Selling your home is a monumental step, and mastering the art of negotiation is a key component of getting the most out of the sale. It's also crucial for buyers since you want to get the most you can for your hard-earned money when buying a home. Whether buying or selling, strong negotiation can mean the difference between closing a great deal and walking away with nothing. In this article, we'll talk about five practical negotiation tips that every home seller should know, and we'll talk about the reverse side. How do these tips apply if you're in the buyer's seat instead? So, get comfortable, grab a cup of your favorite brew, and join me as we dive into 5 Proven Tips for effectively negotiating a home sale.
The Power Play: Five Pillars of Real Estate Negotiation
Let's kick things off by breaking down the power play into five fundamental pillars. These are the cornerstones of effective negotiation, and each one can be the key to unlocking your dream deal.
1. Don't Write Off an Offer – Think of It as a Whole
Receiving an offer below your expectations is a common scenario in real estate. The knee-jerk reaction can be to reject it outright. However, this is where strategic thinking comes into play. Instead of merely focusing on the offer price, consider the entire proposal as a holistic entity. Dive into the finer details – the closing date, contingencies, and other terms that may benefit you. Could you make this offer work to your advantage with a few adjustments? Negotiation is akin to solving a puzzle; every piece has its place.
Example: You receive an offer $20,000 below your asking price, but the buyers are willing to close the deal quickly, which aligns with your timeline. With this in mind, you might reconsider and explore potential compromises on the price or meet in the middle. If some variation of the existing offer could work, that might be grounds to send back a counteroffer with a few changes. Alternatively, maybe the price drop is too low. Rather than decline the offer, you could throw the ball back in the buyers' court. Let them know that the price is too low and they must come up a lot higher. Finally, an offer might be way off the mark (i.e., $100k below asking). Again, rather than simply saying no, you could let their agent know that's far too low and then tell them the range they need to be in if they decide to try again with a higher offer.
As Buyers: We all want a good price, and the flexibility you have to negotiate will vary depending on the current market (i.e., is it a buyers' market, sellers' market, or somewhere in between?). Like for sellers, your ability to negotiate will be dictated by the current market climate. However, as a buyer, don't be afraid to start lower when there is an opportunity to negotiate on price. While the rare seller may storm off and never talk to you again, for most sellers, a low offer is usually a choice between countering the initial offer or saying no. If they say no, and you still want the home, you can always go up in price or adjust your other conditions to make your offer more attractive.
2. Keep All Potential Buyers in the Loop
Transparency is your most potent ally in the real estate arena. When an offer is on the table, ensure all potential buyers know it. This fosters an environment of healthy competition and ensures that the negotiation process remains ethical and above board. The more parties involved, the higher the likelihood of securing a favorable deal.
Example: You have two interested buyers, A and B. Buyer A submits an offer, and instead of keeping it a secret, you inform Buyer B. This transparent approach encourages Buyer B to make a competitive offer and thoroughly supports the negotiation process. If you keep the lines of communication open, Buyer B may come back with a stronger offer, and if you continue to keep buyers updated, Buyer A may come in with another stronger offer.
As Buyers: the bidder process and effective communication by the listing agent naturally work against you. Usually, the listing agent should want to update all buyers about new and competing offers to bring in the best possible offer for their client. However, as a buyer, that potentially means more competition against you and your offer. It could mean you end up paying more than you otherwise would have, or worse, losing your dream home. To avoid these situations or minimize their impact, a fast offer submission is your friend. If you can be first in with an offer, and your offer is strong enough, it's possible that you'll avoid having to compete against someone late to the party. Even if you do end up competing, you'll often get a slight edge against your competition just by being the first person to make an impression and show that you're serious about this property. Sellers appreciate that kind of eagerness since they don't want to have to wait around for other buyers to make up their minds.
