Negotiating the Deal

From our monthly e-newsletter, Property Lines

Whether at work or at home, in good times or bad, negotiating skills are crucial in dealing with everyday situations. The big question is: who are the negotiators in a real estate transaction? Are they the agents, the buyers, or the sellers? Many people assume that it is the agents who drive the transaction. And, in many instances, this is true. They certainly help set the tone and direct the flow of documents. But, typically, it is the principal who ultimately makes the decisions; therefore, this article is for you.

For Buyers

Let’s assume that you have been out looking at houses and you have finally zeroed in on the one you want. How much should you offer? You’d love to get the deal of the century, so you don’t want to start out too high. At the same time, you want to be sure the seller sees you as a serious buyer. What do you do?

Start by asking yourself: What is more important, getting a good deal or getting the house? After all, if you don’t get the house, you also don’t get the good deal.

Next, educate yourself. Before you submit an offer, research the following:

  • Study similar homes that are currently on the market. More importantly, examine recent comparable sales. They are a truer gauge of the market because comparable sales represent what a buyer actually paid for a property, not a seller’s fantasy.

  • Pay close attention to the condition of the house. If it has considerable deferred maintenance just to make it livable to your standards, you must factor in that cost.

  • Find out how long the property has been on the market and, if possible, the reason the sellers want to sell. If the home just came on the market, chances are the sellers won’t budge much, even if they eventually have to lower their price. The sellers are still in their “honeymoon period” where they are getting many showings and few disappointments. One of two things will happen to these sellers: either their home will sell quickly, or they’ll have to reduce the price.

Water seeks its own level and so do home prices. When sellers take less than their asking price, they are coming down to market value, not from market value. This is a very important distinction.

If you find out that you are in competition because another buyer has written an offer, our advice is to put your best foot forward on your first offer because it is very likely that you will only get one chance. Make your offer attractive enough that if you don’t get it, you aren’t kicking yourself afterward.

Lastly, Buyers, be reasonable. Success in negotiation comes when both sides are flexible and understand the importance of a mutually beneficial outcome.

For Sellers

You probably already know that it’s unlikely you’ll walk away with the bundle of cash that you thought you would when you purchased the house. The big unknown is how low you will have to go to arrive at an accepted offer.

Many of you today face the following scenario: You put your home on the market at a far lower price than you had ever imagined. After several weeks, you take your realtor’s advice and reduce the price. Then the phone call comes from your agent who says, “I have an offer. When can we meet?” You assume the offer is for the asking price. After all, you just reduced the price so any fool can plainly see what a bargain it is. You arrive at the meeting, the offer is on the table and, guess what, it’s low by your standards. What do you do?

First, celebrate! You have an offer – something that only 20% of all sellers have at any given time. Someone picked your home to purchase. You have something to work with, something that you didn’t have yesterday.

Next, respond to the offer in a timely fashion. If the agent representing the buyer presents the offer in person and the offer isn’t what you’re looking for, don’t shoot the messenger. The buyer’s agent did the best he/she could.

Make a list of all the things you find objectionable in the offer (price, closing date, personal property – anything that you don’t like). Then draw a line through as many items as you can live with. In other words, try to narrow the issues that separate you and the buyer. This is very important: buyers are questioning their decision anyway so don’t give them an excuse to walk away.

If price is causing the great divide, settle on an amount that won’t bring nightmares or regrets if the buyer walks away.

Whether you are a buyer or seller, the most important advice is to remain flexible. Most negotiations reach impasses but not impossibilities. Pay close attention to what the other side is asking for and consider what you can offer to achieve a win-win scenario.

For more on negotiating, visit the tips in the Buyers or Sellers section of fhallen.com.

Our monthly e-newsletter, Property Lines – Your Map to the Market, provides an easy way to stay informed about local real estate stats and topics. This month we discuss negotiations from a Buyer’s and Seller’s point of view, as well as how the length of time on the market can affect a home’s final sale price. To read the current issue, click here. If you’d like to subscribe to Property Lines, contact your Frank Howard Allen Realtor or e-mail us: info@fhallen.com.

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Posted by:Noreen Smith