How to Negotiate in The Home Buying Process
February 25, 2016
Because buyers will usually expect a back-and-forth negotiation, their initial offer will be lower than what they are actually willing to pay and lower than your list price.
Once this happens, many sellers counteroffer with a price below their asking price, because they are afraid to lose the sale. Human instinct says that they want to show they are flexible and willing to negotiate in order to close the deal. This strategy does indeed work in terms of getting the property sold, as thousands of sellers can attest, but it’s not necessarily the best way to get the most money for your house.
Instead of lowering the price to get closer to the buyer’s offer, counter at your list price. Someone who really wants to buy will remain engaged and come back to you with a higher offer. Assuming that you’ve priced your property fairly to begin with, countering at your list price says that you know what your property is worth and you intend to get the money you deserve.
Buyers may be surprised by this strategy, and some will be turned off by your unwillingness to negotiate and walk away. But you’ll also avoid wasting time on buyers who only make lowball offers, and who aren’t so much interested in buying your property as they are in getting a bargain.
If you’re feeling courageous enough, you can also try a negotiation tactic that’s more extreme than countering at your list price. Simply reject the buyer’s offer and don’t counter at all. To keep them in the game, you then ask them to submit a new offer. If they’re really interested and you haven’t turned them off, they will.
This strategy sends a stronger signal that you know your property is worth what you’re asking for. If the buyer resubmits, they’ll have to make a higher offer.
Also, when you don’t counter, you’re not locked into a negotiation with a particular buyer and you can accept a higher offer, if it comes along. For the buyer, knowing that someone can come along and make a better offer at any moment creates pressure to submit a competitive offer quickly, if they really want the property. This strategy can be particularly effective if the property has only been on the market for a short time or if you have an open house coming up.
List the home on the market and make it available to be shown. Schedule an open house for a few days later. Refuse to entertain any offers until after the open house. Potential buyers will expect to be in competition and may place higher offers as a result. You might only get one offer, but the buyer won’t know that. On the other hand, if you get multiple offers, you can go back to the top bidders and ask for their highest and best offers.
When a buyer submits an offer that you don’t want to accept, you counter their offer. You’re then involved in a legally binding negotiation with that party, and you can’t accept a better offer if it comes along.
In the interest of selling your home quickly, consider putting a short expiration time on your counter offer. This strategy compels the buyer to make a decision so you can either get your home under contract or move on.
Don’t make the deadline so short that the buyers are turned off, but consider making it shorter than the default timeframe in your state’s standard real estate contract. If the default expiration is three days, you might shorten it to one or two days.
In addition to closing the deal quickly, there’s another reason to push sellers to make a fast decision. If the deal falls through, however, you’ve added time to the official number of days your home has been on the market. The more days your home is on the market, the less desirable it appears, and the more likely you are to have to lower your asking price to get a buyer.
While many buyers don’t have or don’t want to spend extra cash up front to get into the home, they can often afford to borrow a little bit more. If you give them the cash they want for closing costs, the transaction may be more likely to proceed.
When a buyer submits an offer and asks you to pay their closing costs, counter with your willingness to pay but at an increased purchase price, even if it means going above your list price. Buyers often don’t realize that when they ask the seller to pay their closing costs, they’re effectively lowering the home’s sale price. But as the seller, you’ll see the bottom line very clearly.
The key to executing these negotiating strategies successfully is that you have to be offering a superior product. The home needs to show well, be in excellent condition and offer something that competing properties do not, if you want to have the upper hand in negotiations. If buyers aren’t excited about the property you’re offering, they will be turned off by hardball tactics and walk away.
Read this article for more Counter-Offer Strategies, and watch this helpful video for Tips to Negotiating Counter-Offers.