This is where you wanted to be! You spent a lot of time and effort in preparing your home and working with your Realtor to price it right. Your listing has been out there for a few days and lo and behold, you have an offer. Now that you have a willing and able buyer, use these tips to carry it through to closing….
Negotiating Offers on Your Home
There are usually 3 prices in every real estate transaction:
The price you want.
The price the buyer wants.
The price you both agree to.
In any real estate market it’s very rare to get an offer on your home that you’ll be 100% compliant. Chances are likely that you’ll need to change something, even if it’s as small as a date change or determining who’s paying for the home warranty. Offers and counteroffers are all part of the process so don’t fret too much if the offer you see isn’t exactly what you wanted at first.
Always remember – a successful negotiation is when everyone gets something they want.
First, the offer on your home is just that – an offer. This isn’t a legal and binding contract until you and the buyer have signed off and executed the document. So, if you make any changes to the buyer’s offer at all, you have a brand new offer that the buyer will have to agree with. When you and the buyer have agreed to all of the terms to the offer (represented by your signatures and dated), you are now under contract.
Your offer will contain at least the following elements:
- How the buyer is paying – cash or financed (terms of financing)
- Contingencies – There are a number of contigencies that could be apart of your offer that include: home inspection, appraisal, termite and moisture, financing, or home sale.
- Who is paying what closing costs.
- Closing date.
If you counter offer, it may look something like this:
- You raised the sales price
- Reduced the time of the home inspection or full loan approval
- You raise the earnest money amount
- Change the closing date
Note: Once again, if you sign the original offer from the buyer, you’re under contract. If you make at least 1 change, the buyer will have to re-sign or could walk away.
Have the Expectation of Compromise
As mentioned earlier, you more than likely will not get an offer that you totally agree with which is why you’ll need to do some negotiating. Most of the time, it will have to do with price but before you counter back with a higher price, be sure to look at the entire offer. See the big picture.
Terms Are Just as Important
Price is of course a big issue but there are many terms of the contract that matter as well. Let’s say you get an offer that is $5,000 less than you wanted but the buyer’s are willing to close in line with when you wanted to close. Giving up the $5,000 may be worth it to you.
Bullying Doesn’t Work in Negotiations
Taking the hard line isn’t a good approach for the buyer or the seller. This isn’t a contest to see who has the biggest ego. The goal is to sell the home, not squabble over a few hundred bucks. The best approach to negotiating real estate is to shoot for “meeting in the middle”. There are always execptions but this is a good rule of thumb.
Keep in Mind – Market Conditions
In Step 4 of this series (Determine a Price) you read about how your Realtor will examine the market to better advise you on a listing price. If you get an offer on your home in a buyer’s market, it may be a while before you get another one. Always have the market in mind before countering back too heavy.
Never Show All Your Cards
It can be tricky countering back with a higher price and not losing the buyer all together. On the first counter back, however, never give your best and final offer. Always have an ace up your sleeve. For instance, you may be willing to pay for a home warranty if they except your price.
Don’t Drag Your Feet
When you have a buyer who is offering to buy your home (pretty big deal) don’t waste time getting back with them on an answer. One thing is for sure, you’re not going to see negotiations swing in your favor by waiting days to counter back their offer.
Avoid These Negotiating Mistakes
Don’t Take it Personal
At the end of the day this is a business transaction so try not to let your emotions come into play. I once was representing a seller who was a Navy pilot and wouldn’t you know, the buyer who came along was also a Navy pilot. Well, let me just say the Top Gun attitudes came out and neither party wanted to budge when negotiating. I have never gone back and forth more over $500 in all my life! We ended up closing but it was a pain in the @#% due to the alpha male emotions that both parties possessed.
The moral of this story is – Don’t lose a sale over $500.
Don’t Make Mountain Out of a Mole Hill
Think about what’s going on. We are working to secure a legal agreement that will represent several hundred thousand dollars. Please don’t let some obscure item or deadline keep you from the main prize. I had a client once who wanted out of the deal because the seller changed out a couch that was supposed to stay with the home (shaking my head).
Negotiating is More Than Price
Most people don’t realize that you can include anything you want in a real estate contract. The bottom line is, as long as both parties agree, you could include the family pet. If you get an offer that you’re not totally sold on for price, maybe you could convince the buyer to keep the pool table that you didn’t want to move.
Other Great Resources for Negitiating Offers:
Top 10 Negotiation Mistakes to Avoid in Real Estate – Kyle Hiscock
Why Collaberation is the Secret Ingredient to a Successful Real Estate Transaction – Karen Highland
Should I Price My Home Higher Knowing a Buyer Will Try to Negotiate Down? – Lynn Pineda
8 Great Negotiating Tips for Real Estate – Paul Sian