Tips to Handling 3 Most Common Negotiating Tactics
Somewhere down this real estate journey you are going to start negotiating. No matter if you are the home buyer or home seller there are some tactics you should watch out for.
Hopefully you have a Realtor working on your behalf. Your Realtor functions as a non-emotional third party which will help steer the transaction to your end goal. And your end goal being the sale or purchase of the home at the best price and terms for you.
Before you start the negotiations you should try to find out 2 items of interest.
#1 - The other parties time frame.
The other parties' time frame, no matter if they are the buyer or seller, is all based on their motivation. And the shorter their time frame then the more motivated they are going to be.
For the Buyer it comes down to:
When their lease is up?
When their other home is closing?
When their rate lock is up?
When they start their job?
When their family is in town?
When school starts?
For the Seller it comes down to:
When is their new home ready?
When their new job starts?
When school starts?
If it is a divorce situation?
If the money is needed elsewhere?
#2 - The value of the recent sales.
While there is no guarantee that either party, buyer or seller, will stay in this "realm of reality" regarding the price. You want to have a good baseline on what the value of the property is. And then you need to make a decision on what you will accept.
As a buyer you can let the seller know through the negotiation process that you won't be able to get financing for a home that is for a price over appraisal value.
As a seller you can let the buyer know the appreciation in the market, the lack of supply and if you are lucky ... the amount of homes selling over list price.
Now here are some negotiation tactics you might come across:
1. Good Guy/Bad Buy
If you have a Realtor then they will be the ones directly exposed to this. In most of the cases it is the other parties' Realtor who acts as the good guy trying to make things work. And it is their client who is potrayed as the bad guy.
In dealing with this situation just remember. Unless you have it in writing and signed off on, then it is not a done deal. No matter how sweet the offer or the "suggestion" the other side proposes. It doesn't matter until in writing & signed.
2. Multiple Bid Situation
In a multiple bid situation the purchase price is often over the listing price. As a seller this is great. As a buyer it's not.
So as the seller you want to create this type of situation by:
-Letting know everybody who has seen your home that you have an offer coming in. And that they will loose out on the property if they don't also submit an offer.
-Pricing your home at or below market in order to get more buyers interested and thus more offers. Yes this does seem backwards thinking. But it has worked before.
So as the Buyer you should decide up front with your Realtor:
-If you want to get involved in a multiple bid situation. If you don't want to get involved in a multiple bid situation then you should act fast on any home you see that you like. Because the day you take to think about the home might be the time another Buyer takes to write an offer.
-The maximum you want to pay for the home once you know you are in the mutliple bid situation. In this situation you should make an offer that if you don't get the house then you don't care. Because you wouldn't want to pay $1 dollar more.
3. Non Stop Nit Picking
After everything has been agreed to either party might start asking for small favors. For the buyer this could be one more repair, one more inspection, one more visit for the relatives to look at the home, etc. For the seller who could be staying after closing for a day, leaving a furniture piece they can't fit in their move, changing the closing date once they have their plans finalized, etc.
You want to maintain good relations as long as possible. And you should examine each request on a case by case basis. But don't forget you don't need to have long drawn out conversations where emotions might get high. Just have our Realtor state that you are sticking to the contract. Everything has been already agreed to and you are unable to do anymore due to circumstances. I guarantee you reply "No. We are sticking to the contract" a couple times they will stop requesting ridiculous things.
Negotiation Tactics in Real Estate