The psychology of a real estate deal is the same as any other situation in which two parties are trying to agree on something, whether it’s deciding where to eat or the biggest financial transaction of your life.
Those partaking in the dance need to know their role even if the other side has not memorized the script.
In real estate, it starts with sellers putting their property on the market.
Is their asking price a ceiling or a floor from which to start negotiating? That depends on the market, as well as the seller’s attachment to reality. It’s a starting point, and a buyer has to know the terrain.
Ideally, if priced for location, features, conditions and buyer expectations, a house has a good chance of attracting attention.
Agents and buyers will review the information, discuss their thoughts, perhaps drive through the area and, if buyer interest remains, an appointment will be scheduled to see how close the marketing and reality match.
If there’s interest, the buyer’s agent may contact the seller’s agent to ask about when the seller is looking to settle, if the asking price is flexible, whether there are there any other offers, and anything else that might grant the buyer leverage.
The buyer’s agent will put together the purchase offer, which typically consists of an offer price, specific terms of the offer (including contingencies that allow the buyer to re-evaluate their decision), and proof that the buyer is “ready, willing and able” to make it all happen.
The dance begins
The offer is presented to the seller’s agent — and the buyer side waits for a response. Sometimes the process accelerates rapidly; other times, not so much.
Sellers generally have three options:
- Accept the offer as presented
- Decline the offer (This is best accomplished by actually telling the buyer agent why the seller is declining the offer; some seller’s agents may decide not to respond, a tactic that has risks.)
- Offer a “counter-proposal” to close a gap between the asking and the offered price
Once an offer is “countered,” the original offer is technically off the table and cannot be relied upon without the acceptance of the buyer.
Some buyers will accept the seller’s response, some may counter their counter, some may stand by their original offer and some may elect to walk away.
Know your options
Sellers and their agent must know the possibilities and act accordingly.
I have met many sellers who wish they had accepted an offer they rejected or countered. There are also buyers who wish they had continued to negotiate.
Negotiating, especially for something as expensive and potentially emotional as a house, requires diligence, patience and an understanding of what our clients want.
We are the experts and our clients may not get a “second chance” or another chance. The longer a process drags on, the less likely the parties are to reach agreement.