Real Estate Buying Negotiation Strategies
Gosh! Working through the negotiation strategies sometimes feels like you’re in a dual between logically vs frustration as you work through the process. The struggle between facts and emotions is frustrating if you don’t have a plan. Creating the Purchase Agreement is only the 1st step in the negotiating process. Once all parties sign the agreement, there are a few more steps that may come into play. There is a possibility you may have to work through negotiations when it comes to the home inspection and appraisal.
Now that your found your perfect home, what’s next?
Hopefully, you have worked through all your negotiations with your lender and are pre-approved. This should be step #1 before you even schedule appointments to view homes. After you find the perfect home you need to work through Price and Terms. Some terms could be; when do you close, how long after closing do you give the seller possession, how much per day in rent, to name a few. Next is the Inspection and negotiate any issues slowly and methodically. Okay, now we get the Lender involved and order the appraisal. What if something goes wrong along the way?
We have reviewed the Price and Value of the property before we put in an offer. If we think we may have an issue because the house is on the market higher than we think the appraisal will be, we negotiate that upfront and share our report with the agent with the offer. This also would be discussed with the Seller in advance, and if it were lower than your offer, we would already have a plan in place. If a Seller has no interest in lowering the price to Appraised Value, we would have that discussion and a plan before we even moved forward with the inspection. Some Sellers will sell only if they get X and sometimes X just isn’t there. It will be up to you if you pay over the appraised value. That will be cash out of your pocket, not the banks.
If there was an issue with the inspection
This the most important part of your transaction. Take some time and review the credentials and certification of the inspection company. Many inspectors have different ways to report. The best in my opinion is a report that is broken down by category, has a picture and a description next to it. In most cases, they even place an arrow on the problem to draw attention to the issue. It’s hard for a Seller to dispute a fact; picture next to it a problem and a solution. You can also decide based on the inspection not to move forward with the purchase. Every problem has a potential solution and will be addressed on facts.
Sometimes drama enters the negotiation process based on personalities and how they handle problems. When you hire an excellent inspection company with amazing credentials and reports, facts are facts and they are hard to dispute. One of the inspectors I highly recommend is Weatherstone Inspection. CLICK HERE to check out their website, and make sure you scroll to the bottom and review their credentials. It up to you who you select to represent your interest during the home inspection. The most important key is, take the time to work through the process one step at a time. Review all information and do your “Due Diligence”. Everything is in writing every step of the way.
Balancing Both Relationship and Substance
It’s important to understand to have a favorable outcome in your negotiation process, relationship and substance occur simultaneously. Let’s say we start the negotiations with a series of offers and counteroffers. Eventually, this process results in an agreement and agrees on price and terms. The terms of the agreement are the substance of the negotiation process. During the process of defining the terms of the agreement, buyers and sellers develop a feeling about one another. This feeling can either be favorable or unfavorable. These feelings everyone is having towards the transaction is the relationship. Is it a good relationship, one that needs work, or did everyone get off on the wrong foot?
Preparing Yourself to Negotiate
To overcome “Form Phobia”, I recommend before you sign a buyer agency contract review the real estate documents in advance and ask questions right away. Don’t wait until you have found a home you want to buy. You want to feel comfortable with the legal documents and an understanding of what your signing and why. This will help you keep a clear sense of reality, and not feel overwhelmed with the process. The goal is knowing you are making the best decision on moving forward base on facts. Determining your flexibility will help you stay focus on the goal you are trying to meet.
What can you do if you find yourself in this situation? If you plan for it upfront you won’t be surprised. I will share with you my viewpoints on the subject, and how I handle the situation. When you are working through your interview process for an agent, find out how they would handle the situation. It doesn’t hurt to ask a few “What if’s scenarios” as part of the interview process and work towards building trust. You may find you don’t want to work with them, and you should know that upfront. The last thing you want to do you put in the time, find your perfect home, put in the offer, and lose it based on how the agent negotiated or on recommendations you didn’t work through 1st. Usually, I find, the breakdown between buyer and agent was over “TRUST”.
We need to check, “what is the home worth? “
Most agents will start with the comps, what other homes sold for in the area, and leave it at that. Yes, this is important, and we will check the numbers and set them aside for the next set of numbers. Let’s take a look at the property through the eyes of the Appraiser, what condition rating could they give the home about value. What updates this property has that the others didn’t, and can we put a dollar value on those improvements. I call this Price Driven Vs. Value-Driven Approach and have more details on the subject. To review the difference in detail… Click Here.
Reviewing Public Data
Next, I pull public records and check what is the city’s opinion of value. Lastly will look at our Market Intelligence Report, our crystal ball on what’s going on with the market. We will check all the documents regarding price and value, figure in your mortgage approval, and see if there is any money to play with. There are two ways we can write the offer NOT contingent on appraisal (you pay the difference) or contingent on appraisal (opens negotiations with the seller about price). At the end of the day and after reviewing all the information about price, “What Is The Home Worth To You”?
Before we start the negotiation process, I like to start with the Listing Agent. Maybe the seller needs more time after the closing and that is more important than the highest bid. Maybe they’re the original owners and raised their family there, and it’s more important to them to pass the baton to the next generation…and that’s what is important. So, write a letter and add a picture of the family. Do not assume the price is the end-all-be-all to the sellers. Let’s get to know the Seller’s a little bit and see if we can make this a Win-Win!
Now for the important emotional questions, is this house a want or need? Does this house have EVERYTHING you are looking for? Does it fit your budget if you go up in price? How is it going to make you feel living there, and how are you going to feel if you don’t. Then make your offer knowing you have done your BEST!
Know upfront the Negotiating Guidelines that your Realtor follows
Make sure you discuss and have a plan for adequate preparations. I recommend doing this in advance, like a trial run if you will, so you are comfortable with the process. This will also define your communication process with your agent, and prospective seller. To have an effective negotiation will depend upon you and the seller maintaining effective communications. If you don’t prepare in advance you are worrying about substance and neglecting the relationship.
Adding Emotions to the Negotiation Process
Yes, everyone does respond differently to the negotiation process. It’s important to respond logically based on facts and not react emotionally. I find this is prevalent when we start the negotiation after the home inspection. That’s why I recommend having excellent reports regarding major issues that have come up during the inspection. Without an excellent report and communicating the facts to the seller can make or break the sale moving forward. My job as your agent is to put you in the best situation when it comes to negotiation strategies. I am certified as a Negotiation Specialist, and always looking for ways to improve. For more strategies regarding negotiations “10 Tips for Strategically Negotiate Real Estate”
In my opinion in or to succeed at the highest level you need a plan and excellent communication with ALL parties. Before you even put in an offer, the 1st communication should be with the listing agent. Not all agents are easy to work with or knowledgeable in Real Estate Sales, so you should know that upfront. More importantly, is ask lots of “What If” questions to verify the agent you are working with is the right fit. It’s also a great way to test their knowledge.
First and Foremost, Safety First!
As we move forward trying to navigate our way through our new surroundings. Putting your dream of a new home on HOLD shouldn’t be one of them. Now more than ever knowledge will be your power. Know the Market You’re In and your Negotiation Power. Check out Categories for additional updates regarding the Market | Buying & Selling.
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