Closing the deal: Follow these seven tips to find out how to prepare and negotiate with competitive buyers and sellers in real estate.
We often think of negotiation during a real estate transaction only in terms of the price of the home. In reality, however, there are a variety of stages of the home sale process and a variety of items to be negotiated, from the initial purchase to the closing negotiation. We put together our top seven negotiation strategies for a successful and satisfying outcome.
Before you begin the process of buying or selling a home, it's important for you to prepare ahead of time. Proper preparation includes a consideration of all of the following:
● Your Goals
● Wishlist Items
● Personal preferences
While we often think of negotiations in terms of money, in some cases timeline may be more important, especially in the event of a job relocation or moving from one school district to another.
Brainstorm with your family to determine what impact your home purchase or sale will have on each member and determine what your goals are for every step of the transaction.
If you’ve ever heard of BATNA -- Best Alternative To a Negotiated Agreement -- you may be familiar with this concept. The strongest position for a negotiation is one where you are prepared for any eventuality and able to weather whatever happens during the process.
Many people go into a negotiation assuming that it will play out in a predictable fashion and lead to a compromise that is mutually acceptable. However, you never really know what the goals and intentions are on the other side of the negotiation table.
For example, as a buyer you may think that a lowball offer up front is a common starting point, while the seller may see it as an insult and stop negotiating. In fact, you may run into a buyer or seller who chooses not to negotiate at all, setting a price and sticking to it no matter what.
Go into every negotiation prepared to either walk away or give in completely. While you'll probably meet somewhere in the middle, you'll feel more prepared if you have at least considered the possibility that you won't.
There are a number of items that are open to negotiation besides the price of the home. If you are having to give in on sale price, consider making up the difference on one of these other items. Put your negotiation skills to work in regards to the following:
● Mortgage rates, by shopping around and considering a variety of financing scenarios
● Closing costs, by asking for seller help to offset a higher sale price
● Home inspection items through a closing credit to cover needed repairs and updates
● The date or location of closing or the closing company you'll use
● Conveyances, including furniture, grills, decorative items, appliances, or playsets.
Believe it or not, you may find that the additional items you ask for more than make up for a slightly higher purchase price and allow both parties to the negotiation to walk away feeling good about the deal.
It is important to enter into negotiation with a clear sense of the variety of ways it could play out. Market conditions, seller or buyer personalities, and other factors can significantly change the negotiation strategy and impact the outcome. Ask yourself the following questions as you prepare for a negotiation:
● Is your local market experiencing high or low inventory? Is it a buyer or sellers market? In a low inventory market, many sellers may be entertaining multiple offers. In that case, your offer will have to be more competitive and you’ll have less room to negotiate.
● How eager are your sellers to sell? A young couple trying to relocate in time for the start of the school year will be more motivated than an older couple who are planning to downsize, but can wait out the market to get their price.
● What time of year is it? A hot spring market can make sellers reluctant to reduce their price, while selling in the middle of winter might mean they are more willing to bargain.
● How does the home’s condition impact the negotiation? If you’re interested in a pristine, turnkey home with expensive upgrades, your sellers may feel that they deserve top dollar and may be less willing to negotiate.
● Was the home vacant? This may mean that the sellers have already moved and are carrying two mortgages -- a situation that may make them more open to a price reduction and a quick closing.
The more you can think through the variety of factors involved, the easier it will be to develop an integrative negotiation strategy, also known as a “win-win” strategy, that helps you both meet your goals.
This is a powerful negotiation tactic that can keep you from making a mistake or allowing your emotions to get the best of you. If you’ve put forward an offer or a counter offer, wait to hear back from the other party. If you go back to them to keep the conversation going, you show your eagerness and weaken your negotiating position. Even if you're a buyer in love with the home or a seller desperate to close, wait for the other side to respond first.
Many negotiations go awry because each side becomes emotional and dug in. This type of adversarial attitude makes the compromise necessary for successful negotiation impossible. Some buyers and sellers have walked away from deals over minute, completely fixable, and inexpensive items on a home inspection report rather than lose face by giving in. This is an impractical way to negotiate.
Consider the negotiation tactic of disruptive negotiation, where you give up the dominant energy in order to feel out the other party and understand what is important to him or her. Remember, the other side of the negotiation has a goal, a budget, a family, and a variety of obligations. Treating their interests and needs as meaningless in order to “win” the negotiation may result in a lose-lose proposition.
Don’t let your ego get in the way of your goals. Negotiating during a home sale or purchase can be frustrating, frightening, intimidating, and emotional. Manage your stress, develop alternative scenarios, and keep the end goal in mind in order to create a better outcome.
You can save time, effort, and frustration when you streamline your closing process with Endpoint. Our seamless settlement, powered by the expertise of our parent company, First American Title, and a higher degree of technical knowledge will ensure better service and more convenience than you ever thought possible.
Find out more about all of the ways we can help you, or continue reading our Step-by-Step Guide to learn more about the closing process.