Real Estate Negotiation Tips
Everyone wants to get the best deal in a real estate transaction. Sellers want to maximize their sales price, while buyers want to minimize their purchase price. While price isn’t the only factor, it is often the most important aspect. While focusing on price, don’t forget about these other major contract points: Cash / Financing, Closing Date, Earnest Money, Option Period, Option Fee, Home Warranty, Seller Contributions, Title Policy, Survey, Contingencies, Lease Back, and Non Realty Items. A skilled negotiator should consider all aspects of an offer.

Research – Knowledge is power. The first tool in you arsenal is the Comparative Market Analysis (CMA) which is a list of similar properties in the area that have recently sold. Since no two properties are identical, the analysis should factor in additions and subtractions to account for the differences. Next you should look at the competition to determine the number of competitors, how they are priced and how closely they resemble the target property. These two tools help establish the supply and demand market principal and will indicate whether it is a buyer's market, a seller's market, or a balanced market. As a general rule of thumb, anything more than a 6 month supply is a buyer's market and less than a 6 month supply is a seller's market. Any additional information about the buyers or sellers personal situation can be advantageous, but don’t expect the other party to willingly share their personal position. A skilled negotiator will know how to pick up on subtle clues about the other parties’ personal situation. If you are in a situation where you are around the other party or their agent, be cautious about what information you share as this can later hurt your negotiating position. Also be aware of any subtle details the other party may share with you. Take everything you learn with a grain of salt as some parties are known to disseminate misinformation to throw you off the trail. A good example would be a buyer providing overly critical feedback, or a seller indication that their property has had a lot of interest.

Fishing – This age old technique is commonly seen as floating a concept or potential terms by the other party without having a written offer to present. This is an information gathering approach and you should be cautious about what you share and how you respond. A good response is to ask the other party to put the details in writing so that you can evaluate the entire offer. It is a rare situation that a verbal agreement is considered legally enforceable, so a verbal counter to a verbal offer is only tipping your hat to the other party about your overall negotiating flexibility. The exception to this rule is when a written offer has already been received, two parties may use verbal counter offers to accelerate the negotiations. Once the agreement is reached, put everything in writing and make sure that all parties agree and sign the written terms. Email is can be a good tool to facilitate negotiations because it tracks the other parties response in written form often eliminating confusion about what was said and what was heard.

Soft or Hard Approach – The soft approach is a party that indicates flexibility on their position and a willingness to work out a compromise. While this approach indicates a desire for a win-win solution, the party should be careful not to be too flexible, or they may end up conceding too much to the other side. The hard approach is a party that indicates a lack of flexibility and is often accompanied with the “take it or leave it” attitude. This approach sets a strong tone to the negotiation and can often turn off the other party to the point of not negotiating at all. A balanced approach is often the best overall approach. This would occur when a party shows a willingness to negotiate terms, but also sets a firm position on how much they are willing to compromise. A common variation of this approach is the “Good Cop / Bad Cop” scenario. This plays out when two parties on the same side take opposite approaches. An example could be a wife that love the home and must have it and a husband who is not willing to budge on terms. It could also be a buyer who loves the home, but their agent says the home is not in line with the other comparable properties. Try and identify the approach the other party is using as this will help determine how you can respond.

Haggling – Usually defined as both parties countering back and forth over small details multiple times with neither party budging much. In real estate, be careful not to haggle too much or this may upset the other party to the point of terminating the contract negotiations.

The Offer – The initial offer sets the tone for future negotiations. If you are presenting an offer to purchase, consider all the information you have gathered and base your offer on the facts that you know. Don’t place too much weight on the seller’s list price. In a buyer's market you can afford to be more aggressive with your terms, however if you are too aggressive the seller may decide not to negotiate with you. In a seller's market, your offer terms will need to be less aggressive to get the attention of the seller. For sellers receiving an offer indicates a buyer’s interest in your property and should be considered a complement. While the terms of the offer my fall below your expectations, you should still consider responding to all offers. A skilled agent can help you determine the best response to each offer. Multiple offer situations can give a competitive advantage to the seller in negotiations, but the seller needs to be careful not to get too greedy or they may end up scaring off all of the buyers and be left with no offers to negotiate. For a buyer in a multiple offer situation, remember the information that you have gathered and determine the maximum terms you’re comfortable offering. Don’t get caught up in an emotional bidding war and end up over paying for a property.

Countering – Carefully review the offer and the knowledge you have about the other party when formulating your counter. Determine how flexible you are willing to be and what points you are willing to compromise. The counter offer will set the tone for continuing negotiations. A counter can have the effect of moving the negotiations forward, or halting the negotiations process all together. In order to reach an agreement, both parties must feel that the other party has conceded enough to continue moving forward. In some situations, the initial offer may be close enough to the other parties’ expectations that the offer is accepted and no counter offer is necessary. Don’t counter just for the sake of countering.

Timing – Timing can play a large role in the negotiations process. From how long it takes a particular party to respond to what is going on externally for the other party at the time of the offer. External variables can be impossible to determine, so don’t spend a lot of time on this one. How soon you respond can play an important role in the tone of the negotiations. A quick response can indicate a willingness to negotiate and reach an agreement quickly. A delayed response can send the opposite message. In real estate, it is reasonable to take enough time to evaluate the terms of the offer and consider your options for a response. While each situation is unique, your real estate agent should be able to provide guidance on when you should respond.

Conclusion – Real estate negotiations can be complicate and stressful. Working with your agent to carefully evaluate and understand all the variables can improve your ability to negotiate and increase your odds of reaching a successful outcome.