The Art of Home Negotiation
Negotiating to buy or sell a home or other real estate is much like buying or selling a used car. But real estate agents and their clients have become much more sophisticated in recent years, thanks primarily to more information available through computers. Subsequently, negotiation strategy plays a major role in home sales.
If the asking price for a home is correctly set close to its market value, as determined by recent sales prices of comparable nearby homes, that home should sell within 90 days for close to its asking price.
Even if a home is overpriced, it may sell quickly if the seller is motivated to sell and the buyer is anxious to buy. Where negotiations often break down, however, is when one or both parties really don't want to make a sale except at a very advantageous price. Here are the simple rules to help you win this real estate negotiation game:
Learn as much as you can to prepare for the negotiation
Knowledge is power in negotiations. If you are selling your home, your best preparation steps are to (a) get your home into tip-top condition so buyers won't have any serious physical objections and (b) have the facts on recent sales prices of comparable nearby homes.
Make price adjustments for the pros and cons of your home compared to the recent neighborhood home sales. Also consider the asking prices of other competitive homes currently listed for sale.
If you are buying a home, don't be in a hurry. You may find the perfect home at the first weekend open house, or it might take you six months to buy a home. When you find a home you want to offer to buy, insist your realty agent prepare a written CMA (comparative market analysis). This is the same form the seller used when setting the asking price. You may be shocked to realize the asking price is a bargain. Or, it might be grossly overpriced.
As a home buyer, you are in the driver's seat. You can always raise your offer price, but you can't lower it. Don't be afraid to make your first offer, if justified by the CMA, 5 percent below the asking price.
Unless the asking price is grossly out of line, a very low first offer insults the seller, who might not even make a counteroffer. Use your superior knowledge of the market to negotiate back and forth until a mutually acceptable price and terms are agreed upon.
Understand the importance of time in the negotiations
If you are the buyer, don't hesitate to ask why the seller is selling. A job transfer, pending foreclosure, illness, unemployment or other motivating factor might be motivating the seller. However, if you learn the sellers are a retired couple who will sell if they can get their price, they probably won't be motivated to accept your low offer.