Section 9: Dos And Don'ts Of Negotiations
By this point in your search, you likely know how much money you wish to spend. Seriously considering all available opportunities and possibilities will give you flexibility during the negotiation process.
How To Make Your First Offer The Best Offer
Making your first offer is an important step and calls for a significant amount of preparation and analysis. Go in knowledgeable, with consideration of all the components of your offer when submitting the proposal to the seller. You are not so much responding to their listing price as using your own factors in arriving at your offer.
An important component is a comparative market analysis, which is a process used to estimate the value of your future home. It uses the elements of the your potential home and compares it to similar houses in the area. This gives an estimation of the local selling prices.
Research market trends. Is the local market going up or down? Are there new houses being built that will soon be for sale? Are existing houses being remodeled?
Those calculations take time and effort, but they will provide you with options to consider. The real estate agent's services will be very helpful here. Your real estate agent will assist in this analytical process and advise you on your offering price, but the final decision on the offer amount is yours.
After you determine your offer, the agent will send the proposal to the seller or seller's agent. The seller or their agent will either accept it, reject it or present a counter-offer. Negotiations can go back and forth until you reach an agreement, or possibly, not reach an agreement. If an agreement is reached, the home buying process will move into the escrow stage.
Negotiating: Which Tactics To Use
The goal of your negotiation is to buy a house at the price and terms agreeable to you. Depending on what kind of market you are in, strategy and tactics will vary. In a buyer's market, there are more houses on the market than buyers looking, you have more opportunities to succeed. You can make a less reasonable offer, request home improvements, and payment of closing fees by the seller. In a seller's market, you have less leverage, as you are not the only one in line to purchase the home. Try asking for too much and the seller can afford to turn your offer down for the next one.
It is vital to understand that both the buyer and the seller may lose sight of the final goal. Sometimes the parties get carried away in a battle of negotiating. Keep your eye on the goal, and keep your expectations realistic.
The following strategies will hopefully help you stay focused:
Use The Middleman. Your real estate agent should be your middleman to negotiate with your seller's agent. Using your agent as a buffer will save you time and aggravation.
Be Curious. Asking questions may draw valuable information from the seller. It might help uncover the reasoning behind the house's sale. This could offer valuable leverage.
Consider Compromise. Be ready to give away something during the negotiation.
Focus On The Main Goal. Remember your main goal is to buy the house. Sometimes you will get stuck negotiating on minor details. It can be a good tactic to wait until you come to an agreement on the main points before proceeding to the details.
How To Avoid Mistakes During The Negotiation
Be Nice. No one likes rude people. Try not to offend the seller during a house visit. For example, discussing necessary renovations and the poor taste of the decorations may hurt feelings, if not the deal also.
Be Calm. Do not express too much interest. If sellers know how much you want this house, they may not accept your first offer.
Think Like A Seller. Change your perspective. Imagine you must sell this house in a few years. Will it be possible, or does it lack some basic features that the housing market considers essential?
Do Not Expect The Price To Lower After Inspections. Bid lower than you can pay and make your final offer with the most comfortable price you can afford.
Sign Cautiously. Make sure that you acknowledge all terms and realize all liabilities before you sign any documents. Once you sign the contract there is no way to make amendments without renegotiating and signing a new one.
What If There Are Multiple Offers
In a seller's market, you will probably have competition for the house you wish to buy. Sellers will make their decision based on the best price and terms. The best way to protect yourself from multiple offers is to make your offer better than the others. In addition to the offer price, review your contingencies. The fewer clauses you have, the more attractive your offer is. Your agent can advise you on the contingencies. You want to make your offer attractive without leaving yourself exposed. For example, it is recommended not to remove the home inspection. Offering a large deposit and down payment may convince the seller of commitment and tilt the balance towards your proposal.
Keep in mind that the owner is interested in selling the home and you are interested in buying it. With time and effort, that will happen.