Negotiating with banks for potential deals is much more different than buying from a traditional seller. It takes a certain amount of patience and persistence to complete a successful bank-owned transaction. There are times when even solid looking deals will fall apart, through no fault of your own. Instead of sulking and complaining about them, there are lessons to be learned. Here are four lessons that should improve your chances of negotiating a bank-owned property:
1. Give and take: The most successful negotiations are those where both parties leave happy. Dealing with banks takes a certain amount of give and take. Unlike traditional sellers, they have no connection to the property. They do not have years of history in the property that they need to walk away from: they are driven by the bottom line. To complete a deal, you should know where to stand your ground and where to make concessions. Like every other deal, you should have a predetermined purchase price number in your head. It is important to stand firm, and not to go over it. The minute you do, you eat away at your potential profits and run the risk of getting into a bidding war against yourself. Where you can make concessions is with the closing date, type of financing and contingencies. Banks want to get the property sold as quickly as possible. By offering a quick, cash closing, you put yourself at the top of the list. You can even cement your spot by waiving certain inspection or other contingencies, but make sure you are comfortable doing so. If you are not willing to bend a little on your next offer, you may run into the same problem moving forward.
2. The deal isn’t closed until it’s actually closed: There are potential snags around every corner. Between last minute issues for title, insurance or even property valuation, your deal isn’t closed until you sign your name at the closing table. It is not uncommon for a bank-owned deal to take several months, only to have it blow up at 11th hour. If you made several other deals contingent on this deal closing, you may be in trouble. It is important that you see the process through all the way to completion. When dealing with banks, you will often get passed from person to person – without prior notice. It is important that you are organized and keep all pertinent documents where you can easily retrieve them. Even if you have an agreement on the price, something may come up that caused the bank to reconsider. Any plans you make should only be contingent on your current deal closing. As you may know by now, your deal is never closed until it actually closes
3. Keep the pipeline filled: Never put all your eggs into one basket. A current offer you have submitted may take up much of your time and energy, but it isn’t the only fish in the sea. There are other deals you should be pursuing. If your current offer falls out; what else do you have going on? It is important to keep your pipeline filled with a mix of offers at closing: offers you are negotiating on and new leads. The minute you neglect new deals is when your business will become stagnant. Trying to find deals after a lost one takes time. You are basically rebooting your marketing, and it will take a couple of weeks, if not months, to get things going again. Regardless of what offers you have out, you can never ignore lead generation. It can be a gut punch to lose a deal you have worked on for weeks, but a full pipeline will make it easier to recover from.
4. Banks negotiate differently: If you have lost a deal with a bank, you understand that negotiating with banks is different. Communicating with them is often your first hurdle. Even if you have a phone number or email, it can be a challenge to talk to a live person. The second hurdle is getting them all of the required items they are asking for. Bank-owned properties have much more red tape than a traditional transaction. You may have to scan or fax everything they ask for at once, or send it to multiple places. Finally, there really is no rhyme or reason to bank thinking sometime. On some deals, they are motivated by the highest price. Other times they are asking for something else. Each property may have a different negotiator asking for different items. This is how banks operate, and there is nothing you can do about it. There is no point in getting frustrated and upset with the process. This is how it will be for the foreseeable future. Don’t worry about the deal you may have lost. Focus on how you can get the next one.
Everything you do in business can be a learning experience. Losing a deal is certainly no fun, but it won’t be the last time it happens. Bank-owned properties, short sales and foreclosures are a great source of leads that should not be ignored.