Let’s wrap up our five part series on real estate negotiations.
Bob Nelson, Eugene real estate investment broker
Marcia Edwards, Eugene residential real estate broker
Marcia Edwards: We’ve been talking about negotiating a transaction, and everyone focuses on that moment when you approach the seller and have the conversation to find a meeting of the minds and take the property off the market for pending sale. But really, the negotiations are still going on after that day.
Bob Nelson: Certainly they are, because on occasion, as you’re doing your buyer’s due diligence, that’s when you’re really taking a look at everything. You’ve had a chance to initially glance the property, glance its features, but not really dig into it. You haven’t had a roof inspection. You haven’t had a termite and dry rot inspection, a whole house inspection, the various inspections that allow you to slowly, but intensely, verify the condition of the property.
And if you find it to be in a condition that requires repair, either immediate, imminent, or very soon, that’s room maybe potentially to go back and say, “Hey listen, that needs a new roof, and I’m prepared to pay half of that new roof because I didn’t think I was getting a new roof when I made my offer, but I didn’t think it was a piece of junk either. So let’s split our cost of a new roof.” That’s a negotiation.
Marcia Edwards: The conversation is basically, “I expected and anticipated a reasonable condition of the home at the time I made that offer at that price point. Now I understand the condition to be different, so I’m modifying my dreams accordingly. I’ve got to talk to you, seller, and have a conversation about what I realized.”
I think sellers often think, “Well, I’ve lived in it. It’s fine.” But you’ve got to remember that you’re also looking at collateral for a loan, so you have to have sufficient life remaining on the roof. For example, minimum of three years life remaining is pretty typical, so the conversation is respectful. You can’t say, “Go replace all the carpets,” when you saw at the time of viewing the carpets were shag and green. You made the offer with that knowledge already.
Bob Nelson: So it’s an interesting process, and it is one that needs to be dealt with very respectfully. If you come in like a bull in a China closet, “If you don’t do this, I’m not going to do that.” And they just tell you, “Hey, take a hike, pal. There’s two other offers right behind you.” And if that’s the case, you have a weakened position, but you also have to recognize, “If I do acquire the property and I do replace that green shag carpet, I’m going to have brand new carpet for the duration of my ownership.” So maybe it is worth losing that initial point and taking the property in this as-is condition. It just depends on what did you offer to begin with, what happened later, and what are you going to have to add to it? That’s your total price.
Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30pm on KPNW for the “Real Estate Today” radio show.