The Personal Finance Playbook

I’ve mentioned before that we’re selling our condo and moving across the state to St. Louis.  We got an offer on our place today.  Our condo is listed at $129,900.  The offer came in at $117,500, with a requirement that we pay for a $400 insurance policy and $1000 in closing costs.  Obviously, we want to sell our place and don’t want to lose this deal, but we also don’t want to sell too far under the two condos in our group that sold in December.  Both condos closed at around 125k, but they also started out listed at around $135k.  So perhaps our first mistake was setting our list price too low. 

We didn’t have a lot of flexibility on this particular point, because there are three other condos for sale in our complex.  One is a one bedroom/one bath, so we can throw that one out immediately.  The other two are both 2 BR/2 BA, but with significantly fewer upgrades.  One of those places is listed at $125,000 and the other is listed at $126,900.  We wanted to come in at a price that encouraged them to see our place, but still recognized that our place was worth more.  We settled on $129,900. 

A rule of thumb, and the topic of this point, is to always keep your buyer in play.  You don’t want to lose a buyer, because you don’t know how long it will be before you come up with another one.  In our case, we don’t feel pressed to sell the place.  We have financing in place for the place we have an offer on in St. Louis.  We can buy that and keep our condo as a rental property moving forward.  It’s not ideal to create another absentee landlord situation (we already have one – in a different city), but we feel like that is a plausible option for us.  By “always keep your buyer in play,” I simply mean that no matter what they offer, come back with a counter.  It doesn’t even have to be a better offer.  You don’t have to come down, but if you aren’t going to accept their offer, always give them a chance to accept yours. 

Your strategy as a buyer should be much different.  As we’ve discussed, as a buyer, the most powerful tool at your disposal is your ability to walk away from a deal.  There will always be another property out there – and you’ll find one you like – maybe even more than the one you lost.  We’re using the knowledge that we have this power to put pressure on the seller to make a deal on the place we’re trying to buy in St. Louis. 

If you’re interested, here is how the negotiation has gone on that property.  The seller listed the property at $230k.  We began by offering the seller $200k for the property.  They countered at $228k.  We countered at $211k.  They countered at $224k.  We countered at $215k and informed the seller that this is our best and final offer.  We don’t know how this will play out.  We’re forcing the seller’s hand.  We could lose the deal over this move.  I honestly don’t know if this was a good move or not.  It really depends on the type of people involved and how they feel about the move.

What should the seller do?  Well, I hope they accept the offer.  If they aren’t going to do that, they should still go ahead and make a counter-offer, even though we said that this was our best and final offer.  It was our best and it wasn’t.  We want the property.  $215k was the top number we thought the property was worth, based on our income valuation method (requiring rental income to equal 10% of the purchase price).  Of course, we’d be willing to come up another grand or so in order to save the deal, if that would do it.  Because this is an investment property, though, we have to be careful about letting our emotions get into play.  I’m hoping both deals get done.  Hopefully, if they don’t like our offer, they’ll keep us in play by countering.  I’ll let you know how it turns out.  Thanks for reading.

My post on the cost of being a vegan was included in the Money Hacks Carnival over at Passive Family Income.  Check it out.  Lots of personal finance posts and info over there.

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acceptance, buying, counter-offer, negotiation, Real Estate, selling

This entry was posted on Thursday, May 28th, 2009 at 5:00 am and is filed under Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.