Extending an offer to Purchase a Home Occupied by a Renter
Here’s what you need to train for: A difficult negotiation process.
When you are negotiating you need to figure out the advantages which both sides of the table have. First, let’s consider what negotiating power the home owner has.
Sellers Strong Points
They have the house you desire to buy. This is the home of your dreams. Once you’ve offered, they know that you are most likely wanting this home.
They have tenants who are paying off their mortgage right now. While the home owners which you are trying to buy this house from may have may huge debt from this home, they’re getting money into the bank or building equity on a monthly basis. These tenants may make the seller reluctant to sale. The things the seller must ask is if they want a ton of cash now, or if they want the long term investment.
Buyers Advantages
You are going to buy their home. After months of waiting for an offer on the home, the seller finally has received one. If they don’t take this now, how many more months is it going to be until one is made?
This is a Buyers Market. If they don’t accept your offer, you are going to walk down the street and make an offer on the neighbors home.
What You Can Do To Make The Home Yours
Have a backup plan!!! This is vital to your negotiating power. Even though you will not communicate directly with the seller, and your realtor won’t, you need to have your realtor communicate to their realtor that you have a contingency plan.
The Best Backup Plan is to have another offer on a different home that you can walk to right now. In college they call this a BATNA (Best Alternative To a Negotiated Agreement). This is where you can say “You’re not going to accept this?… well, Jim down the road will accept these such and such terms…”
To acquire a some leverage, aka BATNA, you need to offer on a different house. You need to low ball on an alternative home that you would be very happy with, but low ball so much so that offer will not be accepted (but if does, then great - or lose your earnest money if you weren’t actually sincere in your buying intent…). At the point that your offer is not accepted by your alternative home, you will have more than likely a generous counter offer. That offer is everything, use that as your leverage.
Check out more stories such as these by going to Buying a Home From an Owner Who Has Renters or Real Estate Topics.
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