| The goal in a real estate negotiation is to reach a good | | | | point. However, every term in a contract can be used |
| agreement - one in which the underlying interests of | | | | to help structure the deal. By trading off, both parties |
| both buyer and seller are met. The results of a poor | | | | can come closer to getting what they need. How do |
| agreement often return to haunt the parties after | | | | you move in the direction of "trust"? |
| closing. Many of our real estate clients have been | | | | Keep in mind that contract negotiation is a sensitive |
| experienced negotiators in other industries, and we | | | | area, and anxiety can be high. All parties are under |
| have learned from their skill and experience. Review | | | | pressure, with future plans at stake. It is possible that |
| these tips as you prepare for the purchase of your | | | | the buyer or seller may have had a previous bad |
| home. | | | | experience. Acting with integrity does not mean that all |
| What do you want to achieve in the negotiation? | | | | cards have to be put on the table. It is not proper to |
| The first step in getting what you need is simply to let | | | | discuss your personal strategy or needs. A high level |
| the seller know - in a clear and reasoned way. For | | | | of trust raises the level of cooperation between the |
| most people, the highest priority is the price they will | | | | parties and forwards the negotiation. The seller will be |
| pay for the property. The best way to establish this is | | | | much more cooperative if the he feels that the buyer |
| by a market analysis of the neighborhood. Set an | | | | and agent are acting with integrity. Here are ways to |
| offering price range that makes sense. Knowing your | | | | develop trust: |
| range allows you to balance the price with other | | | | Listen and understand what the seller has to say. |
| needs. Your interests might include: | | | | Express appreciation for the seller's home, gardens, |
| Buying at the lowest price possible. Setting a closing | | | | decorating. |
| date that meets your time frame. | | | | Respond within a reasonable time to counter offers. |
| Settling any repair issues fairly. | | | | Reassure the seller of your ability to close. |
| Having your concerns heard and addressed. | | | | Reveal some personal information about yourselves. |
| Locking in an acceptable mortgage loan rate. | | | | Finding common ground with the seller can be a very |
| Clearing any title or survey issues that come up. | | | | powerful tool in the event of multiple offers. Sellers |
| Completing your relocation and job change process. | | | | often choose their contract for personal reasons. For |
| Getting your family settled into a home and | | | | example, the buyers reminded them of their own |
| neighborhood. | | | | family when they moved in with young children. Or, |
| Forging a good working relationship with the seller. | | | | they were of the same religion. Or, the new owners |
| Having no future problems after closing. | | | | would care for their gardens or feed the birds. |
| Is an adversarial or cooperative approach more | | | | How much leverage do you have? |
| effective? | | | | A crucial part of your strategy in a negotiation is an |
| Effective negotiation does not result from stubborn | | | | accurate perception of the real estate market. You |
| demands. There is nothing more destructive to the | | | | must know the underlying market condition. If you are |
| negotiation process than combative behavior. | | | | in a sellers' market you must act quickly, and be willing |
| Professional negotiators try to preserve the | | | | to present an offer at the top of the range. This is |
| relationship between the principals. The goal is to avoid | | | | most important if the home is in a hot area and has |
| an impasse in which neither seller's nor buyer's goals | | | | strong appeal. If the seller has multiple offers, you must |
| are met. In many cases, the contract negotiation | | | | make your very best offer up front. |
| process begins with some initial distrust between buyer | | | | In a buyers' market your prospective home may have |
| and seller. Effective negotiators move in the direction | | | | been on the market for months. There may be a small |
| of trust as quickly as possible. | | | | buyer pool for the home because of economic |
| In preparing your offer, let the marketplace establish | | | | conditions or due to repair or updating needs. In this |
| your price, while remaining very complimentary of their | | | | case you have a lot more leverage than you would |
| home. Buyers sometimes submit a letter to the seller | | | | with a new listing. Some knowledge of the sellers' |
| pointing out deficiencies and explaining why their house | | | | needs may help you improve your leverage. If you can |
| is not worth what they are asking. This will always | | | | meet some of their needs you have gained leverage |
