Don’t Low Ball That Offer!

Do you know the difference between cost, price and value?

When it comes to the real estate transaction, a low ball offer is probably one of the worst things that you can deliver when you come up to bat.

Facing the Consequences

Low balling an offer to the seller or landlord usually has grave consequences.  No matter the financial position of the seller or landlord, right off the bat, you risk insulting them.  The most common responses are to counter the offer at the original full price, refuse to counter, or for the transaction to become a series of balls and strikes with multiple counter offers, usually ending in someone fouling out. The buyer or tenant may eventually get the price that they want, but the cost will be the loss of goodwill in the transaction and more.

Setting the Stage for the Duration

Once woundedness occurs, it is very difficult for that change and for the wounded party to recover.  This is also true with bank committees representing short sales and foreclosures who have no emotional attachment to the home because they are managed by people with emotions whose work environment and nature of the transaction tends to create high stress situations.

Once ill will is established in the transaction, it can promote breakdown in other areas such as negotiation for repairs or lease renewal or extension.

Questions to Ask First

Before you make that low ball offer ask yourself a few questions:

1. Do I really understand the cost of my low ball offer?
2. Is my offer based on similar nearby homes that have recently sold or leased at the same condition, type, and price range?
3. Would I want a buyer or tenant to do the same thing to me if I were in his shoes?
4. What is my REALTOR recommending?
5. What is my plan B if this doesn’t work?

You Make the Market

After you have sincerely considered the questions and are comfortable with the possible outcomes, go ahead and make your best advised offer.  Until you make your offer, even if by necessity low due to property condition, market conditions, and recently appraised values, you never really know what might work for the other party.  However, be advised.  What you pay will become your very own comparable for your future appraised value certainly for the next 6 to 12 months establishing your own neighborhood market price. And you’re sure to become the talk of the next neighborhood bar-b-q, having established a downward trend for neighborhood values for everyone for months or even years to come!

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Chrystal is a REALTOR® and principal of The Safari Group, a local, homegrown real estate firm, specializing in all phases of the residential and small business real estate market.  Celebrating over 20 years in tenant procurement and rental portfolio development, and over 13 years in general residential brokerage in the Charlotte Metro Market, Chrystal offers guidelines to assist tenants, home buyers and sellers in evaluating today’s real estate market for maximum leverage.  In the TOP 5% Nationwide for closing the transaction with Estately, Inc, a national referral company, she can assist you with all your real estate related needs. Contact her today for more at 704.562.1030 TXT/PH or Chrystal@TheSafariGroup.com  Join the conversation on Facebook https://www.facebook.com/TheSafariGroupRealty

Investment Properties

Experienced and green investors evaluate potential investment properties very differently.  Both should follow a few similar guidelines.

When considering an income property, the first decision is to establish your targeted rental client.  The property you choose may limit the pool of prospective tenants, but not in the way you’d hoped.  If you’re targeting young professionals, location, features, amenities and potential rental rate will be very different than that for a future tenant who is just entering the market as a first-time renter still in school or just entering the workforce who needs to be located near public transportation.

Next is to determine, based on your targeted client, the location, features, amenities and rental rate for your likely renter.  A good rule of thumb is to purchase a property you wouldn’t mind living in yourself, and the closer to home the better.  Long-distance land lording is not advisable. 

Though some landlords feel it’s too close for comfort, a rental in your own neighborhood will allow you to keep an eye on your property, and to know first if anything begins to go wrong.  No matter where you purchase, always introduce yourself to the neighbors and give them your cell number and tell them to call you before they call the police, if the need arises.

Now that you’ve found the right property at what looks like the right price, it’s time to confirm that with a rental rate estimate based on the currently rented homes in the area before you make the purchase.  Your experienced REALTOR® can help with that.

If the rental rate estimate looks promising, consider the condition of the property.  Is it just dated or dilapidated?  Has it been updated in the last 5 years?  Or does it need a major overhaul?  Floor plan issues are best left to the pros.  For a positive return on your investment, kitchen updates shouldn’t cost more than 10% of the home’s value.  That’s true for any renovation. 

Determine your level of ability to make changes that would make your rental number one with interested consumers.  Choose materials and products that require less routine care and maintenance, and factor in the timeframe to complete and cost for each.  Add 20% to your budget for unexpected delays and overages.  Your REALTOR® can provide a list of licensed, preferred vendors to help with any repairs, maintenance, or renovations needed.

If the total cost of the project meets with your overall budget, it’s time to get the property under contract, begin advertising for a renter, and screen and hire your renovation team.

Next up, how to screen for good tenants.

Avoid the sticker shock of a new or move up purchase

LANDLADY LEAD… Whether you are a renter, investor, or move up buyer, you can Avoid the Sticker Shock that has no doubt contributed to many foreclosure scenarios.  Put away the amount of money each month that is the difference between what you now pay for rent or mortgage.  For example, if you now pay $1,000 per month rent/mortgage, but expect to move up to $2,000 rent or mortgage, put away the additional $1,000 per month needed for 6 months.  If you never have to touch that money in 6 months, you will likely have little problems with paying for your new home.  Same works if you think you might need a new car.  Stash away that new car payment, and if it’s untouched for 6 months…you’ll have a great down payment!