04 Nov How to Negotiate a Real Estate Deal
Now that you’ve found a real estate property you want to invest in, it’s time to contact the seller. This may feel like the most challenging part for some people, especially those new to real estate investing. But it doesn’t have to be! With the right mindset and negotiation tactics, you can explain to the seller why you are the right buyer, even when you’re structuring a deal that might have little to no money down. Today, we’re going to show you exactly how to negotiate a real estate deal that both you and the seller can agree on.
Where to Begin
How to negotiate a real estate deal is one of the most critical aspects of investing in real estate. Without knowing how to negotiate a deal, you may have difficulty convincing the seller to structure a deal that allows you to make the most profit.
That’s why we’re here to walk you through some negotiation strategies that work.
A few strategies work well to maximize your profit, but we’re only going to discuss one here today (you can discover all of them here). Will this strategy work in every situation? No, it won’t. It will be up to you to decide which strategy will work best for each situation, but we want you to know what is possible and feel comfortable implementing them.
Negotiating the Assign Out Real Estate Deal
The strategy we’re discussing here is an Assign Out. This is the simplest of our strategies. With an Assign Out, you and the seller agree on a minimum purchase price–a price the seller is not willing to go below. Then you also agree on minimum monthly payments.
Finally, you will agree on the minimum timeframe in which you would be open to doing this kind of lease purchase. Be sure to let the seller know that most lease-purchase buyers need between 18-24 months to qualify for their loan.
Once these terms are agreed upon, it’s important to let the seller know that as the investor, you’re going to take the house to market at a higher price because our buyers are willing to pay premium prices for the property, and that’s how we get paid.
The seller needs to understand that we have to have equitable interest in the property; otherwise, we’ll take a hit from the market.
Usually, our buyers are just outside the range of financeability. Maybe they’re self-employed or have had a legitimate hiccup in their credit and just need a little more seasoning before they qualify for a loan.
It may be a good idea to go in-depth with the seller and explain how 65-80% of buyers are interested in a deal like this. And with rules for qualification changing and getting clamped down on, buyers looking for deals like this are growing by the minute.
After we discuss this, we’re going to talk about our usual vetting process. At the end of our vetting process, we’re going to know roughly how long it’s going to take them to get a mortgage. We’re also going to run a background check on them and provide the seller with all the information that will allow the seller to make an informed decision on whether this lease-purchase seller is the right fit.
Wrapping Up the Deal
Let’s assume that after all this, the seller accepts the buyer. That’s when we’re going to collect the non-refundable deposit–which, as the investor, you will get a piece of. So, now the seller is going to get the minimum purchase price agreed upon early, and they just got a bonus with part of this non-refundable deposit!
Not only that, but every month, the seller will be getting the monthly spread as well.
So, let’s cover this again because it’s super important. With this deal, the seller is getting the minimum purchase price agreed upon in the beginning. They’re getting part of the lease-purchaser’s non-refundable deposit, and they’re getting part of the monthly payments the lease-purchaser is paying in rent.
For the seller, when this deal is broken down like this, it’s a no-brainer. Their property is selling for their asking price, and they’re getting more money on top of that.
Discover all our negotiation strategies like the one below by watching this video on our YouTube channel.
What You Need to Know About the Assign Out
We just discussed one of the negotiation tactics that sellers love, but there is some information you need to know about the Assign Out deal as an investor.
When you learn real estate investing from us, we encourage our investors to have 3 Paydays™ because we want you to build long-term wealth. Most of our real estate structures offer you these 3 Paydays™. But the Assign Out option isn’t one of them.
The Assign Out structure is one of the easiest options for sellers to say yes to, and for good reason. It’s a great deal for them! It’s easy to understand, and it often yields more money than the seller thought they would get from the agreement.
For these reasons, the Assign Out is a great way to first start investing. But other deals, like the sandwich or owner financing, will be a better return on investment for you because these options offer three paydays.
Don’t forget! Get your free copy of our Real Estate Investor’s Blueprint. Just fill out the form to the right and we’ll email you our step-by-step guide to getting into investing and owning more homes without using your cash or credit.