| backfire and start the negotiation off with a defensive | | | | for a lower price. |
| seller. Sellers have an emotional attachment to their | | | | It is important to make your offer as straightforward |
| home, and will have a strong negative reaction to a | | | | as possible. Contingencies will reduce your leverage |
| critical buyer. | | | | for a lower price in a buyer's market, or for any |
| How do you handle an adversarial strategy by a seller | | | | consideration in a seller's market. Be proactive about |
| or agent? | | | | showing the seller your desire and ability to close. Here |
| You may find that you have to work with a combative | | | | are some possible contract contingencies: 1. Contingent |
| seller or agent. Their strategy may include: defensive | | | | on sale of your home: Usually, the seller will not accept |
| arguments, emotional statements, snide remarks, | | | | a contingency to find a buyer for your home. It is more |
| threats to terminate, ego involvement, and stated | | | | likely to be accepted if your home is under contract. |
| positioning. Creative solutions are difficult to find in this | | | | Attach a copy of the contract and status report. 2. |
| environment. Good control over your own emotions is | | | | Contingent on inspections: In our area this is covered |
| critical when working with a combative style negotiator. | | | | by an option period. Keep the option time within |
| Here are some pointers: | | | | accepted norms. This contingency can be removed to |
| Do not argue. Arguing will position them more strongly | | | | strengthen your offer. Do this only if you are |
| and drag the negotiation off course. | | | | knowledgeable about the property condition. |
| Do not respond emotionally. An angry or defensive | | | | 3. Contingent on financing: Strengthen your offer by |
| response will escalate the negotiation into a no-win | | | | obtaining credit approval. An approval letter with your |
| battle. | | | | offer improves your leverage, and is crucial in multiple |
| Do not accept or reject their arguments. Listen and | | | | offers. If you are making a cash offer, get a letter |
| show that you understand their points. | | | | from your banker stating that the resources are |
| Accept the fact that strong emotions are present. | | | | available. |
| Strong emotions arouse fear and anger in others. | | | | How much under list price should you offer? |
| They may be a negotiation tactic. | | | | Unless there is a strong seller's market, buyers usually |
| Avoid an "us-against-them" strategy. Attach cover | | | | offer less than list price. Establish your price by a |
| memos to your responses in order to communicate | | | | market analysis. It is usually counter-productive to offer |
| with the seller and break down barriers. | | | | so low that the seller will automatically reject the offer. |
| Show that your proposals were not been made | | | | This will set a negative tone from the beginning. In a |
| unreasonably. Firmly anchor pricing, repair requests and | | | | recent deal the seller responded to a low offer with an |
| other points to outside data. | | | | above-list-price counter. |
| Be careful not to allow hazy proposals to stand. Put | | | | How are multiple offers handled? |
| everything in writing. An emotional negotiator will often | | | | The listing agent and seller will decide how they will |
| produce an unclear agreement. | | | | handle multiple offers. They may disclosure to all |
| Make your offer as attractive to the seller as possible. | | | | parties, or disclosure to none, that multiple offers have |
| Look for ways to meet their underlying interests. | | | | been received. By disclosing that there are multiple |
| Offer some wins on some of the terms. Face saving | | | | offers, the seller is not "shopping your contract." |
| is important. Do not try to win every point. | | | | Shopping occurs when the seller discloses the terms |
| Keep your long term goals in mind. The seller may | | | | of an offer to induce a buyer to submit a better offer. |
| have a beautiful home that meets your needs. | | | | This can have a negative result by creating distrust of |
| Is every point in the contact negotiable? | | | | the process by all parties, and possible loss of the |
| Yes. However, one of the most effective ways to | | | | buyers. The standard procedure is to notify each |
| come to an agreement is to rely on accepted norms | | | | potential buyer that there are multiple offers, and give |
| when possible. For example, it is common practice in | | | | each a chance to raise his offer by a certain time. |
| our area for the seller to pay for the title policy, and | | | | When all are received, the seller will review the offers |
| buyer to purchase the survey. Using consistent | | | | and choose one to work with. |
| standards reduces the need to haggle over every | | | | |