Some folks say that negotiation is another word for compromise.
That may be true. But the best negotiations are those that leave everyone feeling like winners. And, in a real estate transaction, it is not only possible, but desirable, to have everyone feeling good about the purchase or sale of a home.
Still, the best negotiators operate from a position of strength. Here are ten tips and strategies to help you in your negotiations.
- Know your final price. If you’re a buyer, it’s important to know what is the top price you’re willing to pay for a home. If you’re a seller, it’s vital that you know your rock-bottom price before you even list your home for sale. As firm as these prices are, however, it’s important to remember to be flexible when it counts. You should think twice about letting a deal fall apart for $500.
- Find out the other party’s motivations. Buyers and sellers are motivated by external factors, including birth, death, job loss, job promotion, and marriage. Knowing the other party’s motivations may help you negotiation around potential soft spots.
- Use a home inspection to your advantage. Home buyers should have a home inspected by a qualified home inspector or structural engineer before they close on a home. If there is a problem, ask the seller if he or she is willing to fix it or give you a cash credit at closing so you can have it fixed. Sellers can counteract this negotiation strategy by having their home inspected prior to listing it, and also providing the results of that inspection to prospective home buyers. On the listing sheet, sellers should make it clear that the price reflects the current condition of the home.
- Don’t talk too much. Silence can work wonders in a negotiation session. It effectively keeps you from talking too much, and may offer the other party the opportunity to express their feelings on a particular problem or issue.
- Know the effectiveness of timing. Rushing through a negotiation can give off the impression that you’re either desperate or anxious. That impressions can cause the other side to return to the table with a different counteroffer than he or she otherwise might. Once an offer has been made, there is tremendous pressure from all sides to get the deal done. You may have to fight that pressure in order to rime the negotiation to your own satisfaction, but the results could be well worth it.
- Play your cards close to the vest. Typically, brokers want to know everything about their clients: How much they make, how much they can spend, and how much they want to net from the sale of their home. Although your broker may be well-intentioned, it isn’t in your best interest to display your personal financial cards to anyone except your spouse or partner. Things can, and do, slip out.
- Don’t limit your options. There’s nothing like competition to heighten the buyer’s or seller’s interest in a transaction. Sellers should make sure a prospective buyer knows others are interested in the property. Buyers should make sure sellers know they are considering more than one home.
Also, buyers should make sure to avoid a bidding war situation. If you are interested in a home and hear that another party may be making an offer, be sure you get yours in the seller’s hands first, and make it clear that the offer will be void within a short period of time, perhaps even 24 hours. If you do find yourself in a bidding war, put your best bid forward, but don’t overbid. If you overbid and get the home, you may find yourself regretting your actions.
- Use contingencies to your best advantage. The best contract for buyers is one that has a contingency to cover every possibly problem. The best contract for sellers is one that is contingency free. Buyers should make sure they can back out of the contract if they can’t get a mortgage, or if the home inspector’s report turns up something expensive and unexpected. These common contingencies are to be expected. But if a buyer wants the purchase contingent on the sale of his or her original home or on his or her acceptance to the local golf club, the seller should consider adding a rider to the contract stating that the home will be marketed until all the buyer’s contingencies are satisfied or removed.
- Don’t forget the 24-hour walk-through. Buyers should make sure to walk through the home within 24 hours of closing, and preferably after the sellers have moved out. If the home has suffered damage, or is not in the same condition as when you made your offer to purchase, you should ask the seller to return the home to the original condition before you close on the home. sometimes, buyers walk through the home looking for ways to get more money out of the seller. Sellers can counteract this negotiation strategy by making sure their home is in tip-top shape and by being upfront with the buyers if any damage occurred during the move.
- Relax. Often, negotiations seems to favor the party who seems to care the least about which way the transaction goes. In a real estate transaction, negotiations can quickly get emotional. The best way to manage a house closing is to divorce yourself from your emotions. Even if this is the only offer you plan to write, or even if this is the only offer you think you’ll receive, you must pretend as if the fate of the world doesn’t hinge on the outcome.
But there’s a fine line between using a relaxed attitude to strengthen your hand and insulting your buyer or seller. Be careful not to cross it, or you may find the other party backing away from the deal altogether.
Published: Feb 17, 1997