Real Estate Deal Analysis & Advice

The 3 Things to Remember Before You Negotiate a Real Estate Deal

Expertise: Real Estate Investing Basics, Personal Development, Landlording & Rental Properties, Real Estate News & Commentary, Business Management, Flipping Houses, Real Estate Deal Analysis & Advice, Personal Finance, Real Estate Marketing
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Today I’m talking about the top three things to remember before you negotiate a deal. Let’s get started!

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OK, guys, check this out: There are three things that I am going to talk about. Number one is information equals power; number two is options equal safety; and number three is you have to be willing to walk away from a deal at any given moment.

Information Equals Power

So let's talk about the first one now. Before you even start looking for a property you need to immerse yourself in a particular zip code (or zip codes). You really need to become the alpha and omega in that particular area from an information standpoint. What that means is you need to understand what distressed properties are selling for; you need to understand what renovated properties are selling for; you need to know who the top selling real estate agents are; you need to understand who is buying the most properties there, who the wholesalers are, and who the bird dogs are. Guys, anything and everything. Soak up as much information as you possibly can like a sponge, because it is really going to come in handy at a later date.

Once you’ve compiled all this information, you are going to start looking for properties. If you see something on Craigslist and say, “Wow, that’s a great price. I know the area, and I know what comps are selling for — now what do I do?” Now you need to get as much information as you possibly can about that particular property. Call the seller and ask several questions like: How long have you owned the property? What condition is it in? Is it currently tenanted? Is it vacant? How long has it been vacant for? Are there any back taxes associated with it? Are there any liens? Why are you selling the property? The more questions that you ask, the more power you will have. You will also know what’s going on in the area.

All of this information will enable you to make educated decisions. Look, we all make mistakes, but the more information you have, the more you will decrease your risk if you do decide to buy that property. That’s the first thing: information equals power.

Related: The Ultimate Guide to Negotiating (for the Negotiation-Averse)

Options Equal Safety

So you’re probably thinking, what the hell does that mean? Well, it means options. How the hell are you going to buy that property, right? You have negotiated it? Gotten the information? You know the numbers in the area and on the deal. It makes sense, and will make you a lot of money, but what options do you have? Do you have cash on hand? Or do you have a hard-money lender? Do you have a bank that you are working with? Guys, you need to have options with regard to how you are going to acquire that property.

You also need options for how you are going to exit that property or sell it. Now you've got the money; you've bought the property; you started renovating it—now what? How are you going to sell it? What are your options for selling the property? Do you have buy-and-hold investors who may want to buy in that particular area? Are you going to sell it to an investor because the cashflow makes sense? Are you going to fix it up a bit and wholesale it to a buy, fix, and flipper?

Or what if no one is buying? Will you refinance out of the property? In the worst case scenario, do you have a property management company that you’ve established a relationship with so you can rent it out?

Guys, you get my point. Options equal safety — so you better make sure you have a ton of options.

Related: 6 Tips for Negotiating Your Maximum Allowable Offer With Sellers

Be Willing to Walk Away From the Table at Any Given Moment

Last but not least, the most important one, you must be willing to walk away from the table at any given moment. You need to know what the price point is that you cab pay — and not pay a single penny more. I have lost so many deals over things like $200 in closing costs. Well, guess what guys: That $200 today is going to be $2 million in closing costs tomorrow when I'm buying that multifamily unit on 5th Avenue in New York. So I stay true to my core beliefs when it comes to negotiating. I'm firm but I'm fair. I always perform. I always close. But I'm willing to walk away at any given moment for a dollar. I will never pay more than I need to pay. When a real estate agent comes back and says highest and best, I tell them I wish the highest bidder all the best. Do not negotiate against yourself. When one door closes, another one opens.

