Negotiation is a skill and the more you do it the better at it you will become. It is a game of give and take and never take it personal. Many times if not all the time here is where your deal is made or lost. Always remember this is not about you this is about what is best for your client. Never advise a client to take a deal that you know is not good for them just so you can make a commission, no matter how big that commission may be.
When you get an offer read it over a few times and be sure you understand what they are offering. You already know what you want for your clients, find the differences and now the game begins. Remember this is a serious game but to many people it is just that a game. Some people really enjoy it many times because they are really good at it. Don’t get insulted or mad at an offer and decide or advise your client not to even counter. The first offer in many cases is to test the waters, the other side also already know what they want. It is this simple the buyer wants it for free, the seller wants top dollar and somewhere in the middle is a deal, and your job is to find it. Negotiation is like an auction, it doesn’t matter where you start it only matters where you end up.
Find out all you can about the other side, know their hot buttons. This could save your deal and possibly save you some money. Let’s look at an example of what I mean,
For this example let’s say that you are the listing agent and you are selling a home that is listed at $250,000, and that market shows that it worth in the $240,000 – $250,000 range. You also know that your seller’s bottom line is $230,000. Now you get an offer from a young couple that happen to be first time buyers, their offer is $220,000.You have also learned that they are tight on their down payment and closing fees. Don’t get mad at the low offer. Don’t just counter at the seller’s $230,000 number. Your first counter could be something like $245,000 and the seller will contribute $5,000 towards the buyers closing cost. This does a few things,
- It makes the buyer happy because they got the price down a little and the seller is showing that they a willing to give a little to make the deal knowing the home was already priced right for the market.
- Being a young couple and first time home buyers you know that their out of pocket money may be a very important issue. By contributing that $5,000 that is $5,000 that they don’t have to come up with.
- If they accept your counter you are getting the seller net $240,000 a fair price for their home and $10,000 over what they were willing to accept. Everybody wins and it is a good deal for all involved.
- And finally, if the buyer doesn’t like the counter, you and your seller still have some room to play to make a deal.
- If they counter at something in the $230,000 – $240,000 range. Go back at them except there price but take the $5,000 sellers contribution off the table. At this point you are close enough and a deal is going to be made here.
The point I’m trying to make here is simply that dropping the price doesn’t always have to be the answer, know the buyers and get creative.
Negotiating Repairs on the property, the simple truth of the matter is a buyer will all most always over estimate the cost of repair and the seller will all most always under estimate the cost of the repair. How you want to handle this depends of the size and cost of the repair. If it is a couple small inexpensive things I would suggest that the seller just correct them. However if it is something bigger and costly you should take a different approach.
The best thing to do here is to get a few real estimates. Once you have picked the one you want to go with offer to either escrow that amount of money from the closing to cover the repair or lower the price by that amount.
One thing you never want to do is go ahead and make a repair for a buyer that you wouldn’t otherwise make. If your deal falls apart you just cost your seller some money that they didn’t need to spend. And if it was cosmetic now you’re stuck with something that was your buyers taste and it may not be the taste of your next buyer and now you have the same problem.
Another thing you never do is never let the buyer make any repairs themselves prior to them closing the property. Once again if your deal falls apart now you may be stuck with items of their taste, they may leave a project unfinished or you could be open to some legal issues.
Negotiating Time Lines is another thing you want to pay close attention to in a sales agreement. You want to keep control of your transaction and make sure that any agreement uses realistic time lines. Here are just a few suggestions.
- Inspections 10 – 14 days
- Mortgage, buyer must make application within 5 business days
- Attorney Review 3 – 5 days
If a time line is too short a buyer may be trying to push a seller. This could happen if a buyer doesn’t want to give a seller enough time for an Attorney Review. Or, a seller may not want to give a buyer enough time for a proper inspection.
You also want to watch if the time frame is too long. This could let a buyer tie up your property while they are still looking at other properties and they may have a out clause in the agreement that you missed protecting their deposit. A seller may use a longer time line to buy time to bring in another buyer to start a bidding war to bump up the sales price.
There are many reasons and possible benefits for a buyer or seller to play with these time lines. You need to know what range they should be in and if they are too long or too short this should be a red flag and you need to take a closure look at the agreement. But I must remind you again if you find something wrong, don’t get mad, don’t quit, counter the offer. A good Negotiator will always put a few things in an agreement that they are willing to give up. This is a good place to do this and it is your job and the job of your clients Attorney to catch these things.
- You always want to have a couple things in and agreement that you are willing to give away or move on. This allows you to show the other side that you are also working with them to make the deal work. It is important that the other side also feels like they got some things they wanted in the process. A deal is only a deal when everyone leaves the table happy and this will go a long way towards this.
- The other side of this coin is to stand strong on things that matter to you and your client. If it is important to your client you can’t overlook it or give it a way you must find a way to negotiate it out to meet your clients wishes. It doesn’t what the other side is thinking or doing, if your own client isn’t happy you don’t have a deal.
- As much as you want something you must always be willing to walk away without a deal. If you are not getting the deal you want, walk away. One of two things are happening here,
- The other side is testing you. If they are not giving you the deal you want and they are threatening to walk away, let them. They could just be trying a take away on you. If they want a deal and you let them walk away, they will be back.
- If they go to walk away tell them” I wish you the best of luck with this transaction. Then inform them the deal you have on the table right now is the best offer you are ever going to make and it is good for today and today only, if they come back to you later your offer won’t be as good as it is now and later you may not be interested at all.”
- They may not be willing or able to give you the deal you want. In either case what they are offering is probably not a good deal for you, walk away and find a deal you do like and that you are comfortable with.
- Silence is golden and it paves the road to victory. When you are coming down to the end and or a major point in the talks either side puts out an ultimatum, he who talks first loses.