Their Price Your Terms

5 Replies

I have recently heard several established real estate investors mention this, but specifically what does that mean? I understand "their price" but the "your terms" is throwing me off. Is there really that much you can change besides interest and amortization schedule? Please let me know what you all think I a novice investor still.

There are many, many things, everything is negotiable. Sometimes by letting them 'win' by paying their price, they will concede to so much more than the extra price you're paying. The options really kick in when owner financing is on the table. Amount of down payment, rate, length of term, structure of payments, personal items included with the sale (could be furniture, could be a vehicle, goats haha, who knows?), closing timeframes, seller performed or funded repairs, closing costs, etc. You're only limited by your imagination. Early in 2015, I purchased a commercial property for $500,000, about $150,000 more than current market value. But by agreeing to pay that much more, not only did the seller owner finance $460,000 of the price, but I was able to negotiate the interest rate from 6% to ZERO. This is not a flip property, but a long term buy and hold where another business I own is the tenant. I will save well over $400,000 in interest over the life of the loan, and market value is coming close to catching up with my inflated purchase price. This is an extreme example of course, but it worked for my needs and goals

@Mark Tallent   I'll pay double list price for any property if they allow me to set the terms. The terms are $1 a year until paid off, no interest.  Aw  heck, I am feeling generous tonight, I will pay three times list price.  Oh I forgot, seller pays all cost of transfer. 

Mark I hope that helps you get the point.

@Ashley Childers Thank you so much for the examples would mind naming other things that could be changed for terms? I'm at the point in my journey where I don't know what I don't know! Thanks again!

Originally posted by @Ned Carey :

@Mark Tallent  I'll pay double list price for any property if they allow me to set the terms. The terms are $1 a year until paid off, no interest.  Aw  heck, I am feeling generous tonight, I will pay three times list price.  Oh I forgot, seller pays all cost of transfer. 

Mark I hope that helps you get the point.

 Thanks for mentioning cost of transfer didn't think of that one do you have other examples besides interest and amortization schedule?

@Mark Tallent the cost of transfer includes many items that can be negotiated separately. Transfer taxes, recording taxes, back property taxes or other municipal bills, title insurance, or attorney fees. 

Also there is normally an adjustment for prepaid items. Lets say the owner paid the taxes on the first of the year for the current year. You buy the property on July 1. The previous owner has already paid your taxes from July to the end of the year. So the title company will normally adjust as of the date of settlement and part of your closing costs are to reimburse the seller for the 6 months of pre-paid taxes.  Depending on your area there may be other items to adjust like water bills. 

The above adjustments are normally done as of the date of settlement but they don't have to be. As an example, auction contracts often say bills are adjusted as of the day of the auction. This is an advantage to the seller. Auction contracts sometimes say interest is to be paid on the purchase price from the date of the auction until the date of settlement.Again this is an advantage to the seller and extra cost to the buyer.  If you are a buyer you could put in the contract there will be NO Adjustments for prepaid items like taxes. This would be a benefit to you the buyer. 

Another term of the sale could be a long time to settle. This can give you time to find another buyer or to find the purchase money. You could ask for Possession of the property now and settle in 1 year.  You could be renovating or renting and collecting income for a year without putting out the money to buy.  Of course the last strategy comes with risks also. 

My point is that everything is negotiable. There are generally traditions and ordinary ways of doing things but they usually are not legally required.