Negotiating
a Successful Home Sale
Negotiating a successful sale of your home
requires an environment that sustains the
buyer's interest and trust during the process.
Many of our clients have been very experienced
negotiators, and from them we have learned
that the goal is to reach a good agreement
- one in which the underlying interests
of both seller and buyer are met. The results
of a poor agreement may come back to haunt
the parties after the closing. Here are
some thoughts to consider as you prepare
to negotiate the sale of your home.
What
do you want to achieve in the negotiation?
Letting
the buyer know what you need, in a clear
and reasoned way, is the first step toward
getting it. For most people, price is the
highest priority, and is given the most
attention. The buyer's offer must be evaluated
in light of a market analysis, marketing
time and buyer responses. This will give
you an indication of what a reasonable offer
should be. In addition to price, there are
other needs to think through. Distinguish
between must-haves and would-likes. Your
interests might include:
- Selling
at the highest price possible.
- Coordinating
your move to your new home.
- Setting
the closing to meet your travel, school
or work time frame.
- Resolving
any repair issues fairly.
- Protecting
yourself by having complete property disclosures.
- Locking
in a mortgage loan rate for your new home.
- Having
no title or survey issues, or solving
any that do arise.
- Completing
your relocation process and getting settled
into a new home.
- Forging
a good relationship with a buyer who appreciates
your home.
- Having
no future problems or unexpected issues
after closing.
How
much leverage do you have?
A
big factor in your leverage is the underlying
market condition. If you are in a seller's
market you should receive offers at the
top of the range. This is especially true
if your home is in a hot area and has great
appeal. If you have multiple offers, you
have very strong leverage! Buyers will make
their best offer up front.
If
you are in a buyer's market, and your home
has been for sale for many months, you have
a lot less leverage to work with. Knowing
the buyers' underlying interests will help
you improve your leverage. If you see that
they love your house you have some leverage.
If their time frame is immediate, and you
can meet it, you have some leverage. If
you can meet some of their secondary needs,
you have some leverage for a better price.
If the buyer is a dispassionate investor
you have very little leverage.
Be
careful that you do not accept an offer
that contains a high risk contingency to
sell the buyer's home, a too long option
period or a buyer without approved financing.
These offers have a down side that may be
difficult to live with. Buyers should submit
a letter from a lender giving their qualification
status.
Understand
the Option Period
In
Texas, our contracts contain a short option
period during which the buyer can terminate.
We all breath a sigh of relief when the
option period is over. In the long run the
option period protects you, the seller.
It allows time for the buyer to do inspections
and answer any open questions. Keep in mind
that, for many buyers, taking the first
step in a big decision is hard. Once the
ball is rolling it is easier for them to
stay on track. Action creates commitment.
There are subtle pressures to keep the buyer
in the deal, such as face saving, and time
and money investment.
Is
an adversarial or cooperative approach more
effective?
There
is nothing more destructive to the negotiation
process than the adversarial style. Professional
negotiators try to preserve the relationship
between the parties. The goal is not to
reach an impasse in which neither the seller's
nor buyer's needs are met. Sometimes buyers
include a note with their offer explaining
why the house is not worth what they are
asking, pointing out deficiencies, etc.
No one can read a note criticizing their
house without a defensive reaction.
In
the same vein, your attitude toward the
buyer can be effective in solidifying their
interest in your home. The negotiation process
usually begins with some degree of distrust
between buyer and seller. The goal is to
move in the direction of trust as quickly
as possible.
How
do you work with a combative strategy?
Sometimes
you have no choice but to work with an adversarial
buyer or agent. Their strategy includes:
emotional statements, snide remarks, defensive
arguments, threats to terminate, ego involvement,
and stated positioning. Creative solutions
are not likely to be found in this environment.
Working with a combative style negotiator
requires control of your own emotions. Here
are some pointers:
- Do
not respond emotionally. An angry or defensive
response will escalate the negotiation
into a no-win battle.
- Do
not argue. Arguing usually positions them
more strongly and drags the negotiation
process off course.
- Do
not ignore their arguments. Listen carefully,
but do not accept or reject.
