Home Sale Negotiations: 3 Phases
Preparation for Negotiations Gives the Best Conversation
Let’s be honest. You will have to negotiate with a buyer yourself when you sell by owner, which is one of the most distasteful tasks an agent normally performs. An agent can help you respond to an offer, then send them off to deal with the other party, but you cannot participate in that fight yourself.
There is no need to be intimidated when negotiating. Our lives are full of negotiations, from negotiating with our spouse and children to negotiating at work to negotiating at a garage sale on a Saturday morning.
Prepare yourself for negotiation, minimize your emotions to the greatest extent possible, and use what you’ve learned from everyday encounters.
1. Be prepared
In the very moment you decide to list your home for sale, you begin preparing for a successful negotiation. That’s just how it is. What is the best price I can get for my house? That will no doubt be your first question. As a result, a series of questions will follow, such as how much you can afford to pay for a new home, what your bottom line for the sale of your current house will be, and when you plan to move.
As soon as your house is listed and open houses are scheduled, you should begin actively preparing for negotiating with a buyer by creating a list of terms you may end up negotiating, then ranking them from most important to least important.
Typical house sale terms include:
- The price
- The closing date
- Inclusions – these may include appliances, grills, patio furniture, rugs, window treatments, light fixtures, and other items that might or might not complement the house.
- The closing costs
- The contingencies
- Transaction-related fees
Make a list of the most important negotiation points in advance. Do you think you’d rather stick with the higher price but be flexible about the closing date? Perhaps you’d consider renting the house back from the new owners for a few weeks while they move? It’s also possible to offer a garage full of gardening equipment instead of a contribution to closing costs. By understanding your own priorities, you can offer things you may not want as much that may be more valuable to your buyer.
Keep your research up to date
You already have a good sense of how your home and asking price fit into your marketplace since you did significant local market research before setting your price. During negotiations, you’ll need to update your research so you have current facts that can support your arguments.
Especially if your home has been on the market for a while, this may have tipped the balance in favor of buyers or sellers. Prospects for future offers and prices can be affected by changes in one way or another. The most important thing is that it gives you a frame of reference, a context, in which you can evaluate the offer. Consider these questions:
- Is the number of homes on the market increasing or decreasing?
- How does the most recent statistic look?
- Has the price of your neighborhood and type of property held steady or are they increasing?
- Check out the lending environment. What is the current state of interest rates? What are the trends? Is there an upswing or a downswing?
In comparison to other homes currently on the market, how does yours compare? In addition to features typical of homes in your area, condition and location play a critical role in determining value.
As a result, you will be able to make a better judgment about your home’s value and negotiate based on the most current data rather than on opinions. The more realistic your price is at the beginning, the easier it will be to justify your price in the future. In the future, buyers will have fewer properties to choose from and prices will likely rise as a result of a declining inventory.
Establish A Negotiation Strategy
A negotiation strategy should be developed before an offer is made. A few minor contract terms may need to be negotiated if the offer is great and you jump on it right away.
Start by revisiting your goals, objectives, and future plans if you receive a below-par offer that could be negotiated to be more favorable to you. Depending on how long your home has been on the market, the market activity, and how urgent you are to move if you’ve found a new home, your motivations and goals might have changed since you listed your home. Your bottom line and negotiating strategy will be affected by all of these factors. Consider what you are willing to negotiate as you approach the deadline for receiving an offer and where you stand on an acceptable final price.
In the run-up to listing your home, you probably understood your own motivations better than you did at the start, so you’re likely more confident now than you were at the beginning. As you assess and negotiate offers, you will benefit from that knowledge.
2. Analyzing an offer
It is the price that captures the most attention when an offer is made, but an offer actually includes a bundle of conditions that, in one way or another, influence the price. In addition to the price, a purchase offer will include the deposit, financing, time frame, contingencies, and final walk-through. Both sides usually compromise in order to reach an agreement with the buyer. As part of the contract or offer to purchase, a description of the property is included, as well as a listing of fixtures, appliances, and personal property that may be included in the transaction. Pay attention to how personal property is spelled out in the contract to avoid last-minute disputes.
Typically, curtain rods are attached or fixed to the house, but curtains are not. It is possible, however, that the buyer thinks you will leave the curtains on the rods as well. It is not uncommon for appliances to be a point of contention. Make sure that the original listing specifies what appliances are included. Be sure to include this information on the listing sheet if you don’t plan to leave a chandelier or other light fixture. Install a new fixture in its place before you list the house to remove the temptation for buyers to include it in the offer.
It is important to know what your own priorities are before entering negotiations, so you will be prepared to offer things you might not want that much but are more valuable to your buyer. As a result, you can build trust with the buyer and ensure a smooth negotiation process.
3. Let's get down to business
An offer will typically be presented in writing by the buyer or their agent to the seller. In-person, by fax, or by email. An offer can be accepted by the seller or rejected and a counteroffer can be made by the seller. In most cases, the offer or counter specifies a period of time for the other party to respond, such as 24 hours.
Don’t be put off by a low price, often called a “lowball offer.” Sometimes that’s all the buyer can afford, but quite often buyers will make a low offer to test the waters and see how the seller reacts or how firm they are with their asking price. This is a business transaction. Give yourself time to cool off but still respond within the timeframe (if it is reasonable) of the offer. If you are not sure why the offer came in as it did, ask the buyer for some context and what comparables were used to arrive at the price.
Consider the market’s demands rather than your personal requirements when deciding your counter price. In order to justify the counter, use recent market data and relevant stats, such as changes in inventory, recent sales of comparable properties, and pending sales. By understanding your own goals and your local market, you can determine when and how much you should compromise when setting prices.
Maintain a flowing conversation; don’t rush. Despite countering the price, respond to all elements of the offer to demonstrate that some parts are acceptable. Especially if you are willing to accept a lower price in exchange for an early closing date, to rent back the house after closing, or to purchase it “as is,” you may be able to find other aspects of the offer that are important to you. If the buyer agrees to the deal, is there anything else you can offer him?
Agreement
The negotiation process can take days. Include a deadline for a response to each counter to prevent the conversation from drifting off into space. Provide the buyer with enough time to consider the offer, but allow them enough time to do so. It is common for real estate agents to limit this time to 24 or 48 hours.
Compromise can be difficult to achieve. It’s best to remember that some buyers are simply looking for a steal rather than a good deal, and even the best real estate agents cannot always come to agreement over price.
When the time comes, you should simply keep marketing your property and let the buyer know they can always come back with a new price if you know the market and have a realistic assessment of your property.