Real Estate Investing - Close the Sale

This is the last stage of the process, selling the property for a profit. There is three steps:

1. Qualify the buyer.
2. Agree on the price and terms.
3. Walk the deal through closing.

Here is a brief description of each:

1. Qualify the buyer.

When you receive calls from prospective buyers, you need to be sure that they are qualified (have the necessary down payment and credit) to buy. If they do not, it's best to find out in the beginning. That way you will not tie the property up, wasting time and money.

To find out if a buyer is qualified, contact a mortgage loan officer and have the buyer speak with him/her. The mortgage officer will be able to determine if your buyer has the ability to get a loan. If the buyer qualifies, the loan officer will give you a pre-qualification letter. This letter expresses that the buyer should be able to obtain a mortgage.

If the buyer has a real estate agent, they will usually have a pre-qualification or pre-approval letter already. This will give you the extra confidence that the deal will close.

2. Agree on the price and terms.

Just as you negotiated to increase profit when you originally purchased the property, it's now time to do it again.

When you are setting the list price for your property, be sure to leave yourself room to move. It makes people feel good to get a discount. An inflated sales price will give you that capability. Buyers want to believe that they out-negotiated you and made you give up more than you should have. If there is nothing to give up, you will likely lose many buyers.

Once you have an offer, you must determine if you are willing to sell at the price and terms proposed. If so, sign the contract. If not, make a counter offer.

As you gain experience, the determination of whether to accept or counter will become easier. Note that I said easier and not easy. It's hard to be sure that you got the highest amount for your property. The buyer may have been willing to bid higher if necessary. You never know. The main thing is that if you're satisfied, take it and move on.

Price is not the only thing to consider in an offer. Be sure to pay attention to the terms. For example, someone may give you a full price offer, but if they want a lot of extras (additional upgrades, extended closing date, seller paid discount points to lower interest rate, etc.), it may not be such a good deal. Consider each offer carefully. If a property isn't as marketable as you had hoped, be more flexible. Remember, this is an investment property. Don't get attached. Your main consideration is profit.

3. Walk the deal through closing.

There is rarely an easy sale from start to finish. Most often you will run into problems. It's very normal. This is a complicated and scary transaction for most people. It's the largest purchase that most buyers will ever make. There is just bound to be problems.

Common problems that may arise are:

Buyer has "credit skeletons" in the closet. Hopefully you are dealing with an experienced mortgage loan officer that finds these early and knows how to overcome them.

Buyer is having second thoughts. It's up to you to assist them through the entire process. Keep the "good deal" feeling.

Buyer is not getting the information needed to the mortgage loan officer. Let them know how important it is and that they are slowing down the process.

Attorney finds a titling problem just before closing. Contact the attorney early and order the title work so that any problems can be eliminated ahead of time.

Buyer does not have the down payment required for the loan. Make sure that you (or the loan officer) verify the funds needed to close are available. If you can, hold onto it yourself as an extra earnest money deposit. An Earnest money deposit is money given to the seller from the buyer as security that the sale will go through. It insures that the buyer does not back out.

Miscellaneous unforeseeable problems. Be prepared for the unexpected (weather, people out of town, loan paperwork was sent overnight but never arrived, etc.).

As you can see, there are several possible problems that may occur. The best advice is to stay calm and cross each bridge as it comes. If you get all stressed out, it will only make things worse.

Tips for Closing the Sale:

• Before signing a contract to sell, be sure to get a pre-qualification or pre-approval letter. This will eliminate any buyers that can not obtain proper financing (and tying up your property for several weeks).
• A good deal is not a price. It's a state of mind. If you make the buyer feel like they are getting a good deal, then that's all that matters.
• Be flexible when selling your house. The more flexible you are, the more buyers will be available to you.
• Leave yourself room to negotiate. You can always come down on price but it's hard to go up.
• Stay on top of everything. Be sure that the buyer is getting the information to the mortgage company in a prompt manner. Be sure that the attorney will be ready to close on time. Be sure that the appraisal has been ordered. Remember, delays cost money.
• Walk the buyer through it. This will help to avoid any cold feet or backing out.