Who REALLY Has The Power In Any Real Estate Deal?
Q: I’ve been negotiating the price on a house with a seller that wants a lot more money than the home is worth. What can I do to convince them their asking price is too high? Jody, Hillsborough, NJ
A: That’s a great question, Jody–it’s one I often get asked from frustrated real estate investors who come to me for help. The truth is that you may not be able to convince the inflexible seller you’re negotiating with that their asking price is too high, but I want to bring up a bigger and more important point for you to consider….and that is who REALLY has the power in almost any real estate deal. In most situations, the person with the money has the strongest, most powerful position in a real estate transaction. I’ll give you 3 examples that demonstrate this:
1) Buyer/Seller of a house (like your example): ultimately, since the buyer has the money, a buyer will determine the final price, not the seller. The seller can ask any price he/she wants, but until and unless a buyer comes along and pays him that amount, the house will not sell–the final sale price ultimately is decided by a buyer with money that he/she chooses to spend
2) Landlord/Tenant renting a house or apartment: in this situation, the tenant has the money and thus a tenant will ultimately decide the price a place rents for. Again, as in the situation with the house for sale, the landlord to ask any rental price he wants, but until a tenant decides to reach in his pocket and pay it, the property will sit vacant–the final rental price ultimately is decided by a tenant with money that he/she chooses to spend.
3) Bank-Lender/Borrower: In this situation, the bank/lender has the money, so they will decide the terms. For the record, that power position changes after the loan is made, because at that point the borrower has the money and the lender is the party hoping to collect payments. To recap, in most cases, the person with the money has the power in a real estate transaction.
Thanks for your question, Jody. Good luck with your negotiation!
For more real estate tips and information, visit my blog at geraldlucas.com.