If you’ve ever bought and sold a house in the same month, you know the fine art of negotiation. If you haven’t, well, that’s probably a good thing. The truth is that real estate transactions are all about negotiation. Banter. Give-and-take. Take-it-or-leave-it. Either-or.
If you’re a mediator-in-the-making, you’ll love this part of the deal. If not, it can be a little intimidating. After all, what if you lose your shirt in the process? And your pants? There’s always that chance, if negotiations (really) don’t go your way.
Negotiating comes into play whether you’re buying or selling a house. If you’re selling, the buyer makes an offer, you agree or counteroffer, they agree, counteroffer or walk. And so it goes until you come to some happy medium.
It’s the same on the buying side — only reversed. Then there’s the negotiation that may come after you’ve had the inspection done. They ask you to fix things, you ask them to fix things, you agree/disagree, they agree/disagree, and you again come to a happy medium — or either of you walks away from the deal.
It sounds simple, but there’s an art to negotiation. Here’s some advice on what to do and when to do it.
Keep an open dialogue — and an open mind
According to real estate expert Diane Hymer, you should think of a home purchase negotiation as a dialogue between you and the seller. After all, it’s really just two mature adults having a conversation, right? If you can agree, you’ve bought or sold a home. If not, it’s back to the drawing board and the home selling or buying process begins again.
There are many ways to negotiate a home sale because each transaction is unique. But the common denominator in every case is that a successful negotiation involves give and take from both parties.
What if your inspector discovers a crack over the garage that needs to be sealed, or roof shingles that need to be re-done? Both represent repair costs, for which someone will ultimately have to pick up the tab. Above all, remember your kindergarten days and play nice. Your seller (or buyer) won’t be as willing to listen if you’re being difficult. And you could lose altogether if the buyer or seller chooses to walk away.
Hymer says buyers may want to structure their negotiation strategy so you give up something you want in exchange for the seller giving you something you want.
For instance, in the recent case of a couple buying an older home, the shingles needed to be replaced. They asked the seller to pay for repairs. Instead, the seller offered the buyers cash to do it themselves — an option the buyers were much happier with than their original proposal.
Plan in advance
Hymer also says to save your "ace in the hole," or bargaining chip, until the very end. Say you know the seller wants to get out quickly. That’s good because you, the buyer, want to move in quickly, but you withhold that information until the end — when you’re negotiating repairs. You get the repairs you want, the seller moves the house quickly and everybody’s happy.
It also helps to plan your negotiation strategy in advance. Find out as much about the seller’s situation as you can. Decide on the highest price you’re willing to pay — and stick to it. That couple buying the older home? The top of their limit was $250,000, but they found a house they absolutely loved for $264,000. When they presented their offer, it was for $256,000 with the seller paying for $6,000 in closing costs. (The buyers knew the house had been on the market for several months and that the seller had put down earnest money on another property.) The result? They ended up paying $254,000 for the house. It wasn’t $250,000, but over a 30-year mortgage, it equated to just pennies more a month for a house they loved.
Stick to your guns
What if you’ve thrown out your best and it’s still not good enough? Stand firm and, as in poker, lay your cards on the table and let the other person know. You don’t have to counter with a new price — just be firm in your resolve. You never know — you just might get what you want.
Here are six tips and suggestions for successful negotiation:
• Start with a fair price and a fair offer.
• Respect the other side’s priorities.
• Be prepared to compromise.
• Meet in the middle. For example, if the buyer wants you to make all the repairs you can offer to make half.
• Leave it aside. Finish the main agreement first; then resolve any other points in a side agreement or amendment.
• Ask for advice from your Realtor. An experienced Realtor is sure to know about creative alternatives.
And remember that "win-win" doesn't mean both the buyer and the seller will get everything they want. It means both sides will win some and give some. Rather than approaching negotiations from an adversarial winner-take-all perspective, focus on your top priorities and don’t let your emotions overrule your better judgment.