This is a real estate market that requires strong negotiation skills. If negotiation has never been your strongest talent, it’s time to focus on improving how you close your deals.
Maybe you are a strong negotiator with a record of coming out ahead every time you decide to buy a property or strengthen your investment portfolio. Do you sometimes feel nervous or unsure about how the other side of the negotiating table is going to take your offer? Are you more likely to be flexible or will you fight for every single thing you want?
Negotiating a real estate deal is both an art and a science. Books have been written about it, courses are taught to help buyers and sellers approach the closing table from a stronger position.
We thought we’d simplify all the information on negotiating deals into a few important tips and strategies that you can employ right away.
Whether you’re an experienced investor or purchasing an investment property for the first time, you need to be prepared to negotiate. You want to feel like you’re getting the better deal, but your seller plans to feel the same way when they come to the table. How does everyone win?
Having a great real estate agent on your side can help you negotiate the best possible deal. In fact, it’s essential.
Here’s what else you need to know about negotiation as you approach a competitive and sometimes unpredictable Oakland real estate market.
Surround Yourself with Real Estate and Property Management Experts
Before you start negotiating a property purchase on your own, make sure you’re working closely with a local Realtor or an Oakland real estate agent who specializes in investment property. Your agent will help you identify opportunities, see potential investment homes, and negotiate the sales price and terms of the deal.
You need more than a real estate agent. You need an entire team of experts. This is the best advice we can provide when we’re talking about negotiating from a place of strength. You don’t need to take the lead with negotiations if you’ve got a great agent on your side.
When you’re buying investment property that you’re likely to turn into a rental, it makes sense to find a real estate partner who can also provide property management. Advice and insight from a property manager during the negotiation of the deal can be invaluable. Your property manager will understand rental values, California’s strict rental laws, and the cost of maintenance and renovations.
This helps you negotiate. You’re not buying a property to move in yourself. You’re buying in order to rent the home to tenants. That means you’ll be looking for different terms. Your price will have to align with what you are sure you can earn in rent. You may want to insist on some repairs and improvements before you buy; your goal is likely to get the home on the rental market as quickly as possible.
So, begin your negotiations with the support of a real estate agent and property management partner.
Market Knowledge is Crucial in Negotiating Oakland Real Estate Deals
Do you know what homes are going for in the Oakland real estate market? Do you know what you’ll be able to rent those homes for once you buy them?
Every housing markets are all unique, and you need to know what to expect from the Oakland market before you make an offer or negotiate a deal. Educate yourself on how the market is performing and what you can and cannot negotiate when it comes to pricing and sales terms. You won’t make yourself look great if you go in with an offer that’s dramatically below what’s being asked. The seller may not even bother with a counter-offer.
When you have the necessary data, you’ll find yourself in a stronger position to negotiate a deal.
The research you conduct on the Oakland market could potentially save you money, as well as time and frustration. If you learn something that could save you even a thousand dollars on your final price, you’re likely to turn that savings into some impressive returns five or 10 years from the date of your purchase price.
Lean on the professional agent and property manager you’re working with. They’ll tell you what’s reasonable and whether you can ask for a bit more or need to pull back.
Know your numbers before you even enter the market. Here are some of the important research points you’ll need:
- What are homes selling for?
- How much higher or lower are those prices than the listing prices?
- Will you need to make an offer that’s above listing or can you offer something less than what the home is priced at?
- What else are you willing to negotiate?
Before you put together a strategy for buying an investment property you’ve identified, analyze comparative properties in the neighborhood. You need to know what they sold for, especially if those properties are similar to yours and they were sold recently.
With the right data and market evidence, you can support an offer that’s less than asking. You can also negotiate terms like inspection requirements, credits, closing date, and even closing costs. Information is power.
Calculate What You Want and Need Before Negotiating
You cannot negotiate effectively without knowing your own needs and the limits of what you can spend.
Once you’ve invested some time and resources into understanding the market numbers and you have a good idea about what’s reasonable when it comes to an asking price and an offer, you have to decide how far you can go when you’re working out an agreement.
Next on your negotiating to-do list is understanding your own purchasing power and setting firm boundaries for what you can and cannot afford:
Here are some things you can do to figure out what you need out of this deal:
- Get to know your own financial position intimately. How are you financing the purchase? You may have more leverage to negotiate when you’re paying in cash and offering an uncomplicated sale. You might find sellers are willing to drop their price for you.
- Establish a budget. This will help you understand how hard you can negotiate and how much you can raise your offer when the seller pushes back.
- Review your investment goals. Think about what you’re trying to achieve. Is immediate cash flow more important than long term appreciation and equity?
Reviewing your finances and investment goals will tell you where you’re starting when you negotiate and how high you’ll be willing to go.
Negotiate Inclusions for Oakland Rental Properties
Pricing is usually what comes to mind when we talk about negotiation, but there’s more to it than that.
You’ll also have to negotiate inclusions. Leverage whatever you can to get the best possible deal. If you are leaning towards accepting the seller’s latest offer, ask for something in return. Maybe they’ll leave the washing machine and the dryer. Or, you can negotiate the repairs they’ll make before you close the deal. You can offer to waive the requirement that the water heater is replaced if they’re willing to come down a thousand dollars on the asking price.
Using inclusions can help you get closer to your target price when you’re negotiating an investment property purchase.
The Emotions in Real Estate Negotiations
You know that you’re making business decisions, not emotional decisions.
This is easy to understand on an intellectual level, but when you get to the negotiating table, emotions can quickly flare.
Be willing to compromise
You cannot enter a negotiation thinking you’ll get everything you want. That’s unlikely, even with a motivated seller. But, if you’re willing to compromise and be flexible, you can likely come away with a deal that makes you happy. Give a little in the places that you can, but hold firm in the areas that really make a difference to you.
Be prepared to walk away
Be prepared to walk away if you’re simply unable to negotiate into a deal that makes you comfortable. It’s not always easy to say no when you’ve invested so much time and energy into negotiating what you think is a pretty good deal. If you’re not ready to walk away entirely, tell the seller that you need some time to think about what their final offer looks like. You can continue negotiating after all parties have cooled off and thought about their positions.
Try not to appear desperate or over-eager
Leave your emotional energy and your excitability at home. Approach the negotiation with an air of detachment so you don’t give the seller a hint that you’re ready to grasp at anything they offer. It doesn’t hurt when the seller believes you’re considering a number of different properties and you’re not even sure you’re completely sold on this one. Try to appear interested and willing, but not over-eager.
If you’re thinking about how you’ll approach your next negotiation for a real estate investment in Oakland or the surrounding areas, please contact us at California Pacific Realty. We have a lot of experience in this area, and we’d be happy to share it with you.