to them. You are not negotiating on paper. You are negotiating on what your house is worth. verbal agreements do not hold up in court, and neither will verbal offers. You have to have a win-win situation if you are working with real estate people.

Play the numbers game. Let’s say the new homeowner is willing to sell the house for $270,000 and the owner’s outstanding balance on the mortgage is $270,000. They want $270,000. You say that the market is going to support the $270,000. Bring in a Realtor and have them crunch the numbers for you. Maybe show you an FSBO that is willing to take $260,000 for the house. Use that Realtor to do the negotiations with the new homeowner. Maybe you can get them to settle at $270,000. Deal with the REO department of the bank and ask them what they are willing to do for the house. They will probably tell you that they can sell the house for $270,000. Use their recommendation and see if that works out. Be sure to include in your negotiations the additional fees that the bank is going to be paying, for managing and marketing the home while it is in the foreclosure process. In many cases, they will give you a dollar value on the fee for managing the home, that they will do in-house. This is a commission that they have to pay. In some situations where they have a hard time choosing between two houses, they might accept a commission less than what the bank is willing to pay, just to get the house.

Ask the new homeowner if a rehabilitation investment loan is available. This type of loan will give you a very large loan, and it is relatively easy to get. If they will accept it, you can only finance 70% of the cost of rehabilitation. You finance the rest, usually at 7% interest, with a first mortgage. It is a big loan, but banks will finance properties just like this if they are qualified. Rejecting houses would save them 6% interest, which is less than what they are probably paying for the house now.

Once you have control of the property, make all necessary repairs. In most situations, you may be on the budget, but in other cases, you may blow all of your repair money. Repair the broken bathroom faucet. Fix the broken electrical outlet. Paint the broken windows. These repairs are necessary if you are to sell the house for a profit. However, these repairs are not a necessary item on a financial budget. You can make some money after fixing these items, but usually not enough to make it a profit. The bank, when they finance these repairs may finance the repairs via their repair money rather than the loan you the money for one person. If you are using the repair money, make sure that you do not take too long before selling the house. A house that has broken windows that is impossible to fix may sit on the market for a long time. The key is to sell the house quickly and make a good profit without making any profits out of your pocket.

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