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Negociation Tight Rope

Come to a negotiation with a number in mind and don't let how much you like or want the property change it. You will like the property even better later if you paid the right price.

Every time you are asked for a concession, ask for one in return. 

The rounds of offers and counter offers can be a roller coaster, get advice from your realtor about property values in the area and ask their opinion about prices but the final decision is your at the end of the ride.

Here are some tips for negotiating the best price on a property.

1.      Get pre-qualified for a mortgage.

Pre-qualified buyers show sellers that they are serious and capable of affording the property. Sellers want buyers that are a sure financial bet. 

2.     Ask questions:

Understand the sellers’ motivation to sell:
     - Are they in foreclosure or is this a short sale? 
     - Do they have another house and need to sell this one?
     - Are they relocating because of a job or money issues? 
     - Has the home been on the market for a long time? 
     - Have there been other offers that did not go through? 

The more signs that the sellers are eager to sell, the lower your offer can reasonably go.

3.    Work back from a final price to determine your initial offer:

Know in advance the most you're willing to pay. Talk to your real estate agent to arrive at that number and work backwards from that number to determine your initial offer. A bid that is too low may offend the sellers / too-high a bid can lead you to spend more than necessary. 

4.     Avoid contingencies:

Sellers like offers that leave little to chance. Keep your bid free of complicated contingencies, such as making the purchase conditional on the sale of your current property. 

   *  Always keep the contingencies for mortgage approval, home inspection, and environmental checks typical in your area, like radon, termites and chinese drywall.

5.       Leave emotions out of it.

This may be your home some day but, now it is a business transaction. Remembering this will save you money. Any actions by the sellers, might be a sign of interest, keep negotiating, until the answer is no. (even then... leave the door open if you are interested, but don't go against the numbers.) Always make it clear you’re willing to walk away.

6.       Don't let competition change your strategy:

Sometimes a property will get many offers. Don’t let this get you to go above your taget price or agree to waive a condition such as performing an inspection or shortening your time to find a mortgage: this is really dangerous.

7.      Keep the down payment reasonable:

Unless the property is very expensive, 2 to 5 thousand dollars is enough to show good faith without tempting the seller to look forward to a default in order to go after your deposit.

Bank, REO and some developers favor a large deposit to make sure the buyer is serious and keep the buyer motivated to complete the transaction, no matter what unfavorable terms they impose.

Keep your options open and your head clear. A good attorney on your side would not hurt either.