Four great tips to negotiate home offer

Handshake copyReader Question: Monty, the same buyer has made several offers on our home but none acceptable to us. This has been going on for two months! What can be done to get them to be more reasonable? Josh and Sarah G.

Monty’s Answer: The success to negotiate a home purchase contract involves circumstances like motivation, negotiating styles, specific conditions (example: buyer’s lease expiration date) the ability and willingness of the parties to share information, their knowledge about market conditions, property values and more. The participating parties are the buyer, the seller and one or two real estate agents, and any one (or more) of these parties can unwittingly be stumbling blocks.

A number of common myths centered on the negotiation process itself can also complicate the transaction. For example, no home has an exact value. In reality, every home has a range of value. Be careful not to negotiate too hard when the offer on the table is toward the top of the range and the market favors the buyer. Another common myth is to negotiate by picking an arbitrary number somewhere below the listing price that becomes the opening bid. Both of these notions can hamper or destroy a negotiation.

Four tips to advance the negotiation

  1. Ask your agent for an updated value estimate. You want a range – not a number. The range should include the lowest price you could expect and the highest price you should expect, and is one of the key services a real estate agent offers. The three or four comparables they choose and the adjustments they make for the differences between the features of your home and each comparable are an important factor to understand. Your agent should be prepared to justify both the comparables chosen and the calculations on the adjustment differences. You should feel comfortable questioning their choices. Do the comparable choices make sense? Are the adjustments consistent?
  2. Ask questions of your agent about the buyer’s circumstances:
  • How serious is their interest?
  • How was their offering price determined?
  • Have they made offers on other properties?
  • How long have they been looking?
  • Will they move up on their offer?
  • Have they been pre-approved for financing? (Send us a copy)
  • What is it about the home that keeps them coming back?
  • How important is the time of occupancy to them?
  • If the agent does not know the answers, ask them to ask the co-op agent.
  1. Ask questions of your agent about the sticking points:
  • Ask questions about Tip One above when the agent presents the updated value estimate.
  • Ask for a list of all similar sold homes, all similar homes that expired unsold, all similar pending sales and all similar homes currently for sale for the past six months. Information on these statistics helps you gauge the state of your specific marketplace and the sales rate.
  • Ask for the number of similar homes that sold last year for the coming 90-day time frame. Information on future sales based on same period last year gives you a sense of seasonality in your market.
  • Ask your agent if the negotiation is unusual, and if so, what makes it so.
  1. The three tips above may offer insights as to the source of the problem. To be informed is the best tool you can use during negotiations. Understanding your home’s condition, the range of value and other aspects affecting value will be help you negotiate with confidence. These questions also may provide insights to increase your awareness of your own emotional and financial demands.

Finally, the information you are requesting from your agent should be on their fingertips. MLS computers today answer many common questions almost effortlessly. Your best negotiating results will occur if you have chosen a competent broker to help guide you through this emotional time. It is your representative’s job to provide you with accurate, timely information in order to answer all of your questions and to help you understand the other person’s position.

Seek to understand, and then be understood

Gaining this knowledge will help guide you through this critical step in the process. Your agent is a very important resource here. The fact is negotiations tend to stiffen faster and more firmly without a good intermediary. While some agents are very good negotiators, it is not so with all agents. Remember that while many styles and personalities will surface, both buyer and seller are protecting their best interest.