Offering On a Home With A Renter

Posted by kirk on Jan 23, 2012 in Real Estate | 0 comments

Let’s say you’ve done your house shopping, and you’ve found the perfect home for you. The previous owners have moved out, gone off to another city or state, and they’ve filled the vacant house with a renter until their home sales.

When you are negotiating you need to figure out the advantages which both sides of the table have. First, let’s consider what negotiating power the home owner has.

Sellers Advantages

They have the home you want to live in. This is your dream home. Once you make an offer, they know that you most likely wanting this home.

They have renters who are paying their mortgage off right now. While the home owners which you are trying to buy this house from may have may huge debt from this home, they’re getting money into the bank or building equity on a monthly basis. These renters may make the seller reluctant to sale. The question the seller must ask is if they want a ton of cash now, or if they want the long term investment.

Buyers Advantages

You are going to buy their home. After months of waiting for an offer on the home, the seller finally has received one. If they don’t take this now, how many more months is it going to be until one is made?
This is a Buyers Market. If they don’t accept your offer, you are going to walk down the street and make an offer on the neighbors home.

What You Do To Make The Home Yours

Have a backup plan!!! This is vital to your negotiating power. Even though you will not communicate directly with the seller, and your realtor won’t, you need to have your realtor communicate to their realtor that you have a backup plan.

The best backup plan is to have another offer on a different home that you can walk to right now. In Business School they call this a BATNA (Best Alternative To a Negotiated Agreement). This is where you can say “Oh, you won’t accept this… well, Jim down the road will accept these such and such terms…”

To acquire a BATNA, you need to offer on a different home first. You need to low ball on an alternative home that you would be very happy with, but low ball so much so that offer will not be accepted (but if does, then great – or lose your earnest money if you weren’t actually sincere in your buying intent…). At the point that your offer is not accepted by your alternative home, you will have more than likely a generous counter offer. That offer is everything, use that as your leverage.