Once you’ve done all the analysis and profit projections on a property and you think you have winner, the next step is to meet with the seller and get them to make a contractual agreement to seal the winning deal.
If this is going to be your first real estate deal want to be sure to double check everything, dot your i’s and cross your t’s.
However, you’re likely already hyper-aware of what you should do so for some of you it’s more important to remind you to breathe and remain calm.
Usually once an oral agreement is made, the next step is a written agreement. When a meeting is scheduled to negotiate a deal, be sure that all decision makers be present, or else it will be a giant waste of time.
Making the Offer
We will discuss different ways to purchase the property you’re looking at but first, let’s review a few things you’ll need to handle in any type of transaction in real estate deals in Maryland.
Ernest Money Deposits
When you meet to make a written agreement with the seller, in just about every case you will need to make an earnest money deposit.
If you’re dealing directly with the seller or seller’s, you can usually make an earnest money deposit of $10 up to $100 on real estate deals in Maryland. While this may seem like a little amount, remember that an earnest money deposit is just a good faith commitment on the buyer’s part.
Of course, you want to put down the smallest deposit you can to protect yourself in case you do back out of the deal.
When you deal with a real estate agent, they usually bring their own contracts and may require up to a $1000 deposit on real estate deals in Maryland.
If you read our last article and follow the formula for assessing the value of the deal with and how much you should pay for it then you factor in closing costs. You as a property buyer will need to factor in all closing costs on your real estate investment deals in Maryland, except for transfer tax.
Transfer tax is usually something sellers need to pay – in most states.
There’s no need to load a contract full of contingency clauses because these will likely give the seller cold feet. Particularly, if you have a small deposit on the line, you should use contingency clauses sparingly.
However, if you’re putting down $500 as your earnest money deposit then you may add one or two general clauses to protect you in case there’s any reason you want to back out of any real estate deals in Maryland.
General clauses give you a right to a home inspection and an appraisal of the property within a certain time frame once you’ve reached a binding agreement.
By performing the home inspection, an appraisal, and getting contractor repair estimates – for properties that need rehabbing – you can verify your projections to ensure you have a great deal.
Give Several Options
One is the loneliest number of them all, and the same holds true with making a real estate purchase offer.
When you give people multiple options you have a higher likelihood of getting as ‘Yes’ as they accept one of them. However, when you only give people one option you have a higher likelihood that they will say ‘No.’
Usually, 2 to 3 options is the max amount to give because more than this creates confusion and paralysis of analysis. It’s smart to make a ‘good, better, best’ offer. In order to make multiple offers you need to have multiple options ready that suit your needs.
This means you need to ask yourself what creates the best-case scenario for you. If you have millions in the bank and want to be a cash-only buyer to remain debt-free then a cash deal is your best-case scenario. If you’re on the other end of the spectrum and have very little money to put down, then your best-case scenario may be seller-financing – where you put a small deposit down and suggest owner-financing.
The Power of Negotiation
You don’t have to be in New York real estate tycoon to win at the negotiation table.
It’s amazing how using just the right words can impact your real estate deals in Maryland.
One of the first questions that you can ask a seller is:
“If I pay all cash and close quickly, what is the least amount you accept?”
No matter what sellers response is, you should always follow it up with a second question:
“Is that the best you can do?”
Another way you can phrase this second question to add more power is:
“You’ve got to do better than that.”
You might ask this in a playful, jovial manner, which makes it seem like their offer is completely out of the question, even laughable. Your smile and laugh works wonders because they’re forced to feel as if they’re not being realistic but won’t get angry because you’re smiling and appear light-hearted about the offer.
Asking this second question or making this second comment is an extremely powerful tactic – and profitable to. Just by making this second follow-up question, you can make another several thousand dollars, and on bigger deals possibly even $10,000 or more.
Dealing With Rejection
After you have made your offer you will inevitably get some rejected bids.
You should not take this personally. It’s just another part of the business. You should also note this does not mean that the deal is done. The seller may simply need more time facing their own rejection from the market.
Do not offer to buy their home at a higher price, but instead, simply submit the exact same offer several weeks down the line. Sometimes, the seller will beat you to the punch and call you several weeks down the line to see if you can still do the same offer.
Time on the market is all that is needed to make unmotivated sellers highly motivated, in some cases.
There are different contracts for different types of deals. For instance, contracts include:
- purchase and sale agreement
- lease option agreement
- option agreement
- warranty deed
Once you get an oral agreement to your offer but you need to get it in writing immediately, in the same meeting.
Don’t miss the point that this time meeting is about presenting offer and getting them to make an oral agreement so that you can then get them to put that in writing in a contract.
Once you have a written contract you can then proceed to complete your due diligence on the house before closing on all of your real estate deals in Maryland.