Tips for Getting the Best Deal in the New Real Estate Market
Many of my clients are actively looking to buy a home. In the last few years, it has been frustrating for many people to buy something in a Seller's Market. It has been difficult to find anything that makes financial sense.
This started to change in May of 2024.
Finally, the Southern California market has hit the brakes! Sellers do not reign supreme anymore, and the crazy bidding has fizzled out. The Florida market has experienced the same phenomenon but even more pronounced than in Southern California.
Lots of people have been anticipating and waiting for this softening of the market!
Now that it is here, I thought it would be useful to share some high level fundamentals with you about getting the best real estate deal, and about negotiating in general.
Let me briefly tell you about my background in negotiating:
For many years, while doing mortgages, I worked as a Realtor, helping Sellers and Buyers. Additionally, I spent 10 years in Commercial Real Estate helping businesses buy and sell commercial property, and during that time I also worked for a Real Estate Hedge Fund in Los Angeles.
The Hedge Fund bought and sold properties in the tens of millions of dollars. This gave me a front row seat as to how these iconic properties are financed and what goes behind the scenes when they are bought and sold.
Since then, my personal mission has been to bring the strategies used by the big boys to the small business owner and creative professional . (This is why I spend a considerable part of my time time doing mortgage planning with my clients.)
Over the years, I have learned that to maximize your chances of getting the home you seek (and getting the best deal while you do so), it is important to invest time in negotiating.
When you hear the word "negotiate," it may conjure up in your mind images of a tough buyer, cornering the seller with a "take it or leave it" proposition. Or you may imagine a hyped-up car salesman talking you into a bad deal.
In my opinion, this perception is what makes people shy away from negotiating. However, this type of "forced" negotiation is the exception rather than the rule.
When you look up the word negotiate in the dictionary, it says:
"obtain or bring about by discussion"
"try to reach an agreement or compromise by discussion with others"
"find a way over or through an obstacle or difficult path"
It comes from Latin "Negotiat" which means "done in the course of business" from "Negotium" which itself comes from Neg (not) + otium (leisure).
As you can see negotiate is not leisure, it is work. It is not “forcing or imposing yourself” on another, but rather seek agreement and a compromise through discussion with another, or find a way through an obstacle through discussion and compromise.
To be an effective negotiator you need to bring to the table a proposition the seller "cannot refuse"; not in an "Al-Capone" style, but rather as a win-win proposition. This takes some doing, research, work, ingenious crafting and lots of persistence!
True negotiating, the kind the big boys do, is somewhat boring because there is little drama and it requires a lot of work!
The payoff for you could not only be in the tens of thousands of dollars but also in getting the exact type of property you have been looking for.
Even if you are offering to pay MORE, there is no guarantee your offer will be accepted. You may still have to negotiate to get your offer accepted!
Real Estate is emotional, and my experience is that clients throw in the towel just when their efforts are starting to bear fruit.
Components of a Negotiation:
Do a thorough Real-World Research
Keep Communicating
Be Personal
Understand the Seller's Motivations
Do not give-in to Negative Emotions and always stay positive
Put yourself in the Seller’s shoes and craft a Win-Win Proposition
Negotiate the Variables of the Deal (not just price)
Do a thorough Real-World research:
Pick a Realtor that knows the neighborhood cold. You really need to know what is selling around the home you intend to buy. Ideally you should drive the neighborhood to understand what are the geographical landmarks.
You cannot use a formula like “1 mile around the property” because neighborhoods are not symmetrical. Avenues, freeways, parks, colleges, big busy streets and geographical features such as lakes, ponds or hills cut the neighborhood.
When you compare what has sold, you should only take properties within the specific neighborhood. The #1 mistake is to take properties from an adjacent neighborhood and therefore you would be relying on distorted numbers.
Years ago I was selling a $5M home in Pacific Palisades and the Seller had received comparables at $6M to $6.5M because the previous Realtor took numbers from an adjacent neighborhood and therefore overpriced this home by $1.5M!! Of course, the home was not moving.
You need to give priority to what SOLD, not to what is For Sale (unless you are in a booming market, which is currently not the case anymore). You should look, within the neighborhood, at everything that Sold, is For Sale, is Pending and even listings that got Canceled or Expired. You should look at all the pictures of the inside of these homes, and you should visit the home you want to buy in person to really understand why some properties sold and what the real Market Value is.
