Negotiating Sweeteners

I’m generating an offer on an apartment building to an owner who is retiring. He’s getting out of the business so I’m guessing there will be no 1031 exchange on his part. I also think the building is paid for.

Do any of you have thoughts about what I can add to my offer to make it more appealing to the seller? One thought of mine was to escrow my funds and pay him over a few years, to reduce his tax burden. I’m open to anything that doesn’t add to my costs. Even non-tax related sweeteners such as offering to buy the property as-is (with an inspection, of course) since I know it’s in great shape.

What have you used in the past? Thanks.

A back massage, a dozen roses, a big hug, mow his lawn, front row tickets to the rockettes, do his laundry, go out for pizza, wash his car, tell him a funny joke, offer to listen to his “life lessons” for three full hours, get him a good ceegar, and finally, promise him that you’ll do the bestest job you can managing the apartments.

Hi I am a newbie. What’s with “I think it’s paid for!” My mother always told me to check it out. See if there is any liens, IRS, mortgages, contractor liens,etc. Is there a cash flow…can you make it float. Are there any massive repairs that need to be done. Check it out but do it quickly. Tie it up with a subject to and then quickly do your checks. :flush

Your mother needs a new line. It’s not very catchy. Anyways, the “checks” are called due diligence. Aside from the MANY things you need to do to sufficiently accomplish due diligence, make sure you don’t screw yourself with all the “sweeteners” you’re wanting to give, b/c you may be giving more than he’s expecting and the property may not cash flow if you neglect the numbers. I would take a 100% owner financing deal to him and see how he responds. Try this - ask him what he wants. That’s probably the easiest and best way to do it. Also, not sure where “sweeteners” came from but ‘incentives’ sounds more professional and doesn’t make me think of Splenda.

My first recommendation is to build trust and rapport with the seller and get him to like you. You will be amazed how willing people are to be creative and compromise after they like and trust you. Two, ask him about his situation, his future plans, goals and what he would like for the property. He will likely give you all the sweeteners you will need, I he will begin to like you. Hopefully he says he just wants to live comfortably and have a certain amount of assets as a nest egg. Ask what that is and hope that a seller financing scenario will meet those cashflow and asset goals. Regardless of what he says, tell him you are unfortunately not in the same ballpark. He already likes and trusts you so he will listen to your ballpark. Tell him twice the discount as where you would like to end up. Then you should be able to negotiate him down to the middle which ends up being a killer deal and he will still see it as a win-win. This won’t always work, but it is a numbers game. Stick to your guns and eventually he will come down. Hopefully you have 5-10 deals like this you are negotiating so you can cherry pick the best deals.

Excellent post Moellerryan. I agree with everything you said. Up until now, this whole process has been controlled by the agents. I talk to mine, the seller talks to his, and they talk to each other. Heaven knows what they say. I’m convinced that by the time my sales pitch is filtered thru the agents, it takes on an entirely different tone. The process is awful, and it’s going to change.

Both agents concentrate on SFR’s and both recognize they are way over their heads on this deal. My agent convinced the seller to call her and she offered to arrange a meeting with me. Apparently he was receptive. I am very analytical and can be very convincing. It’s interesting that when my agent’s broker read my offer, he all but told me I was crazy. I have a very detailed and thorough spreadsheet I use for my deals and after just a few minutes reviewing it with him, he completely agreed that my offer wasn’t just fair, it made sense for the seller.

Now I have just one more person to convince…

Good luck with negotiations. Stick to your guns. A property is only worth what you are willing to pay. If you get enough good deals coming thru your pipeline you will be able to cherry pick the best of the best deals.