A strong return on investment starts with achieving the lowest purchase price with the best terms.  Novice investors spend too much time solely focusing on price, at times to the determent of an excellent real estate investment.  Real estate negotiations tend to be a zero sum game when the two parties solely focus on price.  However, when consider items like seller financing, capital improvements, tenant removal, and others, both parties can come away from the deal better off.

Before thinking about negotiations from a buyer’s perspective, it is important to understand the motivations of the seller.  A majority of sellers would like to get the best price from a buyer that can close quickly and without any major issues.  Veteran real estate buyers can do their due diligence, secure their financing and close on a simple real estate transaction within 30-60 days.  Sellers also prefer no contingencies, clauses in the offer contract that allow buyers to walk away from the transaction with their earnest money.

On the other hand, buyers want the lowest price and the ability to have the property under contract for as long as possible before closing.  Additionally, buyers would like to be able to walk away from the transaction and receive their earnest money back if there is anything wrong with the property, their financing falls through or they simply find a better deal.  This additional time also allows the buyer to shop the property.  In extremely hot markets, it is not out of the ordinary for a buyer to put a property under contract, find another buyer at a higher price and flip the property before they even purchase it.

Buyers need more than the right price.  Seller financing can be an excellent way to increase the return on your investment and conserve much needed capital for future investments.  Seller financing is a deferred payment to the seller with interest.  Since 2008, seller financing has been on the rise and should be a potential negotiating point for any real estate transaction. 

Negotiations should always be fact based and unemotional.  Buyers should enter negotiations with the seller armed with market data and a clear understanding of neighborhood fact patterns that justify their bid price.  If all the comparables from the past six months show decline property values, then it is fair to say based on the trend in this neighborhood, your property appears to be worth x, not y.  During the due diligence process, a buyer discover the tenant has been late with multiple payments or worse, the seller can not produce an accurate payment history, it is perfectly fair to say, due to concerns about the current tenant on the property, your property is worth x and not y.

Over prepare for the negotiation process.  Do not solely rely on a real estate agent, whose interest is not aligned with yours.  Remember, they are compensated as a percentage of the selling price.  The higher the price, the more they get paid.  Remember, the buyers perspective is more than just a low price.