Know What You Want
I know this sounds rather stupid, but you might be surprised at how many sellers are not really all that clear as to what they want, or they know what they want, but not how to get it. While you undoubtedly have a pretty good idea as to what price you want, have you given any thought to how you want it, or even why? Perhaps a straight deal, putting big equity bucks in your pocket might create a huge tax liability. Or maybe you plan on investing at least some of it into CD's. Perhaps your child is ready to go to college, and you need money for the tuition.
Whatever you might be using the money for, you could easily increase your chances of a sale for top dollar simply by allowing the buyer to help you fulfill those needs. If the buyer requires less upfront cash, or requires a smaller mortgage because he is taking on some of these things, the buyer benefits greatly, and can afford to pay top dollar. And you, the seller, can get everything you want - a true win/win situation. Let us look at an example:
John Seller wants $150,000 for his $150,000 home, but realizes that he will likely get only $140,000. He has $60,000 in equity, with an existing mortgage of $90,000. John plans on getting only $50,000 out of this, after negotiations. He plans to use $30,000 as a down payment on his next home, and the other $20,000 would be invested in CD's, currently at about 5.5%.
Bill Buyer wants to buy the house, and can only afford $7,000 down and a mortgage of $133,000, for a total of $140,000. On the surface, it appears that this deal will work for both parties. But there might be a better way, IF John Seller realizes it before negotiations get too far.
When Bill Buyer begins negotiating the price downward, claiming it is "just a bit out of my reach", John can come back with something like, "If you will agree to $145,000, I would be willing to finance $20,000 at 7% interest only, principal due in 5 years when you can refinance - that's much less than the rate you would pay on your mortgage, which saves you money. And, instead of taking out a $133,000 mortgage at 8.5%, you would only need a $125,000 at that rate, and with the $20,000 second you would owe at 7%, you come out a little better - a slightly smaller mortgage payment each month. Then, we both get what we want."
You see, if you sell for $140,000, pocket $50,000, use $30,000 as a down payment on your next home, you have $20,000 left, earning you $1100/year in interest. But if you sell for $145,000, you still have $30,000 down on your next home, $5,000 extra cash in your pocket and a $20,000 note that pays you $1400/year (instead of $1100). You come out ahead by $5000 cash plus an EXTRA $300/year in interest (times 5 years = $1500 extra dollars). That's a total increase of $6,500, and the buyer pays nothing extra for it. You both win.
Or, instead of you paying $5000/year towards your child's tuition, let the buyer sign an agreement to do that in exchange for an equal amount off the price of the house, provided he can show the financial means to do so, and your agreement with him is a lien on the home. Or perhaps you had planned to use $5000 of your proceeds to pay off your credit cards - let Bill Buyer assume responsibility for those debts in return for an equal amount off the purchase price.
The point here, of course, is that if you can give the seller a break - and still accomplish what you need to do - you can negotiate a better deal for both of you, just in a different way.
NEXT: Speaking The Buyer's Language
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