Find out as much as you can about who you’ll be negotiating with before you start the process. Sellers need to know if the buyers are financially qualified to close a deal. Most sellers get hung up on the price. But, the highest price doesn’t always come from a buyer that can actually close the deal.
For example, if the buyers make a low cash down payment and the lender’s appraised value is for less than the purchase price, the lender may not give the buyers a large enough mortgage to close the sale unless the buyers come up with more cash. This can lead to further negotiations and a failed transaction.
You’ll also want to know how long the buyers have been looking for a home. Have they made other offers? Were any accepted? If so, why didn’t they close? Did the buyers back out or was the seller unreasonable? Your agent should be able to get answers to your questions by talking with the buyers’ agent.
Sellers should be aware that there are buyers who repeatedly make ridiculously low offers. Often these buyers have a reputation in the local real estate community. Ask your agent to check around before wasting time.
HOUSE HUNTING TIP: Buying and selling a personal residence is an emotional experience. Try to be as rational as possible in your decision-making process. Sellers should plan to counter any offer, even if it’s for less than the list price if it’s from a bona fide financially qualified buyer. Buyers should anticipate a negotiating process that could involve many counteroffers. Don’t give up until you’ve exhausted all possibilities. But, don’t pay more than current market value.
Many buyers and sellers view negotiation as adversarial. Turn this around and look at the dialogue as a process where both parties attempt to reach a common goal — the sale of the property.
Before buyers start negotiating, they should attempt to determine if the sellers are realistic. You can waste a lot of time and emotional energy trying to make an impossible deal work. Some sellers will sell only if they get a certain price. If that price is way out of line with current market value, move on to sellers who are eager to sell.
Find out the sellers’ motivation level. Have they already bought another home and now have two? Are they involved in an employment-related transfer? Does the house no longer suit their needs? Perhaps, they are empty-nesters in a home that’s bigger than they need. Or, is the home a surplus property due to a death or divorce?
Even though you want to make a good attempt at putting a deal together, don’t show all your cards at once, For example, if you’re a seller and the buyers make an initial low offer, counter it, if the buyers are legit. But, leave some room in the price, which sends a message that the buyers need to come up in price to buy the home.
Buyers who can pay all cash might initially make an offer that is contingent on obtaining approval for a mortgage. During the course of the negotiation, you could increase your cash position significantly or offer to pay all cash in exchange for a break on the price. Everyone needs to compromise when buying or selling.
There are niches of the market where demand exceeds the supply, and multiple offers are still in vogue. In this case, you may have only one chance to let the seller know your best offer. Coming in low and negotiating to a mutually acceptable price may not be an option.
THE CLOSING: Try to have your offer presented in person; make sure your agent has good communication skills and is skilled in the art of negotiation.