Any of the good Real Estate courses you take, will tell you that money in Real Estate is made when you “BUY”. That really sounds counter intuitive. You normally make money when you sell. (At least you hope you do.) How do you make money when you BUY?
It comes down to which deal (Buy or Sell) do you have the most control over. The BUY deal is the only one that you have complete control over. By complete control I mean, you decide whether you spend the money, or don’t. You control the price of the purchase. If the price is acceptable, you go through with the deal. If it is not, you don’t. You have total control.
When you are selling a property, you can ask any price you want for it. But will you get it? The only control over the Sale price is if you don’t sell till you get your price. From experience, most people selling a property, are doing so for a reason. That reason eventually means they HAVE to sell, even if, they don’t get what they want. That is why you have less control when you sell than when you buy.
If you buy a property at 15% below market value, and the market goes down even 10%, you are still 5% ahead. If you just buy at market and it goes down 10%, you’re in a loose position. That is why the buying price is so important.
Having been a Real Estate investor, and having been in sales (everything from Autos to Zodiacs) for over 30 years, you begin to discover some interesting things about making deals. I personally believe in Win/Win sales. It is always a good deal if both sides win. You might not get everything you want, but you still get enough to consider it a win. Win/Win is also a Karma thing to me.
I have also learned, and believe, that the time to make a sale is when someone is wanting to buy. Remember, if there is an offer on the table no matter what it looks like, you have a person who seriously wants what you are selling. This is where negotiations are so important. Agreed, there might be more potential buyers out there, but, when will they show up, and how much will they offer?
I have also learned from personal experience, that NOBODY KNOWS what price a property will sell for. Not even the seller. I swore that I would NEVER sell a property for less than it cost me. I have done it twice. Circumstances were such that I needed to sell. I even told the Real Estate agent, when I listed the property, that I would not sell at a loss.
It is also worth noting, that not every sale is based on price alone. Closing time can be a critical factor in any negotiation. What is included and excluded from the deal, can also make a difference. The penalty that a seller has to pay, if they discharge the mortgage can also be a factor. This penalty is often dependent on whether interest rates are going up or down. Going down is often worse.
Just because you present an offer on a property does not mean that you have to buy it. If the offer is rejected, or signed back with conditions not to your liking, you can just walk away. Offers are like a tennis match. Your offer is you serving the ball to the seller. If they hit it back to you, (sign back) you have to judge if the ball is going to fall in the acceptable (to you) part of the court, or if is going to be out of bounds. If it is in the acceptable part of the court, you can hit the ball back, or sign the deal. If it is out of bounds, you just let the offer go and walk away. There will ALWAYS be another property.
Walking away can be a wise move. This applies to both Buying and Selling. I have had several instances where I have walked away, and then a week later was asked if I would present the same offer. I have done the same when selling, and the buyer came back a week later with a better offer. Walking away should never be done expecting a favorable outcome. You are definitely taking a chance.
My dad always told me, “whether you are buying or selling, a property is worth what someone is willing to pay for it.” It is tough to walk away from a property that you really like, just because the price is high. But over the long run this is the best financial move. Paying extra on a mortgage for the next 25 years can be expensive. It is not easy to do, but don’t be in a rush. The house may be wonderful, but your finances are ruthless. You can’t enjoy a home you are struggling to pay for it.