Strategies for Successful Real Estate Negotiations: Insights and Techniques
When it comes to selling a home, the negotiation phase can be one of the most difficult parts of the process. The art of real estate negotiation necessitates not just creativity, but also mastering seller negotiation tactics. Getting through to the ideal potential buyer is simply the first step to take.
Since no two negotiation procedures are the same, there are specific negotiating skills you should master as a property seller in the real estate seller's market. Let's face facts: if you don't know the basics of real estate negotiation, you're going to end up with a bad deal.
To win any real estate negotiation, you need to become familiar with the essential real estate negotiation tips for sellers before approaching the negotiation table. This takes us to the highlight of this guide. Below, we will delve into the basics of real estate negotiation as well as the essential tips you need to get started.
What Is Real Estate Negotiation?
Negotiation is the art of two or more parties striving to agree on a deal that ends up benefiting both parties. In most real estate negotiations, one or more parties agree to compromise or settle on mutually agreed terms. For both parties to agree, negotiation necessitates profound skills and expertise.
There are hundreds of possible factors in a sales transaction. A purchase contract offer can be altered in a variety of ways to best serve the negotiation process. For several contractual checklist items, details such as the price, closing time range, seller credits, and required loan contingency periods can all be changed.
In essence, as the negotiation process continues, it's either the seller rejects, counters, or agrees with the offer made by the buyer. During this process, there are bound to be some modifications made for both parties to come to an agreement.
Essential Things You Need to Know About Real Estate Negotiations
In any real estate negotiation, buyers will ask questions and sellers will respond. While sellers want the best price and buyers want the best deal, the two must come to an agreement for a transaction to be completed.
Negotiating a home sales/purchase is crucial because it is most people's largest asset and there is potentially a lot of money at stake. Looking at the statistics and the black and white of it all, before looking at the parties involved, is the foundation for negotiation.
At the end of the day, both parties want to complete a deal that will be beneficial. However, the negotiation process may be messy as it proceeds. Most times, one party has the upper hand over the other
In a buyer's market, those looking for a home have many options and can walk away if the terms aren't favorable. In a seller's market, where bidding wars and several offers are common, the homeowner can be a bit picky regarding the various terms of the negotiation.
The goal is to get an agreement on the deal's terms, which include the price, timelines, contingencies, and other stuff that may be included in the sale.
The Top 10 Real Estate Negotiation Tips for Sellers in 2023
Below are some real estate negotiation tips for sellers that will get you through the negotiation process.
1. Make a Good Plan
Having a plan before a negotiation involves planning ahead of time for the negotiation. It's as if you're taking complete command of the deal before it even begins. As the adage goes "If you fail to plan, you are planning to fail". As a seller, planning your negotiating strategy is just as vital as the negotiation process itself.
The planning stage is the first step in any commercial discussion. Preparation is often regarded as the mother of all accomplishments. Even before deciding on which bargaining methods to employ, it is important to have a well-thought-out strategy that covers all bases. That is to ensure that during negotiating with the potential buyer, everything goes according to plan.
2. Understand the Ethics in Negotiation
When it comes to negotiations in real estate, one of the most crucial factors to consider is ethics. Ethics, as we all know, are moral rules that regulate all of our actions. It also establishes what is beneficial to individuals and society as a whole.
Expectations of fairness, equity, and honesty can all be part of negotiating ethics, but circumstances might occasionally force you to act unethically, despite your best intentions. As a result, it's possible to follow the law but still act unethically.
It's pertinent to know that ethics and negotiation go hand in hand. To begin, you must understand your ethical standards. After that, find out what your client's ethical standards are on a tactical level. That will help you to understand the bargaining process and where you both stand.
3. Try as Much as Possible to Listen to Your Client
When negotiating, the necessity of paying close attention cannot be overstated. A professional selling agent makes it a point to make sure that buyers are heard. When a buyer begins to believe that their opinions are being ignored, it creates a lot of anxiety, confusion, and irritation.
Due to this, it's always a better idea to listen when negotiating. Take time to listen to your client's objectives, desires, and expectations rather than speaking too quickly. Never take a firm stance. Instead, lay the groundwork for a positive client relationship based on excellent communication.
4. Know the Fundamentals of Persuasion
Views, attitudes, and perceptions differ just as much as people do. That is exactly what you need to know about the art of persuasion. It’s not the goal of persuasion to change people's minds and opinions. Instead, it’s to alter their thought process so that they see things in a new light.
The goal is to persuade potential buyers in such a way that both you and the client benefit from the negotiation. Back in the day, the goal of a traditional negotiation was for the real estate seller to win without considering the client's perspective.