- Acknowledge
the fact that certain emotions are present,
without responding in kind.
Strong
emotions arouse emotions in others, including
fear and anger. The anger may have a source
outside of your contract, or it may be a
negotiation tactic.
The
agent may try an us-against-them strategy
. If this happens, write cover memos with
your responses to the buyer in order to
break down the barrier.
Firmly
anchor pricing and other points to outside
data. Show that your proposals have not
been chosen unreasonably.
Do
not allow hazy proposals to stand. Put everything
in writing. An emotional negotiator will
usually produce an unclear agreement.
Offer
some wins on some of the terms. Face saving
is important. Make your counteroffer as
attractive to them as possible. Look for
ways to meet their underlying interests.
Remember
that they may be qualified buyers who can
satisfy your goals.
Is
every point in the contract negotiable?
Yes.
However, one of the most effective means
of coming to an agreement is to rely on
consistent standards. For example, it is
common in our area for the seller to buy
the title policy and buyer to pay survey
cost. Using accepted standards prevents
buyer and seller from haggling over every
point. On the other hand, all points in
an offer can be used to help structure the
deal.
How
do you move in the direction of trust?
Most
people are fair minded and reasonable. They
respond well to respectful treatment and
to having their concerns heard. If the seller
feels that the buyer and agent are acting
with integrity, they will be much more cooperative.
Contract negotiation is a sensitive area,
and anxiety can be high. Both buyer and
seller are under pressure, with future plans
at stake. Acting with integrity does not
mean that all cards have to be put on the
table. It is not proper to discuss your
cost basis in the house or urgency to move.
It is valuable to develop trust because
trust raises the level of cooperation and
forwards the negotiation. Here are ways:
- Listen
and understand what the buyer has to say.
- Take
their questions seriously and get back
to them quickly.
- Express
appreciation for the buyer's interest
in your home.
- Respond
within a reasonable time to offers or
proposals.
- Disclose
the property condition thoroughly. This
usually has the effect of improving the
buyer's interest.
- Reveal
some personal information about your use
and enjoyment of the home.
- Leave
out bottles of water for your prospective
buyer.
- Offer
a small gift such as a neighborhood directory,
list of service people, babysitters, etc.
- Give
the buyer first choice on any items you
are planning to sell or give away.
- Give
an orientation to your home to show how
to operate your pool, sprinkler, security,
etc.
- Accommodate
the buyer's requests to drop by and measure
the house or show it to relatives. (We
know this can be annoying.)
Finding
common ground with the buyer can be a very
powerful reinforcement of the buyers choice
of your home. If you meet the buyer during
a visit to your home, make the buyer feel
welcome and look for some common interests,
children's needs, etc.
Responding
to a Low Ball Offer
There
is a point at which an offer is so low and
poorly considered that it should not be
given a response. However, most of the time
it is best to respond to offers:
- The
buyer may be unfamiliar with your market.
In his market, greater price reductions
may be commonplace.
- The
buyer may be unfamiliar with the comparable
sales for your home. By providing sales
data, we can build his confidence in the
property.
- The
buyer may be starting low, but be willing
move up.
It
may be in the buyer's background or culture
to negotiate aggressively. Once terms are
settled, he may be very relationship oriented.
By
refusing to counter you are adding a little
slap to the buyer's ego. He may not submit
another offer, and you will not see how
high he will go.
Responding
to a Reasonable Offer
Buyers
expect sellers to take an evening to discuss
the offer. If an offer is accepted within
5 minutes, the buyer may feel uneasy.
Multiple
offers must be presented fairly. You should
either disclose to all parties, or disclose
to none, that multiple offers have been
received. We prefer disclosure to all parties
in most cases. This will maximize your ability
to obtain the best price. By disclosing
that there are multiple offers, you are
not shopping your contract. Shopping occurs
when you disclose the terms of an offer
to induce a buyer to submit a better offer.
This results in distrust of the process,
and possible loss of the buyers. There may
be lot of emotion on the table. Future problems
will be avoided by a formal procedure for
handling offers. |