Keep Communicating:
The further apart you are with your offer from the Seller's expectations, the MORE you should communicate with him/her and his agent. Find any excuse to communicate or send them a letter.
This especially applies when you are in the middle of offers and counter-offers. Do not stop the process. People become "offended" and allow their emotions to get the better of them. You have to stay cool and keep the process moving, even if it takes you 10 offer/counter offer rounds!
A few years ago I helped one my clients buy a home in Santa Monica. The home was at the very limit of what he could afford, it was quite a bit overpriced, and the sellers were on the verge of foreclosure. Therefore, his offer was substantially below asking. He was undeterred, he continued the offer/counter offer process relentlessly. With each offer/counter-offer he would write a long letter explaining the reasons behind his numbers. He was told his letters were worthless and that the Sellers (about 5 sellers) did not care. He continued. This was so unusual and out of the ordinary, everyone could not help but read the letters. This prompted the Sellers to start responding with their own letters! This was beautiful, because it got the Sellers engaged at a personal level. Needless to say, he got the home of his dreams! It was not easy, it was uncomfortable, and it required persistence—but he got it.
Be personal!
This brings me to the next big important point: Business IS personal, it is NOT impersonal.
People like to know who they are dealing with! Be at the property, try to meet the Seller if you can, go to the open houses and show up! Some people attempt to do the whole process online or via videos. That might work in a super-hot market but not when you are trying to negotiate or get the property.
The more removed and impersonal you become, the smaller are your negotiating chances. This is why online services, when it comes to real estate, in general, fail. They try to take away what precisely is needed when doing a Real Estate Transaction! Negotiating is the essence of Real Estate!
Sometimes it happens that the listing agent will not cooperate, or worse, becomes obstructive.
This happened to me last year on a Probate Listing I was getting for my client. In this case, I was acting as the mortgage broker. I bypassed the Seller’s agent, found out who the attorney in charge of the case was, and started to communicate directly with him. My client ended up getting the property at the lowest most reasonable price!
Understand the Seller's Motivations:
Sellers often price their properties based on personal goals or needs, rather than current market trends. This creates an immediate challenge: while your offer is driven by market analysis, the seller perceives it from an emotional perspective.
Therefore you need to find out and understand what is the problem the Seller is trying to solve. If there is more than one Seller, ideally you would make an effort to understand and see the viewpoint of each.
You can do this by speaking with the listing agent, hopefully with the Seller too, doing online research and pulling a Title Profile!
The Title Profile tells you:
Who is the Seller(s)
How much he paid and when he bought it
How much money he owes
Whether or not he has paid his property taxes on time
How long he has had the property
and more
Oftentimes Sellers are business people and you can find them online or on LinkedIn. This gives you a better understanding of what they do for a living and their motivations.
Be Positive!
This is hard! But you must stay cool! Real Estate is highly emotional, and people get offended or build scenarios about the other party in their minds that have no bearing to reality. Be unfazed as much as possible.
Do you remember the character "Mr Spock" from the TV Series "Star Trek"? Be Mr Spock but with a smile!
Put yourself in the Seller's Shoes:
Once you do all this research, a pattern of the Seller and his motivations is going to start to emerge in your mind. You begin to better understand his viewpoint.
This understanding will automatically flood your mind with ideas.
This is a secret I have learned over the years:
The more research you do and the more time you put into understanding (by first looking at what's there), the more creative you become.
Creativity, in this business sense, is not a matter of pulling ideas out of inspiration or thin air— it comes to you when you have invested the time into really looking!
In other words, you don't have to worry about coming up with the "Win-Win" Proposition, because it will rush into your mind after you do the above steps.
In fact, you may have the opposite problem! By the time you really investigate the deal, INCLUDING THE LISTING AGENT, you might have so many ideas and so many win-win proposals, that you may need to sit down with someone else and discuss them all before you pick one!
If this happens or if you need any help during any part of this, feel free to give me a call, as I love helping people getting the property they want and realizing their dreams.
You can text me or call me to set up an appointment, or you can self-schedule an appointment online.
