NEGOTIATING A SALE

Selling a home has several stages. We have discussed the various stages in our previous blogs. They can provide easy tips and ideas for sellers and buyers. Today we shall look at negotiating the sale. Negotiating is one of the final stages of selling a home.

In closing a deal, the seller and buyer shall agree to the terms with a legal contract. As a seller, you now have an offer to consider in front of you. You can choose to negotiate, accept, or reject the offer. Closing the deal can create or subtract value from your final selling price. You must negotiate the sale in the right way.

Real estate contracts allow the buyer a period to conduct due diligence. During this time, the buyer can look at their potential home and research it personally. They can ensure that the house is worth the amount they are paying. While nobody expects surprises, it is always better to fix all issues and queries before closing the deal. Sellers should have plans to respond to the buyer’s demands and questions before transferring ownership. Sellers should also maximize negotiation and carefully push for their expected selling price. Any issue that arises after the offer acceptance, but before transferring ownership is an expense for the seller. As a seller, you should have ensured that there are no surprises or last-minute changes and costs.

Negotiation tactics can’t be taught or learned. It is an inherent skill that also depends on the personality of the seller. You can ask a professional such as the agent to negotiate on your behalf, or you could it do yourself. Our handy guide to negotiation tips can help provide a clear picture of how to sell your home. Successful negotiation can lead to an excellent selling price and increased value of your home. It can also provide value for money to the buyer. Negotiating real estate deals could cause thousands of dollars gain or loss for the parties involved. You need to get on the same page as your agent to start the negotiation process. There are phases and stages of the negotiation process. Let’s have a look at the distinct aspects of the negotiation process.

• Research- During a negotiation, the side with all of the information always wins. Confirm that you are prepared to answer all questions or issues, deal with any potential crises, and study your buyer carefully. Your research should consider the general market, price of similar homes on the market, the neighborhood, and motivations of the buyer/seller. Sellers can ask a letter from the buyer stating why they are interested in purchasing this particular home. You can also look up the buyer’s financial ability and background by asking your agent.
• Preparation-Don’t underestimate the other party in a deal. Prepare yourself for negotiation by practicing strategy or prepping with your agent. Discuss potential demands or issues that may arise and anticipate how you will tackle those. A house is more than just an empty structure. It is a home, a place for your expression and comfort. Buyers always assume the price is too high while the sellers are emotionally invested in their home. Sellers also want to maximize their sales and receive enough value for their time and efforts invested in the house. Sellers can prepare for the deal by arriving at a listing price well within the home’s actual value.
• Closing the deal- Price is not the only determinant in closing a deal. Various other factors affect the buyer’s decision and the seller’s price. Closing the deal involves finding a suitable compromise for both parties and signing a contract that satisfies them.

Negotiations are crucial for the parties involved. A real estate negotiation is high stakes and can affect both parties tremendously. Real estate negotiations depend more on the details of the contract, not the timing. Knowledge, experience, and confidence are key factors in negotiating the sale of your home. Many expert negotiators will tell you that understanding your opponent is very important in closing the deal. There are three basic negotiation concepts for home sellers.

• Value of the Information-Having the correct and valuable information could make a significant difference in your negotiation power. The side with the most potent information could get the best outcome and price. Understanding your buyer’s urgency or needs could tell you much, he/she is willing to pay or negotiate. If you are a buyer, then knowing the seller’s financial stability or duress could allow you to lowball them. Predicting the real estate market, specifics of the sale, and the situation decides the negotiation process.
• Knowing when to walk away- Sellers should define a lower limit for offers with their agents. This amount indicates the lowest they are willing to consider before rejecting the deal. Is walking away from it the best alternative? Negotiations require patience, so your point of walking away should consider every other factor. By walking away, you reject that possible offer and have to undergo the whole process of selling your home from scratch. For sellers who have multiple offers, walking away could be the easy way of dealing with the lower offers. If buyers find similar houses in a cheaper range, then walking away cuts down their time negotiating with sellers.
• Psychology of gains versus losses-People actively try to avoid losses whenever possible. This logic explains why homes take longer to sell in slower markets. Sellers would rather hold on to their homes than sell at a lower price. Counteroffers appear to be loss-making for the seller as they compare it with their ideal selling price. Buyers and sellers should have a reasonable frame of comparison and adjust their expectations when negotiating. This doesn’t suggest that you should accept a loss, but look at the loss in a bigger frame. For example, a woman purchased a condo in Florida for $90,000 in 2000. In a fast market, at the best of the economic conditions, her neighbors sold their condos for $400,000 in 2007. The woman later sold her condo for $350,000 in 2014. Her actual financial gain is about $260,000, but to her, there seems to be a loss of $50,000.

Negotiations are a two-way street. Every seller should know when to adjust, and every buyer should know when to raise his/her offer. If a buyer makes a demand, it is understood that you shall be asking for some changes as well. Giving in a little makes the transaction feel fair and honest. The market could favor a buyer if the real estate sector is struggling and sellers are selling under duress. A seller’s market is where the homes are high in demand and bought within days of being listed on the market.

Negotiations that last longer than intended could be off-putting and sometimes frustrate the buyer. Every offer and counteroffer requires time, discussion, and debate with your agents and family. This could cause delays for both parties. Simplify the negotiation by limiting yourself to a set timeline agreed by both the parties. You could even aim to limit three rounds of negotiation to get to a deal. Negotiating your sale in a time frame has proven to be effective.

Never change your reservation price during the negotiation talks. The reservation price is the least acceptable amount and conditions set by you and your agent. Going back on this suggests weakness on your behalf and could put the buyer in the driver’s seat. You will receive offers on your home, so don’t consider grabbing the first one you get. Buyers should also remember to not agree blindly to every condition set by the seller and put forward personal demands and requirements after conducting due diligence.

For sellers, the style of negotiating would vary drastically depending on the type of buyer sitting in front of them. This is where understanding people and marketing skills come in handy. If you have a young couple purchasing their first home, then you would approach them differently. They would be different negotiators compared to a wealthy couple living with their elderly parents and buying their second or third home. A buyer who is interested in investing in property would be negotiating in a much sharper and different way than a person who has just relocated to this area after a recent divorce. People’s skills and personality traits come useful during real estate negotiations.

The buyer has an agent representing him in the transaction. The seller has an agent representing him/her in the transaction. Mortgage companies, lawyers, home inspectors, surveyors, contractors, and other professionals are included. They all provide advice or support, thus complicating the negotiation process and deal. Every person plays a crucial role and could cause a delay or alteration in the negotiations. Their job is to ensure both parties get a fair and impartial deal that can lengthen the process and sometimes even cause the deal to be canceled.

Practical factors that impact the negotiation process involve time, speed, research, fairness, and transparency. Your home is a part of the bigger real estate market in the country. While it is unique, there are several others on offer for interested buyers. But if you market it well, research in the right direction, and price it smartly, you will have no trouble negotiating and closing the deal with the correct buyer at the right time. This is how the basic stages of the negotiation process look in a real estate transaction. You can close the deal if you know your opponent well and play your cards right.