As a home seller, you’ve likely put in a lot of time and effort keeping your home well maintained, possibly even making a few renovations. You’ve put in time, money and due diligence, hired a knowledgeable agent, staged your home and you're finally ready to sell. All that’s left is for that full-price offer to come rolling in. The only problem is, of course...
Full-Price Offers Aren’t the Norm
Full-price offers do exist, but they're the outlier. The good news is that if you’re in a seller’s market and your home is pristine, you may just get your full listing price and if your local real estate market is extremely hot, you may even end up with a bidding war that produces offers that could exceed that threshold. However, if you’re like the majority of people selling their homes, you’ll need to negotiate with potential buyers - something that many homeowners like yourself may not be comfortable with (high stakes and all). So here are some tips to help you capture the market while it's hot and make sure you're not left in the cold after all the homes in your region have filled up with new buyers.
Tips for Negotiating Your Home Sale
Many of these tips will be common sense (more of a checklist than a revelation), but some items may be a new consideration or needed refresher to help bolster your confidence as you enter the market.
- First off, unless you inherited your home, you were a home buyer once too. Why is this important? Becuase likely, you've been them before and they may not have been you before. It's as if you're playing poker with someone that hasn't yet played. Millennials are now the dominant home buyer demographic and they may be first-time home buyers. You may be a first-time home seller, but you've likely been in their shoes as a buyer. Already, you're starting out in a power position... and that might help ease any stress going into things. That said...
- Relax. No, really... you're going to freak them out if you employ dominating power-strategies. While you absolutely should use whatever reasonable means you have to get the value your family deserves for your listing, it's equally important to remember that negotiations are less of a confrontation and more of a dance. Your prospect home buyer is your partner and whether you're in step with them or not, you're both locked in an orbit with mutual financial goals that are two sides of the same coin (you're both looking to retain the most capital you can, but also to close the deal). From this realization and for this process, your goal is keeping each interested party as close as possible for as long as possible. Here's why...
- In an ideal sale, you're not trying to sell fast, you're trying to sell fast for the most gain. To make this more likely, you want to have as many active home buyer negotiations as possible throughout the listing lifecycle. How this can work for you is for your team to set up the perfect storm of buyer interest - and a larger group of buyers bidding on your home will more likely attract other interested buyers. That is, the more people that are visibly interested in your home, the more likely that other interested buyer leads will look to see what the fuss is about (if not just out of curiosity or market research on their end) - and this leads to what you want in place in order to exceed your listing price... a bidding war.
- Even the name "Bidding War" is off, though... as a "war" dictates a winner and a loser. Like dating, all parties in this negotiation are exploring their options, ultimately seeking that right financial fit. While some people may seem born for negotiation (perhaps even needing it in order to feel like they've really gotten the best deal they could muster), you'll fare best if you remain objective and inviting to all parties and all offers. "Objective" in order to articulate your negotiating positions well and "inviting" so as to keep all the fires stoked for as long as possible. That said, you are ultimately in the controlling seat (as you're already in the home they want). This is your "ability to walk away" and it's another power play for you. Here's why...
- Money isn't the only card you're working with and your ability to say "No, thank you" is more powerful than you may immediately recognize. Put bluntly, buyers know that sellers have a certain window within which they need to sell in order to maintain momentum with the listing and if the buyer senses that you need this to happen more quickly, then they'll feel armed with a better hand from the start. Fortunately for you, this is a seller's market and if you've properly stacked your buyer leads, then inclusively rejecting an offer can be more of a conversation starter than a conversation ender. At least, you should keep this in mind as you respond to bids.
Due diligence and a good amount of confidence will go a long way in your favor. To reiterate... gather and stack buyer leads, keep them close (in open negotiation) and show your options (subtly make it clear that you're in no hurry to accept anything coming your way). This will create the perfect storm environment for a higher-than-list-price sale.
Consider the Entire Offer Before You Do Anything
The offer to purchase your house has several components and price is only one of them. If this is your first time selling a home, then you'll do best to remember that there is more value in this transaction than mere cash. Sounds off, doesn't it? But as any Wall Street banker will tell you, some cash is better than other cash. For instance, fast cash versus slow cash or perhaps cash with more extras versus cash with fewer extras. In some instances, as counter-intuitive as it may seem, less is more. Let's explore...
- Contingencies: Offers can be made contingent on the buyer obtaining financing, an acceptable home inspection and/or appraisal, sale of the buyer’s existing home, or a clear title. Naturally, fewer contingencies make a stronger offer, but like anything, they can play an important role as chips on the table. Strategizing with your agent on contingency items you may or may not be flexible with can help you focus on clearer opportunities and filter down buyers that aren't really helping you meet your family's goals. Again, some cash is better than other cash and a fair price that is attached to a ton of contingencies you're not comfortable with may be something you want to cut loose before it kills another opportunity that otherwise meets your goals.
