Real Estate Negotiations

 
Part 1

 
During the offer/negotiation, the one thing we always want to remember is we always want to try and put ourselves in the other person’s shoes. The buyer obviously always wants to pay the least amount, but somewhere in the middle lies the happy medium. As a buyer, when we make an offer, we want to do all the homework. We want to see what the seller paid for the home, how long they have been there and we obviously have to make some sense of an offer. If the seller has only been there a couple of years, they probably paid $15,000 – $30.000 less than what the offer price is. Going in with an offer that is $25,000 light is probably not going to make a whole lot of sense because the seller would be losing money at that point.
During the pricing, during the home inspection negotiations, those types of things…we really need to take into account the other person’s position. Do we think that asking that is unreasonable? Well if you’re a seller and you get a home inspection request from the buyer and you’re thinking about, “That’s unreasonable, there’s nothing wrong with that, my heater’s worked fine for 25 year!” Well, think about if you were paying $300,000 for a house, they want to make sure the heater works and many of the other kinds of deficiencies that may come across the house. The home inspector may say, “The roof is beyond its’ serviceable life.” The buyer may say, “Well, I don’t want to move into a house when the roof is going to start to leak.” The seller may say, “The roof is fine. It hasn’t leaked a bit.”
We really want to make sure we understand the seller’s point of view and the buyer’s point of view. When you take those points of view, put yourself in their shoes, it will make the discussion. It will also make the negotiation, it will make the thinking process and analyzation process on how you’re going to negotiate. What you think the answers are coming back as, and understanding the dynamics of both the deal and the ability to make both parties happy, you’ll get to the closed deal. That really is the key.
 
Part 2

 
There are always two sides to every transaction. There’s the homebuyer’s point of view and the home seller’s point of view.
When we’re making an offer or we’re going to look at a home for sale, we always want to consider the seller’s motivation. We want to try and find out what the seller’s motivation is in the best way we can. We don’t want to be intrusive (it’s really none of our business where the seller is going), but it does make some sense to understand the dynamics.
For example: If the house is vacant and the sellers move out of state, they might be a little more aggressive on the pricing because the home is vacant. If the seller has a baby on the way, they have six to eight months before they have to be somewhere, they might not be so enthusiastic to take a price very far off their asking price. We always want to think about what the situation is. Where the seller is going? Is it a divorced situation where they are going to haggle on the price because they have to split the money equally? Is it an out of state relocation? Is it a job transfer? Is it a growth? Is it a family growth? Is it a family downsizing? Are kids moving to a different school system? You always have to figure out why that is. They need to ask the right questions, they need to do the homework for you so it puts you in the best situation to negotiate.
Negotiation isn’t always paying full price every single time. “Okay, here’s your money….take it or leave it.” It’s really figuring out how you, the buyer, can get the best deal and the seller can understand, in his or her own perspective…how they’re going to leverage the most amount of money out of the sale.
Communication between the buyer agent and the listing agent is a must. The listing agent should put the seller in a good light and the buyer agent obviously should put the buyer in a good light. “They’re ready willing and able, nothing to sell, 20% down, can close anytime.” So when you’re actually constructing the offer itself, be mindful of the dates. If the buyer is flexible, say, “we can put a closing date that meets your schedule.” We can put a contingency date that meets your schedule.” “We’re in this situation, you’re in that situation…let’s come together.” There is a lot more to the offer process than just the price. Dates, times, contingencies, home inspections, things like that also factor into what makes the deal comfortable and smooth.
Now I wouldn’t recommend in ANY case, waiving a home inspection. I think that’s a buyer’s right. I think that they should do it every single time. I don’t think it’s something that should be waived. Now if you’re buying a small condo, you might want to think about it…is it worth it? What are they really going to check? On the other hand, if you’re buying a single or multi family home, you definitely want to have a licensed home inspector go through and see what’s what.
Again, it’s about the date, the time, the purchase type, the financing type, where the seller’s going and their motivation. Do they have a house to go to? Are they building new construction? Are they downsizing? Are they moving out of state? Is the home vacant? Is something wrong with the home? Is it a divorce situation? Those things are very important when determining how you are going to make an offer on a house that you like. Your buyer agent is the one that should gather that information for you.
Part 3

 
This is our final, Part 3, of negotiations. There’s a term that comes up quite a bit. It’s the term, “The buyers are playing games, or the sellers are playing games.” The buyer clearly wants to buy the house. They wouldn’t have visited it…they wouldn’t have taken the time to put the offer together, to put money in escrow for them to just “play games.” I hear this quite a bit and it’s actually pretty disturbing and frustrating. I don’t usually express my opinion, but this one I’m going to!
You have to understand that at the end of the day the buyer wants to buy the house, the seller wants to sell the house, the listing agent wants to sell the house, the attorney wants to close on the deal, the buyer agent wants to close on the deal…there’s gold at the end of everyone’s rainbow.
So the idea during the negotiations is that, the buyers are playing games or the sellers are playing games. Or they’re playing head games. All that is just silly. Negotiation tactics – there’s no right way or wrong way to negotiate. If the buy wants this, it’s the responsibility of the buyer to articulate that to the buyer agent, the buyer agent to articulate that to the listing agent, the listing agent to articulate that to the seller and then it goes back. It’s like when we were in grade school and we passed the secret down the line. “The rabbit jumped in a hole,” this can become “The rabbit ate food out of the bowl.” Transition, tone and message can get distorted between the four parties. Then, if you put attorneys on board, you have three parties on each side.
When a buyer agent puts in a request to the listing agent and the listing agent goes back to the buyer agent, we just have to put it out of our minds that “the buyers are playing games, the sellers are playing games.” Negotiation IS actually a form of a game. It’s, how hard can I push on one or the other, to get what I want that you will agree to? Athletes do it all the time. “I want 10 million.” “We only want to pay you 5 million.” At what point are they going to come in the middle? So that’s not the team and the player playing games with each other. That’s determining what they think is valuable, what’s important to them. That’s not defined as playing games, that’s defined as hard-nosed negotiations. Some people have a strong stomach for that, some people have a weak stomach for it. At the end of the day, we always have to remember, (going back to Parts 1 and 2 of this series) you have to put yourself in the seller’s shoes, and you have to put yourself in the buyer’s shoes. You have to understand the motivation of the sellers. You have to understand the motivation of the buyers. When you put all those things together and you keep it rationale and you don’t make decisions at 9:30 at night, you have a fresh clean mind to think about things…things will come together.
Playing games is not the motivation of the buyer. The buyer does not put an offer in on your house to play games with you and start messing with your head. They just want what they want. They want to pay what they think is the fair value of the home. You the seller, obviously want what you think is fair for the price you are receiving. That doesn’t translate to playing games…that translates into negotiation.
 
This free eGuide will answer many of your questions and likely bring up a few things you didn’t even know you should consider when buying a home.
» Download Free eBook