Buyer Tips for Negotiating Price
by Julie Garton-Good
You want to make every dollar count in the purchase of your home. And one way to make it happen is to employ sound negotiating tactics that make a difference between small cents and dynamic dollars.
So let's cover steps you can take to negotiate a fair price with sellers and not leave money on the table. It's perceived that price is often a major concern with sellers. In fact, a common seller's lament is "We have to get our price because..." (I'm sure you can fill in the blank with statements you've heard).
But it's really not the highest price sellers are after - it's the greatest net proceeds from the sale. "Net" is determined by subtracting the seller's closing costs and any outstanding loans, liens and other financial encumbrances from the sales price. A second way home buyers lose out when negotiating the purchase price is to make a low, often ridiculous first offer. Yes, I know, sellers sometimes do take less (even though it's done far less often in the today's strong seller's market.) Put yourself in the seller's position. How happy would you be in continuing negotiations with a buyer who had just insulted you and your property?
First offers set the stage for all other negotiations that follow. In fact, the seller may become enraged and refuse to make any counter offer back to you. Or if there is a counter offer, the seller might turn the tables and insult you by asking for a price higher than what the property's listed for. (Yes, this does happen in a hot sellers' market!) If you do make a lesser offer, be prepared to defend why such as repairs to be made, etc. Sellers will be more willing to listen to a price cut if it's rationale and fair.
One last tip - earnest money does talk. When evaluating two offers side-by-side, the one bearing the heftiest amount of deposit gives the perception that the buyer is more serious about the property and is perhaps a better financial risk (even if it isn't true!) This is an important tactic in a seller's market where many buyers are vying for relatively few properties with multiple offers to the seller simultaneously.
When it comes to negotiating the purchase price of your home, neither buyer nor seller get to win all of the marbles! Decide how important purchase price is to you and negotiate with that priority in mind.
Negotiating Tactics & Strategies Can Make or Break the Home Sale
In a perfect world, real estate closings would occur over night, sellers would keep every promise made, and both buyers and sellers would negotiate openly and fairly. Unfortunately, welcome to the real world where buyers whittle at the purchase price, closings are postponed, and both sets of players use negotiating gambits to win advantage.
No matter which side of the transaction you're on, it's vital to learn to identify various negotiating techniques and their respective antidotes to achieve a win/win real estate transaction.
Negotiating Tactic #1: Nickel-and-Diming
As the seller, it's not necessarily price but net proceeds that you should focus on. Some lower-price sales can actually put more money in your pocket than a higher offer that asks for various terms and conditions that you are not prepared to deliver. As the buyer, remember that everything is give and take; and in tough seller markets, you stand to lose the property to a higher offer if you play the nickel-and-dime game too long. If you really want the property (and can financially afford it) play the cheap card in moderation and give the seller a fair offer.
Negotiating Tactic #2: Good Guy/Bad Buy
This gambit occurs when a party wants time before making a decision (often on a counter offer) and/or wants to sway the direction of the sale.
If you're working through a real estate agent, he/she will probably try to present the offer to both spouses simultaneously. If you're working alone as a for-sale-by-owner, make the appointment to present for a time when both spouses are present. If only one of the parties shows up, ask if joint consensus is needed to make the final decision or if s/he is empowered to speak for both parties. Get signatures on all paperwork as soon as possible.
Negotiating Strategy #1: Higher Authority
One or both of the players must defer to a third party for answers and/or approval. The higher authority could be a lender, an appraiser, a relative, and even a boss.
If you're making an offer that requires a response, set short time frames for the other party to respond back unless unreasonable (i.e. out of town buyer). Communicating to the buyer that you know she/he is capable of making sound decisions, with or without a third party, will quickly tell you if a higher authority is needed. If so, consider it a necessary roadblock with a timeframe that you'll have to deal with.
Negotiating Strategy #2: The Stall
The stall is a decision not to make a decision.
Ask the stalling party to isolate their concerns about the offer. While you need to build the party's desire to accept the offer, don't forget that you have a powerful negotiating tool - revocation of the offer before acceptance. While this may seem like a dire measure, there's no harm in communicating to the party that you understand this option - This may be just the nudge needed to precipitate a decision.
Negotiating Strategy #3: Reduce-it-to-the-Ridiculous
The idea is to make something you're negotiating for seem so insignificant, that the other party would appear a fool to say no!
As the seller, turn the table and show the ridiculousness of a buyers comments without insulting them - i.e. equate a sum of money into cost in cents per day to buy the house.
The bottom line is that neither buyer nor seller gets to win all of the marbles; contrarily, no one should lose them all. Identifying negotiating gambits and more importantly, their antidotes, can help you structure a win/win transaction where all parties feel as though they've compromised, but won. Good luck with productive and fair negotiating!