1. Ethics – It’s the first word in negotiations. First and foremost, it’s important to gain the trust of the buyer. Always be honest and straightforward. We’ve had sellers ask us to tell the buyer that they will not sell for any less than “$$$,$$$”, when in fact they would. If you present a price limit that is in fact not your real limit, you’ll lose the buyer’s respect and then compromise your position from that point forward.
2. The Golden Rule – There are those who believe that a contentious, confrontational, and negative approach is the formula to be successful in negotiations. My experience runs counter to that philosophy. Being the tough negotiator encourages the other party to dig in and respond in like kind. When you negotiate with the Golden Rule as your principle, you’ll find people are more likely to become more cooperative in working with you to come to a mutually beneficial agreement.
3. The Other Guy Isn’t the Enemy – Are you offended when someone who does not know you projects a condescending attitude? Have you ever felt like another person treated you like the bad guy? If the other party offends you with their ill-founded, pre-conceived ideas about you, you can pretty much bet that you could easily offend them with yours! Approach the buyer with respect and a willingness to try to work cooperatively.
4. Understand That the Buyer Does Not See a Dollar the Same Way You Do – As a seller, a $5,000 higher price means that much more for you at closing. But your buyer does not see it the same way. To them, a $5,000 price difference represents less than a $25.00 change in their monthly payment (assuming a 30-year amortization schedule at 4%). But the buyer’s perception of any price concession depends on their timeframe. In the long haul, they could save much more than $5,000 if they kept the home for a long enough period of time. For you it’s about price, for the buyer it’s about the deal – meaning the price and their financing and timeframe.
5. You’re Not Selling a Used Car – Most people have haggled over the price of a used car and many other items they have bought or sold. So it’s no surprise that people often assume when buying or selling real estate it will necessarily include another haggle over price. One of the most common mistakes inexperienced sellers make is to simply let the negotiation process begin. When you’re selling a used car, you and the buyer both put the same value on a dollar, but as we’ve seen there is a big difference when it comes to real estate.
There are other BIG differences also. You and the buyer may well be negotiating one of the biggest financial transactions of your lives. It has long term implications and it’s about much more than the final agreed price. There are almost always other very important factors like financing contingencies, home inspections, and timing the closing to work for both you and the buyer’s situations to name just a few. Take the time to prepare. Consider all the elements in the big picture when you review the buyer’s offer.
6. A Little Friction is Not a Bad Thing – Have you ever been involved in a negotiation that ended quickly when the other party was very agreeable with your offer? How did it make you feel? Did you think that maybe you didn’t get as good a deal as you could have? When the other party offers little resistance, they were likely happy with the deal and you may have gotten the short end of the deal. The fact is that the other party may walk away feeling the same way because you were quickly agreeable also. Although a cooperative spirit by both parties can help to foster an effective negotiation that brings the parties to a mutual agreement, without a little friction both parties can often be left feeling like they did not work hard enough to earn the best deal they could.
7. Never Re-open a Closed Issue – Make sure you take the time to make each negotiation decision carefully. Re-opening an issue that was previously agreed to will almost always upset the buyer party, compromise your credibility, and therefore your effectiveness in negotiating any remaining open issues.
8. Negotiating in a Buyer’s Market – In a Buyers’ market, you are clearly at a disadvantage. Buyers are few and far between and once you have an interested party, the challenge is getting the best you can without risking that the buyer decides to walk away from the negotiation. Prices tend to be soft or even trending downward slightly at times.
Strategy (be flexible and prompt in making concessions)
Spend the extra time and effort to present your property in its best light. Make sure it is clean, well-staged, and that there are no significant repairs needed.
Set your price at or very near the figure you are willing to sell at. Buyers have a lot to choose from and too high of an asking price will kill buyer interest.
Be as flexible as possible on agreeing to buyer terms such as closing cost concessions and closing date.
9. Negotiating in a Seller’s Market – When there are more buyers than properties, i.e., when inventories are low, you are in a favorable position when it comes to negotiation. In a sellers’ market, properties sell fast and buyers, therefore, are more likely to make concessions. Prices tend to be trending upward and in a very strong seller’s market, multiple offers and bidding wars are not uncommon.
Strategy (hold your ground)
Negotiate hard on the price. In a seller’s market, you can often hold firm on your asking price. In fact, you may even have several buyers at the table at the same time. If that is the case, always consider responding with a Multiple Counter Offer to get all buyer’s highest and best.
Look for “clean” offers that are simple and straightforward.
Negotiate hard for terms that best suit your needs such as the closing date.
Consider not accepting offers that have a home sale contingency. In a seller’s market, you can often wait briefly and then get another offer without the often bothersome contingency.
10. Negotiating in a Balanced Market – When the supply of homes on the market is balanced with the demand of all the buyers who are looking, neither side feels urgency and both sides can give equal importance to their own personal priorities. Expect the back-and-forth counteroffer phase to take longer than it does in either a buyers’ or seller’s market. After several rounds of paperwork, the buyer and seller might agree to do a 50-50 split of their differences on price, terms, and personal property.
If you work hard to be your best at negotiations, this might just be in your future –