Realty Wonks Know How to Negotiate

The ability to negotiate is more of a learned art than a hard-and-fast science. Some people are just better negotiators than others.

Here are some COMMON SENSE NEGOTIATING TIPS for everyone:

Be prepared. Thoroughly review the Real Estate Condition Report and the Home Inspection Report if it has been ordered. If the buyer is submitting a substantially lower-priced offer, she/he should be able to provide reasons (i.e. roof needs to be replaced; comparable houses are for sale at that lower price; kitchen needs upgrading). This reduces the seller’s knee-jerk, negative reaction to a “low-ball” offer.

Leave your emotions and attitude at the door. Most sellers view their home as their pride and joy. Buyers usually have very little emotional investment in the house. Respect each other’s point of view.

Prioritize the “must have” versus the “nice to have.” Plan beforehand what concessions you are willing to make and then use them when the bargaining gets under way.

Don’t sweat the small stuff. Never let a negotiation bog down over a minor point. If you can’t agree, put the point aside and come back to it later. Concentrate on getting agreement on major points like price and terms.

Don’t share information unnecessarily. Knowledge is power in a negotiation, so giving the other side extra information may weaken your position. It’s easy to become too “chummy” in your desire to make the deal work. Conversely, learn as much as you can about the other party.

There’s MORE to a mutually agreeable sales contract than the PRICE. Consider other factors when negotiating, such as:

• Items included in the price. For instance, if a seller is offering all the kitchen appliances (in decent condition), this will save money for buyers who may need these items.

• Timing flexibility. Buyers and sellers who will consider options regarding closing dates and move-in dates are in much closer bargaining positions.

• Financial strength of the buyer. A pre-approved buyer provides much greater security, for both parties, that the deal will close easily and rapidly.

• Contingencies included in the offer. For instance, a buyer who doesn't have to sell another home gives the deal more flexibility.

• Earnest money. A buyer’s willingness to make a substantial earnest money deposit is a strong sign that the buyer will complete the deal. An offer of $200,000 with $10,000 earnest money deposit to the seller will probably take precedence over the same offer with $2,000 in earnest money.

Work toward a win-win. Both seller and buyer should end up feeling that they have gained something. A successful negotiation is not the same as grinding the opponent into the ground. No one should leave a negotiation angry; you never know when you might have to negotiate with the same people again.

Know when to quit. Sometimes sellers and buyers invest so much energy in a negotiation that they feel obligated to reach agreement, even if the benefits don’t justify the cost. Knowing when to stop a negotiation is just as important as knowing how to keep it moving.

If you are not working with a Realtor during the negotiation process, we strongly advise both sellers and buyers to consult with a real estate attorney.

TIP: Ask the attorney if she/he can act as a facilitator between the parties, ensuring that a mutually agreeable sales contract is created protecting both parties’ interests. This will be a more cost effective option--for both seller and buyer--than if they each hired their own attorney.