Guys, there are so many opportunities out there. A lot of you folks on the East Coast, West Coast, and expensive markets are outbidding each other to pay more, which is absolutely ridiculous to me. I keep going to these conferences and events and everyone is talking about a lack of inventory and prices getting ridiculously high. I don’t know where that is coming from, but I feel like a kid in a candy store. I’m sorry. The Midwest is where it is at. I’m biased because I’m here. But there is a reason I’m here. I’ve come from sunny Sydney, Australia and it’s snowing outside right now, but this is where the numbers make sense. This is where the opportunities are. This is where deals are falling off trees. So there is no need to pay more, not even $100 more.

Look, that is my advice for you guys. Information equals power; options equal safety; and be willing to walk away from the deal no matter what. I’d love to hear from you, comment below.

What are your go-to tips for negotiating a deal?

Share them in the comments below!

Engelo Rumora, a.k.a."the Real Estate Dingo," quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate al...
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    tim boehm
    Replied over 2 years ago
    Hay Engelo How did you get a name like Engelo living in Aussie land? Anyway yea, the midwest is the place to be right now for flipping and doing low income rentals. I have seen properties selling there for 200k you could buy here for over a million. I have seen some properties around here that I also couldn’t build for the selling price. We all know the three most important things in buying but they aren’t necessarily the three most important things in making money. Good luck from this kiwi!
    Engelo Rumora Specialist from Toledo, OH
    Replied over 2 years ago
    Thanks for your comment Tim, My parents are from Europe so I guess they decided on an Italian name for me lol Much success
    Dave Rav from Summerville, SC
    Replied over 2 years ago
    Be willing to walk away is something that is resonating with me right *now. Too often, especially when we are hungry for the next deal, we bend a little too far on price, terms, our negotiation in general. Don’t be too hungry! I looked at property 2 days ago. It’s a 3/2 TH held by seller as rental. He told me it’s paid off, so I immediately thought = seller financing. Also worth noting in positive light is there are zero regime/HOA fees! Wow. So boost to CF. Anyways, I came with my offer of $80k, which included 10k down and 70k seller carryback. Not only did seller balk at financing, but he countered me at $87k. I probably shouldve walked away as seller fi was my primary interest, but instead I countered at $82k and let him talk me into considering bank financing. I never had any desire to get institutional financing in the first place! I was hungry and bent too far.
    Engelo Rumora Specialist from Toledo, OH
    Replied over 2 years ago
    Thanks for sharing Dave, Never pay a penny more that you need to. There is always another deal around the corner. Much success
    Quinlan Canary Rental Property Investor from Miami, Fl
    Replied over 2 years ago
    I definitely resonate with, information equals power! I’m at that part of my process in looking to close on my first deal. Thanks for the post Engelo!
    Engelo Rumora Specialist from Toledo, OH
    Replied over 2 years ago
    Thanks Quinlan and congratulations
    Rob Cook from Powell, WY
    Replied over 2 years ago
    Good post, Engelo. I finally sent you the email today, by the way. All good rules and advice. I have similar basic rules, such as follows. • Do our homework, due diligence • Stick by your numbers, don’t get auction fever, etc. • Become a Local Expert on your hood you want to work in • Never fall in love with a deal – take it or leave it attitude and stance • Have multiple exit strategies before buying – maybe flip, wholesale, keep as a rental, etc. just in case. You have a good deal of experience and this shows in your advice here. Thanks
    Engelo Rumora Specialist from Toledo, OH
    Replied over 2 years ago
    Thanks Rob, Getting emotional is a big one. Many folks over pay due to “liking” what a property looks like It doesn’t matter how ugly or pretty it is, as long as the numbers are sexy lol Thanks again and catch you on the next blog ps. Didn’t get an email from you
    Tayler Franklin
    Replied over 2 years ago
    Great post. I need to remind myself of that last point pretty often. Since Live-in-Owner renting is what I’ve done so far and what I hope to continue doing, it’s easy for me to think emotionally about these things. It’s where I’M going to live as well, after all. But if I’m losing out on my own security, comfort, and money in the long run because I overpaid, I’m the only loser.
    Engelo Rumora Specialist from Toledo, OH
    Replied over 2 years ago
    Thanks Tayler, Base your decisions on the number and not emotion Much success