Negotiating the sale of a home is a complex matter. Often it is not as simple as sellers wanting the highest price and buyers wanting the lowest price. There are many other possible factors and it pays to do some homework, ask the right questions, create the right environment and be creative.
Do Your Homework:
Understand what type of market you are in: A seller’s market will usually have lower inventory with fewer days on market, rising prices, active buyers and, in some cases, multiple offers. A buyer’s market will have high inventory with longer days on market and stagnant or decreasing prices. Both will have an affect on your negotiating position and who has leverage in the situation.
Research previous comparable sales and active listings in your preferred area. Research the difference in each home’s amenities that might affect pricing (pools, flooring, home improvements, etc.) Determine what neighborhood factors add value or convenience: proximity to schools, parks, shopping, freeway access for commuters, cul-de-sac location for smaller kids to play in, clean/quiet area, pride of ownership, neighborhood activities, etc.
Research the home’s sales history, time on market, price changes, taxes, HOA dues, property inspection and disclosures. Are there any offers on the table or expected?
Ask the Right Questions:
Determining motivations, showing interest and uncovering the home’s history (repairs, improvements, etc.) are important. If you can, ask neighbors questions about the sellers, the home, the neighborhood. The more knowledge you have, the more confidently you can negotiate.
Create the Right Environment:
Despite having different motivations, the goal is the same: the successful transfer of the home. Establish rapport or common ground and constantly reinforce trust. Common ground could include similar jobs, college backgrounds, interests, hobbies, children’s needs, experiences and more. A pre-qualification letter lets sellers know you are serious buyers and helps establish trust.
Avoid stirring up negative feelings. If you are the buyer, talk openly about the home’s features, repairs and improvements, but don’t run down the home by pointing out faults and deficiencies.
Complimenting the home, decorations and landscape will let the seller feel good about your interest.
Adjust to special needs:
Older sellers may move at a slower pace; job relocations or sellers with a contingent offer on their next property may require a faster close.
Use the knowledge that you have gained to negotiate. Timing (length of escrow, occupancy date, post-sale lease-back); repairs; security (home warranty, alarm systems); amenities (appliances, furniture, artwork, garden tools, recreation equipment) can all be bargaining chips. Removal of contingencies and payment of closing costs can also be powerful bargaining tools. Creative incentives (resort stays, vacations, etc.) have also been used to close sales.
Negotiations are about give-and-take. Typical seller mistakes include getting angry or emotional about a low offer, overpricing an aging property, and not being willing to negotiate.
Don’t take a low offer personally; it is part of a negotiating strategy. Find out the reason for the low offer. They may be using inaccurate comparables, investors who low-ball, or buyers trying to buy above their price range.
An aging property may need repairs, repainting or updating. Sellers who have comfortably lived in a home for years may not see the home the same as buyers who have seen newer or refurbished homes.
Before summarily dismissing an initial offer, sellers need to be willing to negotiate and should ask questions to determine what the buyer wants. The offer means that the buyer is interested.
Remember the goal is the same: the handshake on the successful transfer of the property!