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So you've found the perfect home and you're ready to put in a purchase offer... it's an exciting (and perhaps nerve-racking) time in your life. Your real estate agent will be able to walk you through all of the stages that are coming next, but it may be helpful to get a grasp on the negotiation process as well. Let's review a couple of tips that can help you move things along as quickly and painlessly as possible.
1) Expect an emotional roller coaster
Sellers are going to have emotions attached to the sale of their home. It's understandable though... after all, that cute little room you want to turn into an office space may have been where their little boy grew up before heading off to college. What does this mean to you and your family? It means that you're going into a negotiation that's slightly skewed in their favor. Not only do they hope to make a financial gain, they're also attached to the home and, more importantly, they can walk away (they already have a home if the deal goes south). This is all to say that going into a negotiation on a home is more than just wheeling and dealing. It may have a lot of emotional ups and downs where someone on their team is all gung-ho, but then the other has doubts. Then the other is on board, but the first one expresses new concerns. Going into negotiations with this understanding will place you in a better position than if you go into them unaware.
2) Make a realistic offer the first time
Another consideration that will be driving their end of the negotiation is the promise of a more fitting home and a better financial standing for their next chapter in life. If you insult the seller with a low-ball number that only benefits you and your family, then your negotiation may fall apart before it even starts. The adage "you teach people how to treat you" is very relevant here. If you make an extremely low offer, then don’t be surprised if the seller makes a full price counter offer. Negotiation is about sacrifice and you should at very least look like you're meeting them in the middle. Doing your homework will be important. Work with your agent to look at the sales prices for similar homes that have sold in the area. Your agent will be able to determine if the asking price of the house reflects its true market value or if it's aimed high specifically to be whittled down in negotiations. If the asking price is reasonable, you can still make a lower offer, just don’t go too low as it may trigger their pride and derail your goals.
3) Consider how long the home has been on the market
While you'll want to be delicate about it, there is a pain threshold associated with home sales. If a home has been listed for three weeks or less, then the owners are likely still testing the market and may not be open to much negotiation. However, if the home has been on the market for a month or two, then the seller is often at a point where they’ll be more open to options.
4) Consider the seller’s motivation
There are times when a seller is in no hurry, so they aren’t motivated to consider offers below the asking price. Other times, a seller may already have a contract on another home and wants to avoid paying two mortgages or they may even need to relocate within a certain time frame for say, a new job. Your agent will have the resources and expertise to uncover the seller’s likely motivation and this will be invaluable to your team. For instance, your agent may be able to talk to the seller’s agent as an interested third party. Sometimes the seller’s agent won’t divulge any information about their client’s motivation, but it never hurts to ask.
5) Consider ways to make your offer more attractive
Sellers think about more than just the price. Anything you can offer them to make the transaction easier may ultimately help your cause. For example, get pre-approved for a loan before you start looking for a home. You'll be in a stronger negotiating position because the seller doesn’t need to worry as much about accepting your offer only to have the deal fall apart due to financing issues down the road. Other things you can offer include a quick turnaround on the inspection (which shows your enthusiasm). If you can arrange a quick close with your lender, that’s usually another perk the seller will be interested in. Some buyers have been successful purchasing a home for less than the seller might have otherwise considered by personalizing the transaction. If you’ve fallen in love with the home and want to raise a family there and if you plan on taking great care of the home, let the seller know. Sometimes the personal touch and an emotional connection to the home means more than another few thousand dollars.
If you really want the house, don’t get discouraged with a bit of negotiation. Always make multiple counter offers if the seller is still engaged. You won’t lose anything and you just might get your new dream home at a price both you and the seller consider fair. But, keep in mind that if the negotiation isn't progressing, you may need to move on. Being able to walk away is your power card in this deal.
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