Negotiating with sellers to buy houses below market value?

Question

What are the best practices to Negotiating with sellers to buy houses below market value?

Chris Seveney · Answer

Take a guru course that teaches you to pretend to be a financial advisor and you are doing what you are doing in the best interest of the seller and its best for them to sell to you at a discount vs. the real other options they have (note this post is satire - do not do this)

James Hamling · Answer

I absolutely hate Hate HATE this BS ridiculous notion popularized by various books, programs, gurus and what not that you just go ask enough, or in the right way, and someone is magically dumb enough to sell you a $300k FMV property for $200k.....

It does NOT work that way and it never has. Not last year, not in 2010, not ever.

So the only "psychological trick" is to not be an idiot yourself.

How it ACTUALLY works, and has always worked, is you are selling a SOLUTION. A solution that has monetary value. And you the buyer are BUYING PROBLEMS that you can solve at a net return.

For example:

Aged property owner transitioning into assisted living. Property is 27 years out-dated.

You are selling them a solution that they can sell it as-is, no need to spend $ out of there pocket to get it into sale condition. This holds a value.

And you can reno it to retail in it's "Sunday best".

Win-win.

Or a person in pre-foreclosure. You can help save there credit from the whammy of a foreclosure on their record for a decade to come. Again, selling a solution.

Or a person who's maybe owned a property 30-odd years and been listing forever with no takers, clearly with a strong desire to sell but an issue of market price not working. You may be a solution via taking it on seller financing.

SOLUTIONS. The primary reality is being a problem solver 4-profit.

In most places they have a term for conning a person to give up there $300k FMV property for $200k via a silver-tongue..... Equity Stripping..... And it can come with a nice shiny pair of bracelets and free room and board at camp-klink for a few years.

The generalized slang of "buy under market value" is a short form way of saying "buy at a price that affords correct margin to effect what repairs and problem solving is necessary with an appropriate profit margin and carried costs to make it a net profitable venture".

If all the books, programs and gurus were focused on accuracy over marketing the headline would instead read "Buy Profitable Problems".

But that doesn't have the same sizzle for those never-doe's chasing hopeium hit's. And that's just the reality, there selling a dream same as Nike building a brand where a 300lb middle aged whatever feels more "athletic" cause they got the new Jordans.....

Dan H. · Answer

1) cash

2) wait until removed from market/mls.  Related, high DOM with some price reductions.

3) offer immediately after a contract falls through

4) removal of contingencies

5) avoid over zealous markets

6) network: bird dogs, wholesalers, FSBO, etc.  Goal is off market.  my last 4 purchases were off market and my last under contract was off market.

7) auctions with sparse turn out (not my market)

8) start your own off market market campaign.   Letters, calls, seo, door knocking, driving for dollars, etc.   propstream, invelo (has free option with BP pro), etc.

Note I am not saying any of these is both easy and without risk.   My belief is that most inexperienced RE investors are best served purchasing using an RE agent off the mls.

Good luck

Bill B. · Answer

All cash, large non-refundable EMD, no inspection/appraisal contingencies. Fast close or rent back if the seller wants/needs either.

Why would you give a stranger $10,000 off your product’s real value? (Really a gift to a stranger larger than given ever given to a loved one.). You want confidence they will close. That’s cash, a large penalty for not closing, or no escape clauses.

James Hamling · Answer

In these instances I have persons who specialize in credit repair of this type and if we can transact it PRE-foreclosure, and even in redemption situations, they have been able to completely remove the foreclosure from credit because it was satisfied in full.

Now, the lates are and will always be lates. The credit will not be perfect of course but it is a very big difference in credit impact of just those lates with a fully satisfied pay-off or with a foreclosure.

It is an item that takes months, but still far better then a decade of foreclosure on record.

Ken M. · Answer

Your comment: "Or a person in pre-foreclosure. You can help save there credit from the whammy of a foreclosure on their record for a decade to come."I agree with your sentiment, however just for clarification, if someone has received notice of foreclosure, that immediately becomes public record and trashes their credit. You will never know a property has lates and is headed to foreclosure unless you ask them. It isn't public information. You can still help them get out of foreclosure, but the damage to the credit is already done.Someone coming along and buying the property after the notice (which is when we learn of the problem) but before the sale, does nothing to improve their credit. The loan has already been reported as a foreclosure. In fact, long before they receive a notice of foreclosure they will have multiple mortgage lates showing on the credit report. That trashes their credit. It's taking about 6 months of lates these days before a notice of foreclosure is even sent.Agreed = "Buy Profitable Problems".

Marcus Auerbach · Answer

The psychological trick is to be authentic and confident in your ability to close. Most people understand that you are offering an easy solution in exchange for less money.

When I was a new agent (but already an investor for years) I was working on a seller for weeks on how to get his house ready - it was a bit of a mess - to get him the most amount of money. Eventually, he asked me if I would just take it as is for basically half price. I still own the house.

I just closed another deal on a move-in ready home in the suburbs. The property was under contract, the deal fell trough and the seller was also the buyer on his new home. He would have not been able to close without selling. I stepped in with a cash offer and we closed on the original date in place of the original buyer, but in exchange for a reasonable discount.

Priyanka Verma · Answer

Find Sellers Who Really Need to Sell - Look for people going through tough times — maybe they're behind on mortgage payments, dealing with divorce, or have a vacant house they don’t want. These sellers are more likely to accept a lower price just to be done with it.

Know What the House Is Really Worth - Check what similar houses in the area are selling for and figure out how much fixing the house would cost. Use that info to explain why your offer is lower — it shows you're not just throwing out a random number.

Be Ready to Buy Fast - If you’re already approved for a loan or have cash, sellers will take you more seriously. People love a quick and smooth sale.

Don’t Be Rude and Be Honest - Keep it respectful. Explain your offer and how it benefits both of you like they don’t have to fix anything, or you can close quickly.

Make Their Life Easier - A seller might accept a lower offer if it means no headaches — like no repairs, no showings, and no delays.

Talk Like a Human, Not Just a Buyer - Be friendly. Ask about their situation, listen, and be kind. People are more open to selling cheap if they trust you.

Don’t Give Up After One Try - If they say no, check back later. Situations change, and your offer might look better after some time.

These tips are how smart investors and buyers get good deals by being prepared, kind, and understanding the seller's needs.

Bill B. · Answer

What kind of psychological “trick” are you going to play through your realtor, and then their realtor? You’re more likely to piss them off and cost yourself the deal or pay a higher price. Again. Imagine a trick a buyer could play on you through two realtors. Heck, imagine a trick they could play on you directly. Would you see it if someone tried to play it on you? Of course you would. Would that make you want to give them a discount?

You haven’t noticed how easy it is to see a fake or a liar? This isn’t how you get a discount. Have you noticed you’re surrounded by experienced experts and none of them have suggested any “tricks”?  There’s a reason.

Theresa Harris · Answer

This really depends on your market.  Where I am, lower priced houses (under $350K) are going quickly, overasking with multiple offers.  Pull the recent compareables and use those along with condition of the home and number of days on the market.

Negotiating with sellers to buy houses below market value?

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