Negotiation is a complex matter and all transactions are unique. Both the buyer and seller side want to feel that the outcome favors them, or at least represents a fair balance of interests. In the usual case, there is a bit of bluff, some give-and-take, and neither party gets everything they want.
So the question is…how do you develop a strong bargaining position, one that enables you to get the most from a transaction? From my experience helping home buyers and sellers accomplish their goals, it’s clear there are basic keys that will determine who wins at the negotiating table.
Market Trends At various times we are in a ‘buyers’ market, a ‘sellers’ market, or a market where home supply and demand are roughly equal. If possible, you want to be in the market at a time when it favors your position as a buyer or seller.
Details A lot of attention in real estate is paid to price. This surely makes sense, but the key to a good deal may be more complex. Consider two identical properties that each sell on the same day for $600,000. The houses are the same, the sale prices are the same, but are the deals the same? Maybe not. For instance, one owner may have agreed to paint the property, replace the roof, and pay $5,000 towards the buyer’s closing costs, and pay for a new refrigerator. The second owner made no concessions. In this example, the first house was actually sold at a discount – the $600,000 purchase price less the price of painting, the new roof, the closing credit and refrigerator. If you are a buyer, this is the deal you want. If you are the seller, you would prefer to be the second owner and give up nothing.
Seller’s Situation You and your agent have the ability to find out a lot of information about any property online and in person. Some of the questions you will want to have answers to are; How long has the home been on the market? What price have homes in the area been selling at per square foot, on average? Are there any other offers on the home? Also, if the home has a lot of deferred maintenance, or the seller’s need to sell because of a hardship, lost job, or divorce for example, these are huge factors that can come into play to create the most leverage possible for your negotiating position.
Financing Real estate transactions involve a trade – houses for money. We know the house is there, but what about financing? There are several factors that impact the money question. Has the buyer been pre-approved by a lender? When a bank provides a commitment letter and indicates that a buyer is good for the offer amount that has been submitted, this creates much less risk for the home seller. As a result, on the buyer side you can use a pre-approval to compete against other offers, including cash offers, and negotiate the best price and terms possible. Lastly, when you have done the upfront work with your lender and given them all the required financial documentation, you can close in 30 days or sometimes even less, and tight time frames like that can make your offer even more attractive and negotiable.
Remember, you get what you negotiate for, so make sure you are your agent are well versed in all the factors that can help you maximize your real estate investment.