When it comes to real estate negotiations, nothing is more important than leverage. The individual with the leverage is the individual who will ultimately come away with a more favorable outcome (assuming they’re able to couple the leverage with patience).
From a buyer’s perspective, nothing gives you more leverage than knowing that a seller is motivated to unload their house. The question is, how can you tell if a seller is motivated?
Some sellers are really good at hiding their motivation, but most will eventually tip their hand. As a buyer, here are some of the telltale signs you should be looking for:
“The best way to determine if you have a motivated seller is simply to ask,” real estate expert Charles W. Moore believes. “When you go to view a home that is for sale by owner, have them give you a tour of the house and ask the simple but pleasant question, ‘Why are you selling such a lovely house?’”
While you won’t always get a straightforward answer, most sellers will at least provide you with some hints. What you’re looking for are any signs that the seller needs to move quickly. This would include issues like: relocating for a job, needs cash out of the house, death of a loved one, personal finance issues, etc.
You can tell a lot by the amount of time a house has been on the market. Most sellers are patient in the first few days or weeks, but this patience will turn into desperation, which makes them do things they otherwise never would have tried.
For example, let’s say that the average time on market is 24 days in your market. If the home has been on the market for 54 days, it’s only natural for the seller to feel a bit of desperation (particularly if they were already motivated to begin with). Coming in and making an offer could get the ball rolling.
When you look at a normal online listing, there are typically pictures of every room, as well as the outside. This gives you a pretty good idea of what the house looks like and whether or not you’re interested. When you see a listing with only a couple of pictures – and possibly only from outside – this is an indication that there’s something to hide.
Sellers who are hiding something generally feel underleveraged. They know there are issues with the home and are more than willing to negotiate with someone who makes an offer – even if it’s much lower than what they’re asking.
Every now and then, you’ll see a home on the market that is advertised as being fully furnished. In almost every one of these situations, the seller is highly motivated to unload the property.
Think about it for a moment. If a seller is willing to leave all of their possessions behind, it means: (a) they have to move quickly and don’t have time to pack, (b) they feel like they need to sweeten the deal, and/or (c) the sellers are getting a divorce and don’t want to deal with the mess of dividing up belongings.
On the opposite end of the spectrum, you may encounter homes that are empty or already boxed up. This is an indication that the homeowner has already moved out or needs to be gone as soon as possible. Either way, it bodes well for you and is a clear indication that the seller has lots of motivation.
Finally, your alarm bells should ring if you go to a showing and the house is ill-prepared. Dishes in the sink, dirty clothes on the floor, beds that are unmade – these are all signs that the seller really isn’t putting forth much effort. Either they already see the property as a lost cause, or their attention is tied up in something else. This gives you a chance to justify a really low offer.
Once you know that you have a motivated seller on your hands, the ball is in your court. Every real estate expert will give you their own advice, but almost everyone agrees that you should start with a lowball offer. In fact, if the seller isn’t offended by your initial offer, then you’re probably offering too much. And if you aren’t embarrassed by your first offer, you’re also offering too much.
For example, let’s say there’s a house you really like, but it’s listed at $300,000. You can only pay $279,000 at the very most. Instead of immediately offering your max price, aim much lower. Tell the motivated seller that you’ll give him $270,000. It’s a crazy number – and you’ll squirm presenting the offer – but that’s exactly what you want. Remember: you have all the leverage.
After telling you that your offer is ridiculous, the seller will inevitably come back with a counter offer. Let’s say it’s $285,000. You can then adjust your price to $275,000 (knowing you still have room to go up). He’ll likely say no, at which point you hold firm and tell him to think about it.
At this point, one of two things will happen. Either the seller will call you within a few hours or days and accept your offer or enter back into negotiations. Remember, he’s motivated and has no other option. If he doesn’t contact you within a few days, you can call back and start negotiating again. Since you still have room to play, you shouldn’t have much trouble staying at or below $279,000.
At Green Residential, we take pride in helping our clients buy, sell, and manage their real estate. For more information on how we can assist you, please don’t hesitate to reach out and contact us today!
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