There are five key factors when structuring the offer:
1. Do not burden the investment with excess debt.
2. When new debt is created, attempt to make it assumable.
3. Introduce a provision that would allow the borrower or future buyer to slide the mortgage to another property of equal or greater equity.
4. Future profit or loss can be a direct result of the terms and conditions of the acquisition.
5. Remember that all parties to a transaction want to come away feeling that they have won something. Some buyers and some sellers tend to leave a sour note at the closing table by making disparaging remarks about the deal, the parties. or agents involved. There is no benefit in this kind of action. You never know where your next deal is going to be. so don’t burn bridges no matter what.
How Much Do You Offer?
All buyers should determine the maximum values that can be paid for the subject property for each of the following: price, down payment, monthly payment on debt, and minimum term of debt.
Once investors have a clear understanding of the highest values they can pay in certain circumstances, then the initial offer can be presented. reflecting a reduction from these maximum values to provide room to negotiate and to allow the buyer to see how good a “buy’ can be obtained.
How Little Should the Buyer Offer?
There is no set rule. The practical approach is to find out how low an offer can he made with some rational justification. If the listing agent or the investor himself or herself has some solid facts to back up the reason or rationale for the offer, then obtaining a counteroffer is easier. It may be that the low offer made is far more realistic than the asking price, but the difference may be a sudden shock to the seller. Buyers must be very careful that the “sudden shack” is not interpreted as an insult.
As a seller you should be insulted when someone makes an offer - just think of all those people who don’t even like the property enough to make an offer.
The real estate agent can be helpful in providing information on other similar property in the same area that has sold recently. This will give statistics to substantiate the “low” offer. However, a good listing agent should have already made this kind of data available to the seller (in an attempt to adjust the price to the market value). If the market is in favor of the seller, a buyer will ultimately pay the seller’s price or very close to it. A highly motivated seller may have already reduced the price sufficiently to attract a buyer.