This tip involves a little trickery and some of you might find it dishonest. Normally in a negotiation the side with the most information wins, or at least gets the best terms.
In the process of house buying you will find yourself in a similar situation. You want to pay as little as possible for the house, while the seller wants to get as much as he can for the house. The only way to save money on the price, is to get the seller to come down on price. And in order to have that happen, you need to try to determine how low the seller will go.
The house might be listed for $250,000. You agent will be able to tell you what the seller paid for it and when. Let us say the seller bought it two years ago for $180,000. And according to the seller paid $30,000 in upgrades and remodeling.
So the house cost him $210,000. If he put down 10% he should have a loan balance of about $185-190 thousand. But he is asking $250k. What we need to do is find out how badly the seller wants to sell. And in order to do this we send in a ringer.
When you find a house you would like to buy, have a friend make a low offer on the house. By doing this you will get to see how low the seller will go in price. You will have more information about him than he will have on you and you can use that to your advantage to pay much less.
If you put in a lowball offer yourself, you risk the chance of insulting the seller and they might let their personal feelings get in the way and refuse to sell you the house at any price.
So we have a friend call the listing agent and see the house. He then puts in an offer of say $205,000. The seller will probably say no. But your friend might get a counter offer. And that is what we want. We want to see the sellers reaction. If he sends a counter, that is great. If not, then we did not lose anything.
The counter offer is then the maximum you will have to pay for the house. If the counter is say $225,000, you just saved $25,000. Plus now you can make your offer less than $225,000 and save even more.
If two offers are made on the house in a short time and they are both lower than what the seller was expecting, he will probably lower the price to what the offers are coming in at. His agent will also be pushing him to sell so that she can get her commission and move on to the next client.
Having a friend put in a lowball offer is a great way to test the seller without causing any damage to your negotiations. But make sure the seller never finds out the lowball offer was a set up.
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