Negotiate the sale of your home like a pro
You’re selling your house and have received an offer. It’s exciting! And terrifying. The offer isn’t what you wanted, so it’s time to begin negotiations. How hard can it be? It’s not like you’re a hostage negotiator (you know, the kind you’ve seen in the movies?) where someone’s life hangs in the balance if you make the wrong choice.
It can feel a little bit like that, though. For homeowners, that house represents a huge portion of your total assets. So, when it comes time to sell and the offers start rolling in, the stress level rises.
There are so many questions to consider:
- How do you know when to compromise?
- How do you know when you should stand firm?
- How do you know when to walk away?
- Or when to run? (Fans of The Gambler will see what we did there.)
Anyway, the key is a cool head combined with preparation. It’s also vital to have a good agent who knows their business and has been in the situation before.
Negotiation basics for newbies
When we use a term like ‘negotiations,’ it sounds intimidating, but all we’re really doing is making a purchase, or, as the seller, working toward accepting an offer. We do that every day, from selling things as part of our job, persuading our kids or coworkers, or determining what to buy at the grocery store. This is just a bigger (much bigger!) transaction. And yet, the basics still apply.
In other words, be a nice person. You and your agent (Ensure they share your ethics before you hire them) want to present a united front, one that will advocate for your interests and make a good deal, but also one that is honest and follows through on promises.
As Wei Min Tan of Rutenberg Realty told Business Insider, “There’s a lot of value in being nice because residential transactions are more emotional. The seller has pride and ego and so does the buyer.”
It’s easy enough. Be honest and ethical. Full stop.
Know the market
Your negotiation strategy will be influenced by how the real estate market is behaving when you’re ready to sell your home. If it’s a buyer’s market, you’ll probably need to give a bit more to make the sale. In a seller’s market, you’ll have more leverage—fewer available homes for sale or properties in demand near you mean you could have your pick of offers. Of course, it’s important that your realtor is closely following what the market is doing in your area of the country.
Move with purpose.
No, we’re not talking about your actual move. We’re talking about the actions you take when working with potential buyers. If you receive an offer, for example, your knee-jerk reaction might be to respond quickly, either negatively or favorably. Pause. Instead, take a breath and read everything carefully. Review any contingency clauses and the terms. Once you’ve done that, you and your agent can compose a quality counteroffer.
All right, now that you know the basics, it’s time to concoct a negotiation strategy.
Negotiation strategies for success
Does talking strategy make you want to rub your hands together and cackle like a cartoon villain? No? Just us? OK then, moving on…
In all seriousness, knowing your negotiation strategy before you begin any back-and-forth correspondence can help keep you focused on achieving your goal without getting sidetracked.
When an offer comes in, you have three options:
- Accept it.
- Reject it.
- Reject it, but include a counteroffer.
Use psychology in your negotiation strategy
Quite a bit of the negotiation process comes down to who plays the better mind game. Buyers and sellers bounce offers to-and-fro trying to hit the sweet spot, all while not revealing too much about their underlying motivations. (For example, if you’ve landed a gig in a new city and need to move quickly, you’ll want to keep that close to the chest. When buyers become aware of an urgency around selling, they are more likely to make less attractive offers, as they believe they have an inherent advantage in the negotiation.)
So how do you make the game work in your favor? Open houses can be a great strategy. Let’s say you host an open house and only accept offers after it concludes. By doing so, you create a sense of urgency among buyers who submit an offer. Additionally, whether you get more than one offer or not, the buyer will probably expect that you did, making them more likely to put in a higher offer. Voilà! Psychology at work.
Remember our negotiation basics, though? Attempting to influence others actions is all fine and dandy, as long as you remain ethical. Amy Fontinelle of Investopedia reminds us, “While it is possible to field multiple offers on a home from several buyers simultaneously, it is considered unethical to accept a better offer from a new buyer while in negotiations with any other buyer.”
