Signs That A Seller May Be Willing to Negotiate

During times of uncertainty, such as a recession, while others are fearful of taking action, millions will be made by the few savvy real estate investors who know how to take advantage of the opportunities in front of them.

As buyers exit the market in fear of losing money due to uncertain economic factors, the lessened competition increases the leverage in the buyer’s favor. The increased leverage opens the door for negotiations between the buyer and the seller. If enough buyers exit the market, the imbalance between buyers and sellers will inevitably lead to a declining housing market. With buyers searching for the best deal, sellers are forced to lower their prices to stay competitive in a low-demand environment. This creates a tremendous opportunity for buyers to negotiate favorable terms to improve their investment.

While these market conditions may seem daunting to most, they can be extremely profitable. But how do you determine if a seller is willing to negotiate? Here are some signs to look for:

The property has been on the market for an extended period: Selling a property is a cumbersome process, and the longer a property sits on the market, the more it’s preserved value is doubted. If a property has been listed for several months, it is usually a sign that the seller is struggling to find a buyer. For those looking to purchase a property with favorable terms, this is a good sign. The longer a property sits on the market, the more purchasing power the buyer has entering into negotiations. A property can go unsold for a variety of reasons, which may or may not have anything to do with the property itself. No matter the reason, the delayed sale of the property can be a strong indication that the seller is open to negotiating on price and or terms.
The seller is motivated to sell quickly: It is not uncommon for individuals to be forced to sell assets they otherwise wouldn’t have. Usually the situation is unfortunate. A seller may be facing financial difficulties, is looking to relocate/move, managing an estate sale, finalizing a divorce or has another pressing reason to sell quickly. These circumstances could indicate that the seller may be willing to compromise on price and or terms for the sake of expediency. This is not meant in a predatory way. Much of the time purchasers who buy properties from these individuals are helping the seller get out of a tough spot. These properties are often great deals, however the only caveat is they usually require a quick closing date. For those buyers who do not have their financials in order, these properties may be difficult to purchase.
The property has some imperfections: It is no secret that well designed and well decorated properties sell quicker and for a higher price than those that are not. On the flip side, properties that are in need of repairs or renovations are often slow to sell and when they do they sell far below their value. Those who understand the risks and costs to repair or renovate these imperfections are at a severe advantage over the buyer pool. Oftentimes the sellers overestimate the cost to restore the property or see the restoration of the property as “not worth their time”. As such these sellers usually believe the property is worth less than it may be valued at, allowing the purchaser room to negotiate. These can be great opportunities for those looking to get a little dirty.
The seller is a bank or an institution: When property owners fail to pay their debts (or taxes) the debated institutional (i.e. Bank) repay those debts by re-processing the ensured asset, in this case a property. They pay off the debt by selling the asset to make up the difference owed. These institutions are often flexible on price and oftentimes will sell properties far under market value in order to liquidate the asset quickly. However, it is important to note that these institutional sales/power-of-sales/fire-sales often have very strict terms and leave almost no room for negotiation on that front. For those looking for a highly negotiable purchase price, bank or institutionally sold properties may be your best bet.
Problem tenants make the sale difficult: Selling a tenanted property can be a challenge, but selling a tenanted property with a problem tenant can be a nightmare. It is not uncommon for problem tenant to disrupt the sale of a property, make the property look dissolved, or at worst damage, the property to prevent a sale. These properties are often tremendous opportunities to buy a property at a discounted price and may even come with favorable terms. The challenge here is in managing the tenants. You may be able to stipulate vacant possession although this may not be a grantee in all situations. Nonetheless, tenanted property is a great opportunity to negotiate with sellers on both price and terms of the agreement, however do keep in mind you will likely have to inherit the problem tenants.
Past agreements to sell the property have fallen through: Oftentimes, if the sale of a property falls through, the seller is left frustrated with the process. At best, they have been trying to sell their property for a few months, getting excited about the sale, only to be left disappointed a month or so later. These sellers are often great targets to negotiate favorable terms. Oftentimes you can purchase the property for less than the previous buyer, and might even be given access to any due diligence the previous buyer may have performed, which may allow you to structure better terms to suit your personal interests.

Joseph Costanza

Costanza Capital Investments

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