In recent years, though, things have changed. The goal now is to find a good solution and a point in the transaction where both the buyer and the seller are satisfied.
5. Set a Reasonable Asking Price for Your Property
Pricing the property right is one of the best real estate negotiation methods for speeding up the sale process. You need to look at nearby locations to price your house competitively. A good real estate summit speaker can assist you in doing a comparative market analysis to set a reasonable asking price.
More bidders will be attracted to your property if you price it appropriately but competitively. This could result in a bidding war. You won't have to spend as much time negotiating as well.
A house that has been on the market for a long time gradually loses its appeal to potential buyers. Therefore, extended negotiations will almost always result in reduced house prices. However, that can be avoided if the proper price is set in the first place.
6. Seek the Help of a Real Estate Agent
Working with a real estate agent that has good negotiation skills and allowing him or her to lead the process is one of the best real estate negotiation strategies. The reason is that sellers often have strong emotional links to their homes, which presents itself in the form of aggressive negotiation methods.
Some emotional sellers might not even be willing to negotiate. Since real estate brokers are professionals, using them in the bargaining process allows you to keep your emotions in check.
During the negotiation process, a good real estate agent can emotionally distance themselves from your property. That's important since your main goal should be to achieve a favorable deal.
7. Make an Offer to Cover Closing Costs
Offering to pay closing costs, such as appraisal fees, inspection fees, and attorney fees, often amount to around 3% of the home's selling price. However, many buyers are cash-strapped due to other expenses like down payment, renovation costs, and moving costs, among others.
As a result, buyers are often unable to complete the transaction unless they are given financial assistance with the closing costs. Choosing to pay the closing costs is one of the real estate negotiation techniques that sellers can use.
Most times, buyers request that the seller pays the closing fees when making an offer on a home. Accepting a buyer's request to cover closing costs can result in a significantly faster sale.
Meanwhile, you can raise your asking price to guarantee that your margins are preserved. While doing that, simply ensure that the price you quote is acceptable to the buyer's lender.
8. Counter at Your List Price
As a seller, if a potential buyer's initial bid on your property is below your asking price, you're unlikely to accept it. Buyers typically expect a back-and-forth negotiation, so their first offer will be lower than your list price—but not necessarily lower than what they're willing to spend.
If you're terrified of losing a possible sale, you should make a counteroffer with a price that's higher but still below your stipulated price. As many sellers will tell you, this technique works in terms of getting the property sold, but it isn't always the best way to get a good outcome.
Rather than lowering your price, keep it the same as it was when you first listed it. Someone interested in buying will remain engaged and will return to you with a higher offer.
9. Initiate a Bidding War Among Buyers and Set an Expiration Date for Your Counteroffer
Make the worth of your home a key component of your negotiation strategy. Schedule an open house a few days after putting the house on the market and making it available for inspection. Refuse to accept any offers until the open house is over.
As a result, potential buyers will expect to compete and may make higher offers. If you receive numerous proposals, contact the highest and best bidders.
Likewise, as a seller, you are legally authorized to counter multiple offers at the same time, although you may need to notify all parties involved. Consider placing an expiration date on your counteroffers if you want to sell your home quickly.
This will compel buyers to make a choice, and you can either have your property under contract or move on. Make the deadline shorter than the default time range in the real estate contract of your state, but not so short that potential buyers are turned off. For instance, if the default expiration is three days, you can choose to reduce it to one or two days.
10. Don’t Be Afraid to Reject Any Unfavorable Offer
Always be prepared to reject an offer if it does not satisfy your needs during a real estate deal. This real estate negotiation strategy proves to prospective buyers that what you're selling is worthwhile. Only if the buyer is still interested in the house can he/she make a fresh offer.
You are not locked into a negotiation with a specific property buyer if you reject an offer. As a result, if a better offer comes along, you can accept it. That puts pressure on buyers to submit a more competitive offer as soon as possible if they want to buy the home.
This real estate transaction strategy is extremely effective when the property has only been on the market for a short period. It's also a good approach to utilize if there's an open house coming soon. However, as a property seller, you should always evaluate an offer before rejecting it.
How Counter Offers Works in Real Estate
When a buyer is interested in a home and wants to buy it, they submit an offer, usually with the assistance of their real estate agents. As the seller, you have three alternatives in this scenario:
- Accept the offer without any stipulations or modifications.
- Make a counter-offer.
- Reject the offer and look for a buyer elsewhere.
There is a real estate counteroffer strategy for buyers that you can use should you be interested in negotiating with the buyer after rejecting his or her initial offer. Counteroffers in real estate almost always revolve around three primary considerations: convenience, price, and timing.