- Timing: If the buyer can’t close for three months, then you may want to ask yourself whether or not you're prepared to wait that long. On the other hand, you may have your own circumstances (such as a pending work transfer) that requires your transaction to take place three months down the road. But if your buyer is pressed to close sooner, then this deal may or may not work (for one or both parties involved). While you can have this conversation later, when/if it comes up, going over your positions in advance with your listing agent can help prepare and even sharpen your team's communication and coordination from the start, maximizing all opportunities out of the gate.
- Inclusions: Things could and ideally should get a little creative, after all, each buyer will be interested in different aspects of the sale and you may find an oddball factor coming into play that you hadn't considered. But if it works towards your end goal, then why not factor it in? For instance, if a buyer wants to include your antique grandfather clock in the price of the house, are you willing to do that? In some cases, you can even sweeten the deal with inclusions of your own such as continued lawn maintenance for a year after the sale (on your dollar). It's a small price to pay on your end that may get you a significantly higher bid. A win is a win... get creative.
- Earnest Money Deposit: If the buyer is only offering one percent of the asking price as a deposit, then they may believe that their offer is likely to fall through before close and therefore are setting up options to minimize any losses on their end. This could be a red flag. The strategy to fill up your dance card in order to gain the best closing price possible is a delicate one and you'll be balancing several plates in the air with the hope of not losing all of them on a stumble. You can aim to reduce your risk by taking into consideration these sorts of "red flag" markers to help determine which deal is more likely to last through the long processes ahead. So much emphasis is placed (and appropriately so) on closing fast, but again, you're not trying to close fast... you're trying to close fast with the highest gain possible. Signs that may point to how long your buyer can negotiate may become a factor itself.
As always, there's more than what's listed here. Moving a product like your home is a major undertaking with a lot of very important gears in the mix. You never know what is going to end up being the lynchpin that undermines a negotiation or the cherry that flips a fence-sitter into a close. Work with your agent to define where you are flexible and where you are not. Let's go into that a bit more with some things you can do on your end (even before meeting with your agent)...
Really Make Your Listing Pop
Your agent will be the one negotiating with the buyer and buyer’s agent, so you'll do well to help arm them with all of the things that make your home special. No, not the tire swing in the back (or the other memories that make the listing special to you) - we're talking about those things which will transfer over to them in the end. That doesn't mean, however, that you're locked to those items you typically find in every other listing. In fact, you're going to want to help your agent better understand the things that the buyer market won't find in competitive listings for the region. What are those?
They're things like walkability (mentioning trails by name), your home's Northern, Southern, Eastern and Western views (specifically)... and so on. Your agent will be able to bring you and your buyers up to speed on the more common details such as square footage, market position based on regional Comps, local restaurants and historical amenities, etc., but while these factors will go into your listing, they will be in other listings in the area as well. So you can help your team by listing out those things that only you and your neighbors know of. Here's where you want to share those hidden gems you've tried so hard for so long to keep secret.
Have special access to a private beach? Perhaps a blazed private trail up the mountain in the back of your neighborhood. Here's where that info comes in handy and will now work in your favor. The key here is to not go in assuming your agent knows about these amenities or that your competitive listings have those gems in their details. Your listing should really pop and you can help that by working with your agent to uncover all that it has to offer for your buyers.
Counter any Reasonable Offer
While you should always feel the comfort of knowing you can walk away at any time, you don’t need to reject an offer and shut down the deal unless you’ve truly reached a complete impasse. That said, nearly any power-negotiator will tell you that everything is on the table. Short of the buyer setting your home ablaze, while you own the property, the deal is always on. Keep your door open to offers and you may be surprised as to how many times failed negotiations become revived once again.
This is how you get multiple parties bidding your listing price (bumping it up and up)... keep all negotiations open, continue to counter... buy for time to gain more bids. You have a lot to work within a transaction this large and with this many factors involved, so get creative. You'll likely find that your offers (and the bidders making them) are more diverse than you had initially thought, ultimately giving you more options to play with and gains to make.
You may end up going back and forth multiple times with one buyer before you reach a nice middle ground, but arriving at that middle ground may not necessarily be your ideal situation. As you've seen laid out, having multiple offers that are all working independently toward individual financial gains may be more rewarding in the end than having one deal that reaches that end in a quicker fashion. It's about options and you want to choose your ideal partner, not necessarily leap at the first one to dance with you. For now, all you need to do is embrace the process and listen to your advisors. Soon, you'll be on to your next adventure (hopefully, with more cash in pocket than expected)!
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