One of the most important steps in the process of purchasing an investment property in the Houston real estate market is negotiating the contract. This is the part of the process when you can get a true steal. While working with investor friendly real estate agent Bill Edge will help, understanding some basic information about the process is also vital before you put in an offer on a property.
Understanding Your Goals
First, understand your goals in the negotiation process. The goals are:
- Get the property at the lowest price
- Keep the existing tenants there
- No changes to the existing lease from the landlord
First, aim for the lowest price. The median price for single-family homes in Houston is going up, with the average price increasing over 13 percent over last year in the first quarter. You need to know the market, what it is doing and how that affects your negotiation.
Next, you want to keep the existing tenants, if there are any. This limits how much work you have to do to the property because you won’t be prepping it for new tenants. Also, you won’t have any down time, nor will you have to pay a commission to find tenants.
Finally, make sure the contract states that the landlord can’t make changes, including verbal changes, to the existing leases. You want to be in control the moment you take possession of the property.
Know Your Maximum Purchase Price
When you start negotiating, you need a plan. You must know what your maximum sales price is and be willing to walk away if the price is too high. At auctions this can be quite difficult, as it’s easy to get caught up in the frenzy of buying a home. Know your max, write it down and then stick with it.
Negotiating the Purchase
As you negotiate, remember that there are many costs associated with the purchase beyond the purchase price. Some areas to negotiate include:
- Seller-paid closing costs – In an investment transaction, your lender will likely limit you to no more than 3 present contribution from the seller for your closing costs, so check with your lender
- Escrow payment – If you are able and willing to put money down in an escrow to show your seriousness about the property, you may find your offer is more appealing.
- Title company – You get to negotiate your choice in title company, so make sure you are comfortable with this decision.
- Option fee – If you want the right to cancel the contract for no reason, you can pay a nonrefundable option fee, typically around $100 to $150.
- Repairs – Build an inspection into the contract, and walk away from any home that does not allow an inspection.
- Type of deed – Know whether the home has a general warranty deed, which insures the owner against title defects caused by the seller or anyone else, or a special warranty deed, which only covers anything done by the seller during the seller’s period of ownership.
- Who creates the documents – You may have your real estate agent write up the documents, or you may opt for a real estate attorney to handle this.
- Appliances and other items – Refrigerators, laundry appliances and dishwashers help you secure a tenant, so you may want to negotiate to have them stay with the property.
The investment process can seem overwhelming, but with the help of inner loop Realtor Bill Edge, you can enter into this process with confidence. Call Bill today at 713-240-2949 to learn more about how you can negotiate a fair price on your next investment purchase or to see current investment properties available for sale.