Negotiating A Sales Contract On Your Finished Rehab
|Lately, I've seen investors blowing deals at the very moment they find out that buyers want to purchase their renovated homes. It's becoming enough of a trend that I feel the need to tell you why this is happening - and how you can avoid it.|
It's not easy to get a home sold today. It's natural to become anxious when someone expresses an interest in your home. But this is not the time to negotiate. Allow me to explain:
For example, let's say your home has been listed for a while, and an agent gives you a call to let you know that they have a party who is interested in your home. You begin to ask questions like "how much are they considering offering?" or "How soon do they want to settle?" or "I hope they aren't asking for too many contributions, because I'm not moving much."
Frankly, my students end up getting into conversations that they should NOT be having yet. And you know what happens? The deal ends up blowing up in their face, before a contract is ever signed.
When someone says that they have a party who is interested in your home, you should have only ONE thing to say…
"Great! When can I expect an offer to review?"
You want to encourage the agent to get an offer to you. It doesn't matter at this time how much the offer is for, what kinds of contributions the buyers are looking for, or how soon they want to settle.
Until they put it in writing, none of that is real.
If the agent begins to pry and say something along the lines of, "My buyers are considering something less then your list price, are you flexible?", your response should be, "Maybe, how soon are you planning on getting the offer over? Once I've had a chance to look at it, I can give you a better answer to your question."
Most beginners would respond by saying "What do you mean by flexible?" or "Just how low do they plan on offering?" The answers to those questions do not matter! If it is not in writing, it is just a meaningless conversation.
Here's Why This Is So Important
You see, getting a buyer to sign a contract is a big thing. They are making a commitment and saying, "I want your house." This is a major step taken on their part.
You NEED for your buyers to take that step before you consider ANY negotiations. You need to know that they are committed to buying your house, before you say anything that could turn them off.
Buyers have jitters prior to signing a contract. If you give them any reason to doubt that you are willing to work with them (whether that is your intention or not), they may not sign the offer.
Once they have made the commitment and signed the offer, however, you have one thing out of the way: they want your house. They've spoken that loud and clear. They have chosen your house over all of the others, and they are ready to deal.
This is when you can start to negotiate. Not before.
Why? Because it's much easier to get someone who has already crossed the first hurdle to clear the second one. The first one is the hardest. You may find, later, that you can't negotiate a deal with these buyers. But at least you are negotiating with someone who is committed.
How you handle an individual offer is not as important in a hot market, where you may receive multiple offers. But now, when offers are scarce, you need to give each offer every chance to succeed. You need to do everything in your power to negotiate each offer from a place of strength, on your part, and commitment on the part of your buyers.
|Since 1998 Steve Cook has flipped many hundreds of houses as an active Baltimore-area real estate investor. Steve's unique specialty is the "flipping homes 1-2 punch", a proven system of real estate investing that powerfully combines wholesaling and rehabbing houses. Steve Cook is dedicated to helping others succeed through understanding and aggressively applying his time-tested, step-by-step approach to flipping real estate. |
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