Know if we are in a buyer or seller market
It is very important to know the “pulse” of the market when negotiating a real estate deal. When you go into real estate negotiations on a property there are many variables and it is a fluid situation. There was a time in the Denver and Denver Foothills real estate market over the last few years that a seller could get away with an awful lot. Those days have passed for the most part. It still isn’t a buyer’s market but sellers can’t really demand as much as they once could. There was a time, especially here in Evergreen, a seller could basically name their price, name 95% of the terms and have 1 hour showing windows every 3 days and still receive multiple cash offers over asking price. That gave the seller great negotiating position. Those days are in the past for now. So we will discuss negotiation strategy in a more level and sane market.
It is in your best interest to be represented by a real estate agent
Obviously this post is written by a real estate agent (broker actually) but that doesn’t change the fact that real estate agents are skilled in the art of negotiations. It is what they do and a major portion of their job description. Some people might be skilled in negotiating deals and contracts involving the sale of other goods and services and believe they can negotiate a real estate deal. Well if it is residential it is a totally different beast. You are not negotiating the sale of a case of widgets. You are dealing with another person’s pride and joy. The biggest investment of their lives usually. Where they raised their children. It is not always just a business transaction. It needs to be approached in a totally different manner.
Remember there are two parties in a Real Estate Transaction
A lot of times buyers and sellers forget this simple fact. When a buyer or seller comes out of the gate with outrageous demands a real estate agent’s first thought is “what would I do if I was the agent on the other end of the transaction”. So if a buyer wants to send an offer that is 15% under list, request the home is painted before close and seller leaves the furniture behind, the snowblower and the ATV my first response to the buyer is “think about if someone made this request to you” What if you were the seller”, “if I was the listing broker this is how I would advise my client…..”. Although it the job of the Realtor to make sure their client gets the best deal and that they are represented, it is also the agent’s job to assure the line of communication stays open and the deal continues to the next step. It is our job to educate and advise our clients on how to make this happen. If the buyer truly wants the home it is the agents duty to make sure they get it. The real estate agent usually knows how the other side will respond. If it is a new listing in the Foothills this offer would most likely not even get a response. If the home has been on the market for 7 months the offer might get a counter but most likely not close to these requests. That is why in the first para we mentioned this is a fluid situation that is always changing.
The contract is 25 pages long. Price is only one line
Although seller’s first question when they get an offer is “what is the price” there are tons of other things in a contract to make it weak or strong. Are they waiving inspections? are they waiving appraisal? How far out is closing? are their concessions? What type of loan? there are countless things to negotiate in a contract and sometimes the price isn’t the most important line on the contract. A good real estate agent can make a low price offer more appealing than a higher priced offer.
The original offer is only the first negotiation step
Buyers and sellers often forget that the original offer is only step one in many other negotiations. Most transactions have negotiations throughout the process. What is usually step 2 is where most deals fall apart, Inspections. If a buyer finds too many things wrong with the home they may have a laundry list of objectionable items. This needs to be negotiated. What items will the seller fix, if any. Who will do the work? Who will pay? Is the item something that should be fixed? Will it be done before closing? Will money be escrowed? These are all things that will be negotiated.
The next step would be if there needs to be any extensions because of dates and deadlines that can’t be met?
Next is what if the home doesn’t appraise? Will they lower the price or pull out?