3. Don't Let Emotion Stand in the Way of Negotiating a Deal
Your home holds a special place in your heart; countless memories have been forged. However, separating sentiment from business around the negotiation table is crucial. Be open to compromise and avoid letting pride obstruct the path to a successful deal. Sometimes, letting go of a sentimental attachment can pave the way for a new chapter in your life. Don't let a low or weak offer offend your pride. Instead, pause, breathe, think about what's most important to you, and then work with your agent to devise a game plan. This way, you can focus on a strategy that will get you to your goal. Also, remember that many savvy agents coach clients to write a touching intro letter. Don't take the bait if you aim to get the most money for your home possible. If you want to hear what they said, ask your agent to give you a summary instead of reading the letter yourself—this way, you aren't taken in by their story and swayed to give in to their wants at a cost to yourself.
Example: The buyers express interest in some of the furnishings in your home. Initially, you were attached to them, but you recognize that letting go of these items could sweeten the deal for the buyers, potentially allowing you to get much more for your home than you would without parting with these sentimental items.
As Buyers: Play up the sentiment and emotion. While this won't work on every seller, many people are more likely to relax on their demands if they know that their home is going to a nice young family or sweet old couple with a great story about who they are, what they do, what their interests are, and why they love this home. Although a listing agent is often well-advised not to share a buyer's letter with their client, when they do it often helps bring a deal together, and usually for the seller's benefit. This is so powerful that it works not only on sellers but also on professionals. I've even had it where one seller was completely unmoved by an intro letter, but my clients' words compelled their agent, who went to bat for us and helped push their client to soften up in the negotiation.
4. Create Room to Negotiate
Setting your initial asking price requires strategic forethought. To leave room for negotiation, consider starting with a price that provides a buffer for concessions. Buyers often revel in the notion of securing a deal, and if you commence with an unyielding price, you may find yourself in a tight spot when it's time to negotiate. Be flexible and willing to adjust within reason to keep the conversation flowing smoothly. Again, this is all market-dependent. You may want to list your price below the fair market in a strong seller's market to drive interest and get multiple offers. In those cases, the dynamic is different; a lower listing price can drive the final sale price much higher. However, in most markets, listing your home above the price you need can also be helpful. This way, you have some room to negotiate down on price if need be.
Example: You've set your asking price at $450,000 for your home, but you're willing to accept $430,000 if the buyer is willing to close the deal within 30 days. An initial offer comes in at $410,000, and after some back and forth, you end up at $435,000 with the originally required 30-day closing. This strategic flexibility can attract more interest and provide you with room to negotiate while ensuring a quick sale. However, be careful not to list too high, as that can destroy any potential interest and leave you waiting on the market for months!
As Buyers: Obviously, creating room to negotiate often involves opening with your most preferred offer (i.e., a lower price and favorable conditions). However, there is another way to approach this as well. Before writing an offer, think about what's most important to you, and ask your agent to find out what's most important for the seller. Getting specific terms and conditions may be more critical for some sellers than getting the full asking price. Perhaps you have a seller who needs a long six-month close because they want to continue living in their home until their kids graduate. That may not be the ideal option for most buyers due to the delay and the uncertainty it creates for financing. However, if you're willing to grant such a term, it may be enough to negotiate the price down $50k or $100k.
5. Know When to Shut Up!
One of the most underappreciated skills in negotiation is the power of silence. After presenting your counteroffer or terms, resist the temptation to fill the void with unnecessary chatter, follow-up, inquiry, etc. Sometimes, a well-timed pause can be more persuasive than any words. Give the other party space to contemplate your proposal; they might return with a more favorable response than you anticipated.
Example: You receive an offer substantially lower than your asking price. After deciding against the offer, your agent advises you not to bother countering the offer as that may show too much interest and flexibility. Instead, he suggests letting the buyer's agent know that the offer is too low and instructs them to come up by at least $100k for you to consider their offer. You agree, and then a few days go by with no new offer. You begin to panic because maybe you've just lost the only buyers who have expressed genuine interest in months. You mention your concerns to your agent and ask if it's worth reviving the deal with a new offer to the buyers. However, since it's only been a few days, and your agent doesn't want you to appear over-eager, he recommends against making the first move. Instead, he suggests following up with the buyer's agent to see if they are still interested. After a casual conversation with the buyer's agent, your agent dispels some outstanding concerns for the buyers and even suggests some terms and conditions that could put their worries at ease. A day later, a new offer comes in from the buyers, $100k higher than before, with the terms and conditions that had been suggested. After a couple of negotiated changes, you land on an accepted offer that everyone is happy with. Pauses and controlled responses convey confidence and leave the ball in the other person's court to make their next move. This often allows the buyer time to reconsider their stance and potentially come back with a more agreeable counteroffer.