When you make a counteroffer, you most likely make modifications to specific components of the offer. Let's look at some of the most typical real estate counteroffer components below.
1. Sales Price
The sales price is the most frequently contested component of a counteroffer. There are two popular ways for sellers to respond in this situation. As a seller, you could start by countering with the initial asking price. That implies that you are unwilling to haggle over the price.
In the second scenario, you may respond with a fair price that is in the middle between the asking price and the buyer's offer. That shows that you're willing to work out a deal. In that case, the buyer has the option of making another offer or accepting the asking price.
2. Closing Costs
Sometimes, a buyer may ask for your assistance in covering the closing costs. In a buyers' market, though, this is far more typical. As a seller, you have the option of agreeing to invest a particular amount of money towards finalizing the deal or just declining the offer.
3. Closing Date
The closing date will be proposed in the original offer. If you want the transaction to happen on a different date, you can make a counteroffer as a seller. For instance, you may require additional time to relocate out of your home and request that the escrow period be extended beyond the first offer period.
4. Earnest Money Deposit Amount
Buyers usually put down an earnest money deposit to prove that they are serious about buying your house and have the funds to do so. In that case, larger deposits are often preferred by sellers since they imply that the buyer is more likely to follow through with the deal because there is more at stake.
5. Buyer-Requested Contingencies
If certain specified requirements are not met, contingency clauses allow one or both parties to back out of a real estate contract. Valuation, inspection, financing, and sales contingencies are all typical contingencies in home offers. As a seller, unless you have a lot of leverage, you shouldn’t oppose these contingencies.
At times, some buyers will include a home sale contingency in their offer. That means that their ability to sell their property will determine whether or not they can buy yours. In most cases, sellers will fight back and try to use a kick-out clause or other measures to get out of the deal.
How to Counter Offer When Selling a House
When selling your home, you're unlikely to accept a buyer's initial offer, especially if it's significantly less than your asking price. So, you should expect to wrangle and bargain over the price. Many sellers increase their initial asking price ahead by 5% to 10%, knowing that the buyer will most likely drop it for their first bid, but this should only be done after consulting with a real estate agent.
Many sellers are becoming increasingly worried about boosting their asking prices too high, instead of opting to accept lower bids to sell more quickly. With that in mind, during the negotiation phase, you should be flexible and realistic. To tempt the buyer and avoid losing the deal, your counteroffer will normally be lower than your asking price.
If the potential buyer is highly interested, they’ll remain engaged and continue to negotiate. However, never go too far below what your property is worth. The price will inevitably be lowered but don’t forget your property’s market value throughout the negotiation.
If a potential buyer is serious about buying your property, he/she will stay engaged and continue to negotiate. Don’t make the mistake of going beyond the value of your property. The price will eventually be reduced, but keep in mind the market value of your home throughout the process.
Here are some pointers on how to make a counteroffer when selling a home:
- Grant yourself time to consider an offer
- Speak with your residential real estate agent about the property's valuation
- Set a goal for yourself that you're willing to work toward
- Compare any possible repair expenses to the offer in front of you
- Examine the housing market in your area
- Don’t allow your emotions to take over because it’s not a good idea
How to Reject Offers on Your Property
If you're not sure about an offer, don't reject it right away. Take some time to consider the situation and try to reach a negotiated agreement with the buyer first. If you and the other party still can't agree, you have the right to reject the offer. Simply inform your agent that you do not wish to accept the offer, and he/she will handle the rest.
If a buyer is serious about getting a house, rejecting their offer may not be enough to put them off. Some sellers will reject an offer and request that the buyer submits another to show how willing they are. That is a risky approach that often turns off potential buyers. However, some sellers continue to use this strategy and it ends up being successful.
It's pertinent to know that accepting an offer isn't legally binding. The buyer does not become the owner of the property until the contracts are exchanged. If you're displeased with the deal, you can still back out if it's not a legally binding negotiation.
If you accept an offer and then receive another, you have the option of rejecting the first offer and accepting the new offer. That's exactly what is known as gazundering, and it is widely regarded as unequal. However, it’s a good alternative if you are still unsatisfied with the original offer.
For most people, selling their home or investment property is a significant financial transaction. It can also be challenging because prospective buyers want to get the most bang for their buck while spending the least amount of money possible.
However, arming yourself with the above real estate negotiation tips for sellers will put you in control and help you get the best real estate deals, even with challenging buyers. The key to successfully using these negotiation tips is to offer a good-looking property for sale.
If you want to have the upper hand in negotiations, the home's structure must present well, be in outstanding shape, and have something that rival properties do not have. If buyers aren't interested in the property you're offering, your hardball tactics won't persuade them, and they'll simply walk away.