So, while you can negotiate with more than one party at a time, the National Association of Realtors maintains that you need to appropriately disclose it to all parties. Your realtor should be on top of the verbiage needed to do so.
Give them a deadline
This is not the time to stop and smell the roses. You’ve given the buyer a counteroffer and of course you need to provide enough time to consider it. You don’t, however, want to give them too much time.
Most states have a default time frame in the real estate contract, say 48 hours, for example. As the seller, you have the prerogative to shorten that deadline. You don’t want to make it so short that the buyer gives up and walks away, but you do want to keep things moving. The longer you’re in negotiations, the longer your home is effectively off the market. In the event the deal falls through, you’ve also added to the time your home remains on the market, which can make it appear less attractive to other buyers. It’s in everyone’s best interests to make decisions as quickly as possible.
Pay the closing costs
It’s becoming more and more common for the seller to cover closing costs. It can even act as the tipping point that makes the buyer agree to the deal. As the seller, you can sometimes use this as a reason to remain closer to your list price in negotiations.
The buyer wins because you’re putting up cash that they might already have committed to moving expenses, and you win because your bottom line stays the same.
(As you enter the world of seller negotiations, we highly encourage you to do so with the guidance of a qualified realtor. Truly, you want an expert on your side when the offers start flying.)
Negotiation mistakes to avoid
For most people, negotiating isn’t something that comes naturally. Although there are some who revel in such exchanges, they tend to be in the minority. For the rest of us, we’ve listed a few of the biggest negotiation mistakes people make and how to avoid them.
Don’t take it personally.
It can be really difficult—especially if you’re selling a home you’ve lived in for years—not to take a less-than-perfect offer as an insult. After all, you’ve celebrated victories, triumphed over tragedies, and lived many ordinary days within those four walls. They’re special!
Yes, they are. To you.
To a potential buyer, however, your home is just a house. One they’re interested in owning, yes, but they are looking at it with a critical eye. They’ve yet to make any sentimental memories there.
When you get an offer that seems way too low, lists every little flaw the buyer wants you to fix, or even mentions items you love that they want to keep, take a step back before you react. Remind yourself that the buyer is not trying to insult you. They’re simply trying to get the best deal possible.
The team at 360Training.com puts it succinctly. “As a seller who wants the best price for your property, you cannot afford to get too attached to it. The business is pretty simple and it should be kept simple. Rationalize the offer being made, negotiate a price that you and the seller agree with and close it.”
Once you’ve taken a minute to reset your mind, reread the offer with an unbiased eye and work with your agent to make a counteroffer.
Don’t get tunnel vision.
The big picture should be the focus. Yes, you want a good price for your home, but if price becomes a sticking point with a buyer, you have other things with which you can negotiate. For example, you could stand firm on list price, but offer to throw in the patio furniture. Small gestures like this can go a long way toward sealing a deal.
Further, if negotiations just aren’t working out, it’s possible you might need to end them. Be willing to do so. Sometimes, we get so caught up in “winning” that we lose sight of the big picture we mentioned before. The sale of a house should be a win for both buyer and seller, a compromise where each party gets some of what they want. Remember, no one’s keeping score and you definitely will not get a trophy!
Don’t be afraid to give a little.
As the seller, you have options, and your negotiation strategy should take these into consideration. Besides negotiating the price with your buyer, you can consider including items like window treatments, appliances and outdoor furniture. Don’t incorporate these from the outset, however, as such options can prove especially useful as negotiations progress.
Closing costs can also be an attractive bonus to offer a buyer, primarily if you choose to counter with a higher price than they may wish to pay. Buyers often feel tapped out when buying a home—paying the many fees associated with purchasing real estate can do that—so an offer to cover closing costs can sometimes make a deal.
The final word
There’s a learning curve to this whole process, and you’ll probably make a mistake here and there. In the end, though, if you take your time, learn the basics, and hire an excellent agent, you should be able to minimize the cost of those mistakes and get a competitive and fair price for your home.