Becoming a negotiation expert for your client

A. Strategies for Protecting your Buyer Against Low Appraisals:

1)    Every Offer should include a mortgage contingency clause for at least 30 days protecting the Buyer during the financing process against loan rejection and low appraisals. This allows Buyer to cancel the contract and receive return of full deposit in the event they cannot secure a mortgage.

2)    If a Seller remains steadfast and the contingency has a direct effect on the purchase price, then attempt to negotiate contingency period to at least 15 days (appeases both parties), you may also want to negotiate a floor for the Buyer (ie: Buyer will cover up to 5% of the purchase price out of pocket – meaning 75% financing instead of 80%).

3)    Appraisal vs Mortgage Contingency- if Seller won’t agree to an appraisal contingency, but there is still a mortgage contingency in place, then we can use this as a shield to protect the Buyer anyway by way of insufficient assets.

B. Creative Negotiation Tools: How to Maintain the Client’s Bottom Line and Still Obtain    the Best Value for Your Client:

1) Seller issues Buyer a closing cost credit or free maintenance at closing

2) Seller includes free storage bin or something of value (ie: furniture included)

3) Buyer offers Seller a free lease back option after closing

C. Creative Negotiation Tools for Everyday Resales: Saving your Clients Money

1)    Seller Concessions: if you client is tight on funds and wants to maintain their liquid cash post-closing, then we can negotiate a seller’s concession whereby the closing costs can be financed into the loan (ie: $20,000) so that the Buyer brings less money to the closing table and gets a credit of $20k towards their closing costs.

2)    Rent to Buy Options: For new construction properties and vacant resale properties that Sellers don’t want to continue carrying, propose this option to a Buyer who is not ready to buy due to circumstances or funds (can be 6 months- 1 year lease). *You collect double commission, on rental and sale.

i.     Arrangement can be made where monthly rent will include a portion to cover seller’s carrying costs, and a portion to go toward 10% deposit (such as 50/50 split of rent). If Buyer defaults on purchase, then deposit monies collected will be retained by Seller as liquidated damages.

ii.     Another option is to have Buyer put 5% down upon lease signing, pay rent

accordingly, and then put another 5% down upon exercising the option to    buy after 6 months. If he/she defaults, then 5% is retained by Seller as damages. Also, the parties will agree to average the 2 appraisals in order to finalize the purchase price in the event of significant market shifts.

iii.     For new construction buyers, Buyer can move in once TCO is issued as a “preclosing tenant”. Buyer will pay market rent to Sponsor until closing and rental amount can be negotiated at a discount which will provide additional savings for your client.