Negotiating a deal for a property to the best possible price is one way to build instant equity into your property. Remember that buying the property right is the key to your real estate investments. So, how do you get a seller to take less than they might otherwise?
- No Market Expert - Without the most relevant information regarding property values, market trends, upcoming development, etc, buyers can't be fully informed. Knowing the ins and outs of the local market is the only way you can make the best decision. A professional agent, like me and the agents that work with me, is working in the market every day and has a knowledge base that extends beyond the actual properties as well as the potential pitfalls that could surround a property that looks good on the surface, but may cost the the new buyer thousands in the future.
- Plan for Purchase - Not having a plan for their purchase: buying without a business plan for your property is like getting in the car and driving with no particular direction and wondering why you didn't get where you were wanting to go. Many buyers make decisions without considering their plan for the property. In order to make the best purchase, your plan should answer such questions as: "how long will I own the property?", "what is important about the property if I resell it sooner than I thought?", and "what type of financial performance do I expect from the property in terms of future appreciation, income potential, etc?"
- Keep with Your Plan - Not sticking with the plan they made: Many buyers will have a plan for their purchase up until the point that they start looking at actual properties. Because there are always choices to make when buying, you can be tempted to abandon the plan. Instead, a property is found and the plan is adjusted to fit that property. Rarely will a property's performance change if it didn't already fit what you were trying to accomplish.
- Setting A Limit - It's human nature to become emotionally attached to a property you like, especially if it is a place where you will spend considerable time. It is important to establish your top line before you start negotiating. That top line will be based on logic. If, during the negotiation, you determine that you want to abandon the logic and spend more, at least you made a conscious decision. If you got caught up and overpaid without some prior analysis, you may find out in the end that you overpaid by $10,000 or more. Depending on our market's appreciation down the road, and the current value of the property, that could mean an additional several years to make up the difference.
- Over Improving - for a short term hold: Whether you are flipping or only planning to stay in the property for a couple years, its important to make improvements you will enjoy, but being aware of things that will be costly but won't positively impact future resale value. Consulting with a professional agent that sells a lot of real estate before making improvements can help you get the necessary information you need to make the right investments. You may still choose to make some costly upgrades, but at least it will be an informed decision.
- Not Understanding How Agency Works - A major financial mistake that buyers can make is not understanding who is representing who in a real estate transaction. Unless you are a market expert with some experience negotiating on properties, its a good idea that you have a professional agent representing you in the transaction. Buyers often find out too late that they were underrepresented or not represented at all due to some conflict that they were not made aware of. An agent is required by law to disclose the relationships in a transaction, and you can also prepare yourself to ask.
- Trying to Time the Market - NOBODY can predict what the market will do with perfect reliability. We are typically learning from hindsight. Waiting is what buyers do when they don't have a plan. If the purchase makes sense according to the plan at that time, pull the trigger. Don't wait for the market to make decisions for you.
These 7 mistakes can be very costly, but also can be easily avoided. Knowing what to avoid is the first step in creating a good plan. Contact me to discuss your circumstances and to map out your plan.