Negotiation is more art than science in real estate, but skilled negotiators can find the right balance that satisfies all parties. Conversely, poor negotiating skills can result in suboptimal deals or deals lost altogether. When it comes to buying or selling a home, there are some key tactics that should be avoided:
- Lowball offers: These offers are much lower than the list price and/or the value of the property. Going far below market value when you make an offer has the potential of damaging your credibility as a buyer or being insulting to the seller. The seller has a range in mind that they’ll accept, and if you’re not even approaching the low end of that range, they may not even consider the offer. Negotiation is an expected part of the selling process, but after putting blood, sweat, tears and money into their house, it is possible they will react negatively to a lowball offer.
- Incremental negotiations: Don’t continue to go back to the seller with small increases in your offer ($1,000 or less). The constant back-and-forth can grow tiresome and lead the seller to consider other opportunities. So be sure to take into consideration the market and whether the seller has multiple offers on the house. If they do, you need to tread carefully. If you’re offering a lower amount and asking for a lot of contingencies, the seller might be motivated to take another offer over yours.
3. “Take it or leave it”: Try not to draw a line in the sand with your initial offer. The seller can get defensive and consider other offers if you immediately show that you’re unwilling to budge. Even if it’s true, don’t make a show of it.
4. Nitpicking after inspection: Obviously, if an inspection reveals a major issue, it should be factored into the final sale price. But insisting on a lower price for every minor repair can put negotiations in a stalemate.
5. Asking for more, more, more: Some buyers will request that the sellers throw in add-ons like furniture or appliances that weren’t included in the listing. Try to avoid giving the seller a reason to build up resentment and think that you’re being greedy.
On the Seller’s side, make sure you know what you want before the negotiations and counteroffers begin. When a buyer is interested in your property they will submit a formal offer. The way you tell them their offer is unacceptable, but you’re willing to negotiate, is the counteroffer. Always have a tentative fallback position in mind — the minimum you will accept. A good real estate agent can give you expert advice based on the market conditions.
When an offer to purchase is presented to you, you have three choices.
- You can accept it exactly as is.
- You can reject it.
- You can reject it and then counter with an offer of your own.
It’s important to note, you cannot both accept the offer and make changes to it. Once you make any changes to the offer presented by the buyers, it becomes a brand new offer. When you reject the buyers’ offer, they have every right to simply walk away from the potential deal.
If you really want to get the home sold, you should avoid rejecting an offer flat out without a counter. Simply saying no doesn’t give the buyers an opening to come back. There are usually four areas in which you may want to make a counteroffer.
Remember, however, that if you make a counter in even one of these areas, you’ve rejected the buyers’ offer, and they may decide they want to change some of the other areas or simply walk away.
As you can tell from this brief article, negotiation tactics can make or break the deal. If buyers and sellers are wondering why they need a real estate agent, it is for their negotiation skills. Agents who have been certified by AdvantageU Home Sellers Resource are among the best negotiators in the market. Make sure you work with the best, it will save you a lot of time and a LOT of money.