Negotiate for Top Dollar! Being a good negotiator starts with knowing what motivates the other side. It also requires you to position yourself as a person of resources who can actually get the deal done. Anyone can demand anything and hold firm. But it takes skill to figure out what the other side really needs and make them want to do business with you. It takes some thought up front to get yourself in a more powerful negotiating position. You need to be seen as the one person who can solve their problem.
If you are the buyer
First you want to know who the seller is. How long have they lived there? How much did they pay? Why are they moving?
You need access to the tax records to try to find out when and for how much they bought their house. Then, you need to see if you can talk with their real estate agent to see if you can get any useful information. A good listing agent will not reveal too much. But sometimes asking questions in different ways can get you the information you need.
What if you find out that the seller is closing on his next home at the end of the month? He might be willing to take less money if you could offer him a closing date before that. This might save him from having to take out a bridge loan or the stress of paying two mortgages.
What if the it's a family trying to sell their deceased parent's home. Many times there are siblings with conflicting thoughts on the situation. Usually the key thing isn't price. It's getting to closing with a minimum of hassle. If you present your contract as a way they can quickly settle up the estate, you can usually get a lower sales price.
Maybe their next house will be ready to be moved into in three months. If you can delay your closing until then it might save them from having to move twice. Who wants a double move?
What if they had a previous contract that fell through because of financing? Playing up your financial qualifications could be the key. Maybe stipulating that final loan approval to be complete within 10 days would be enough for them to possibly accept a lower offer price.
Knowing about the listing agent can also work to your advantage. What if their listing were about to expire and they were going to lose it in a couple of weeks. Don't you think that they would try to get the seller to give in a little? Maybe they would even cut their commission a bit in order to make it work for everyone. It's usually better to have half of something than all of nothing.
Don't assume the listing agent really knows what the house is worth. Many times the listing agent is a friend of the seller and doesn't really know the area well. The seller might have set the asking price and the agent just went along with it. So do your homework and feed your comparable sales information to the listing agent.
The bottom line is you have to find out as much as you can about the seller. Then you must present yourself as the answer to their problem. Usually what that means is that you are financially capable and can be flexible on issues such as closing dates or other things that are important to the seller.
If you are the seller
You have to address the two biggest fears that a buyer has: are they paying more than it's worth and are they buying a money pit? Address these fears and you have a great chance of getting top dollar for your home. Also, you need get your home in great shape and price your home so buyers become nervous about someone coming along and snatching it away from them. No one wants to lose the chance at a great deal.
How did you come up with your asking price? Hopefully it was determined by analyzing the recent past sales in your neighborhood. That is what any prospective buyer is going to be looking at. You should have a detailed Comparative Market Analysis justifying the asking price for your home. Make sure that it not only includes the homes that sold by Realtors but also any FSBO ("for sale by owners"). Many times the FSBO's are overlooked by Realtors because it's a little more difficult to get this information. In a hot market sometimes homes sell for asking price before they actually get on the market. These might be the key home data needed for a buyer to be comfortable accepting your price. Make sure they have the data.
You might even consider getting a professional appraisal on your home to set the price. What buyer can really argue with you wanting to get the appraisal price? If you can get a high appraisal and sell it for a little less you're really in a good position. Everyone wants to get a bargain.
You might also consider a professional inspection done on your home before you put it on the market. If there are problems, it's much better knowing about them up front. A buyer will still get their own inspection done but knowing that another inspector already checked it out will give them more confidence to move forward. They won't pad their offer for any unexpected problems. There's an inspection company that will guarantee their inspection for one year. Isn't that going to give a buyer a little more confidence to move forward?
It's also important to complete the Seller's Property Disclosure with detailed explanations about any and all problems that have occurred to your home. The more minute and detailed the better. A buyer will feel much better reading about the toilet that overflowed two years ago and left that little water stain on the living room ceiling than having their inspector make a note of the "mystery stain" on the living room ceiling that might require ripping open the ceiling to determine the source.
Have you been having your HVAC serviced on a regular basis? Present those records and a buyer will feel comfortable that there probably isn't a lot of deferred maintenance waiting for them when they move in.
Getting your home in tip top shape also conveys to the buyer that things have most likely been taken care of. A house that is messy and dirty will put questions in a buyer's mind about the condition of all the things that he can't see.
A home warranty is a cheap way of providing some peace of mind to a buyer. For about $350 you can get a warranty that covers a lot of things for one year. It doesn't cover everything but it's usually a good way to remove yourself from any liability. If the hot water heater goes out the day after closing, the buyer is covered and you're off the hook. What else could you have done for the buyer?
Pricing your home is key to creating urgency in your buyer. If it's priced very close to market value, your buyer will be nervous about competing bidders. They will want to move quickly. They might start with a low offer to test the waters but will come up quickly if they really want it and fear that they might lose it to someone else. Sometimes buyers have seen a lot of homes and finally get fatigued and want it all to end already. Make your home the answer to their dreams.
When it comes down to the last $5000, make sure the buyer knows how little this comes down to in their monthly payment. It's only about $30/month. Do they want to lose their dream house for $30/month? Maybe they would consider a 5 year adjustable loan at a lower interest rate. Refer them to a lender who can show them various options of financing your home that can save them money.
These are just a few items to consider when negotiating a contract. There are many books out there with all sorts of tactics and techniques of negotiating. Many are very useful in certain situations. But you need to practice them on a regular basis.
We are out there negotiating all the time. Our business is to get our buyers and sellers the best deal. Many times the best deal isn't reflected in the final sales price. The bottom line is whether or not our client gets to where they want to be. Did they get the home of their dreams in a timely fashion? Did they sell their home and move on to a new life in a new neighborhood with minimal disruption? Price is important but your life is priceless.
Many times our clients get clarity about their objectives after they come in and meet with us at our initial one hour consultation. We can listen to what they are trying to accomplish and advise them on their various options. Give us a call to set up an appointment. Let us help you bring your dreams into reality.