Negotiation is a huge part of the process of selling a home. It starts from the first phone call or meeting at the property and continues until the ink is dry on the contract. After nearly 13 years in real estate, I have come to the conclusion that negotiation is not rocket science but it does take a lot of intuition. I will broach a few basics at a time and hopefully, by reading you will be more prepared and aware as both a potential seller, buyer, or possibly agent.
Ensure you and your agent both keep a cool head
It is easy to panic, especially when interest is shown on a property. Here is a real-world scenario I can recall. An agent was putting gentle pressure on an owner to accept an offer he had received on a home. The owner was very close to succumbing to this pressure. This was despite the fact he had good interest in the property and would very likely achieve a better price if he waited. The fear was that they would lose the buyer, which was unlikely. We sat down and worked out that (in this situation) the best course of action was to relax and let things play out. They did this, and the owner ended up close to $50,000 better off.
As an owner, you need an agent who is going to be a calming influence and provide the right advice. The last thing you need is an agent who has commission breath and is making decisions based on their own fear of loss.
This is a good lesson for both people selling properties and those buying. You personally also need to put these fears to the side when negotiating and make decisions based on rational judgment.
Both parties need to stay on good terms
Have you ever been selling or buying a home and you feel the real estate agent makes the whole process harder than it should be by unwittingly and unnecessarily souring the relationship between the buyer and seller? An agent should not be speaking with either party in a negative light. This is often to justify why the negotiation is not panning out as smoothly as it should. Buying and selling a property is a very stressful time in someone’s life and they may often act out of character.
The actual “product” (the house) is a very material thing. But the process of buying a home where someone is going to live and potentially raise a family is very emotional. Small issues become extrapolated very quickly. Subsequently, the best way to bring a negotiation to a halt is for someone’s ego, emotions, pride and stubbornness to get involved. All too often I have seen a property negotiation unnecessarily struggle to come together in the final phase.
You don’t need a “yes man”
I don’t believe an agent should accept an offer like they are taking an order at McDonald’s. Agents often end up trying to negotiate owners down rather than work at increasing the buyer’s offer.
Now there is a caveat here. The number of variables when negotiating is ginormous and sometimes you do need to bring the owner an offer without much push back. It may be for a variety of reasons including the level of the offer, helping to provide competition, a buyer’s temperament, a particular sale method, or an owner’s situation. Good dialogue with an owner is imperative to make sure you are both on the same page. But, if an offer is just too low I believe one of our jobs as an agent is to provide education to buyers as to why their offer is not in the ballpark, not just be a yes man.
If I happily draw up an offer that is too low I am a) conditioning the purchaser to the chance they may own the property with that offer. I am also b) cornering the buyer into a position where they won’t be at the market level or an acceptable level even if they come up a huge amount during the negotiation.
A real-world scenario: Mary wants to offer on a home that has a fair BEO of $795,000. She asks me to draw up an offer at $720,000. I know full well the owners won’t accept less than $790,000 and this has been tested. What would be the best thing for me to do? As the buyer, I am sure you would appreciate complete honesty. Often if the agent takes a cheeky offer to the seller they unfortunately get annoyed and won’t negotiate at all.
We draw up the offer and take it to the owner, the offer is negotiated up to $770,000. This is $20,000 away from the owner’s bottom line. However, the buyer feels that an increase of $50,000 has been a huge concession. They can’t bring themselves to pay more even if at $790,000 it is a great buy and they have the capacity. The problem is they started too low in the first place.
Often, the right conversation with a buyer at the point of the initial offer or contact can mean a better result for the owner. This can also mean the buyer actually ends up owning their dream home.
I hope by reading this blog one or two points have helped enlighten you in relation to the process of selling a property (or perhaps just selling in general). I am looking forward to continuing the negotiation theme in the coming weeks and months. See you around the property circuit.