As Buyers: The same principles apply. Unless you have to have the home you're trying to buy, give yourself time and flexibility to negotiate. If you've submitted an offer and gone through a few rounds of counter offers back and forth with the seller barely budging on their requirements, it may be time to walk away and take a break. Sometimes, if you let the current offer die, that opens an opportunity to put the ball back in the seller's court and get them to chase you. If you walk away from a negotiation and the sellers still haven't received any new interest a week later, that may be enough to prompt the seller to come back to you with one or two new concessions to revive the deal. Instead of simply negotiating with the sellers, you're using time to get them to negotiate with themselves.
Some additional thoughts:
Hedging and Uncertainty
Uncertainty is an inherent part of negotiations. Each side may need clarification about potential concessions and price flexibility during the conversation. When trying to remain nimble, incorporate phrases like "I think" or "maybe" when discussing potential adjustments. This softens your stance and fosters an environment of open dialogue and compromise. It also keeps the other party on their toes, so you're not guaranteeing a willingness to make a big concession and potentially inviting them to ask for an even bigger concession. This is particularly helpful when the other side probes for details before sending you a counteroffer. If you tell them a solid yes or no when they inquire about a concession, this could mean you end up leaving something on the table by conceding more than necessary. Confirming "maybe", "probably", or "I think so", gives them the yellow light to continue cautiously, instead of a green light to take everything they can. However, once you're close to landing on an arrangement that works for everyone, this is often a good time to tell the other side exactly what you'll accept, especially if you think they'll go for it.
Etiquette in Real Estate
Let's infuse a dash of charm into your negotiation style. Kindness and respect are highly valued in our culture. Please and thank you can go a long way in a negotiation, but more importantly, remember that each person involved is a human being. We all have feelings, priorities, and reasonable motivations. Recognizing where someone else is coming from and appreciating their wants and needs is a great way to get them to return the same courtesy. For example, finding out what's important to them and why can help you identify and negotiate a win-win agreement that works for everyone. If you're dividing up an orange, where you want the orange slices and they want the peel, then both parties can get exactly what they want without sacrificing what's most important to them. Negotiating the sale of a house is the same in that it's easier to strike a deal when each person feels that they are getting what's most important to them.
Market Awareness
Navigating the real estate landscape effectively requires understanding your local market. Stay attuned to whether it's a buyer's or seller's market, recent price trends, and what buyers are currently seeking in your area. With this knowledge, you can tailor your negotiation strategy to the market's demands and offerings. Sellers can be more demanding in a seller's market, and buyers can be more demanding in a buyers' market. More inventory in the market usually means more options for buyers and less pressure to seize each opportunity. Higher interest rates mean that fewer people can afford to purchase a home, and real estate demand and buyer competition are likely to be a lot lower. The combination of different market factors results in a unique market situation at each moment, and those specifics will determine the unique challenges and opportunities buyers and sellers negotiate within each market situation.
Final Thoughts
Selling your house isn't just a transaction; it's an adventure filled with twists and turns. Always remember these crucial tips:
See the whole offer.
Maintain transparency.
Set aside emotion when necessary.
Leave room for negotiation.
Know when silence speaks the loudest.
Armed with these negotiation tips, you'll be ready to tackle the process like a seasoned pro. And remember, don't let emotions cloud your judgment. Embrace uncertainty, be kind, and stay informed about your local market. Until next time, stay curious, stay focused, and make that next deal come together!
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I am a Victoria-based local realtor with eXp Realty. My commitment to honesty, integrity, loyalty, and hard work have been essential pillars for me because they drive a high standard of excellent service for my clients. Helping you realize your dream is my goal!
I service Vancouver Island, but my focus is on Victoria, Sooke, Saanich, Malahat, Shawnigan Lake, Cobble Hill, Duncan, and the rest of the Cowichan Valley.
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