Prior to beginning any negotiation for the home of your dreams you should coordinate with your real estate agent and make several preparations. You will need to have available all of the most current market information, including the current active and recently sold properties, for the area immediately surrounding the home that you wish to purchase.
Knowledge is key to successful real estate negotiations. Collect the much needed data to help you make wise choices for your negotiation. Your agent will acquire the previous purchase price, the actual deed and tax records, mortgages, plus other recorded documents for insight into the seller's motivation. This data will help you decide the best way to structure your offer.
Understanding how people think and predicting behavior comes with experience and education. I attended Pepperdine’s School of Law, Straus Institute for Dispute Resolution to learn advanced negotiation skills. I learned that negotiators need to be cooperative and competitive to get each side all they are entitled to get. Making reasonable offers per the data collected will provide you much better results. One way to inspire negative results is to make a low-ball offer on a desirable home that is priced well. This will likely cause a seller to refuse to negotiate with you because you have offended them and you seem insincere about your desire to purchase the home.
I recently negotiated a real estate transaction in two days with only two counter offers. It was a smooth negotiation, as I represented a buyer who had proof of cash and was willing to close in 20-30 days. The wise seller may have wanted more money and could have continued the dance by sending back counters. However, in the end, the seller knew there could be difficulties while waiting for a lender to approve another buyer who may have been willing to pay more money, but needed to qualify for a loan in a market full of lending uncertainties.
It’s important to know as much as you can about the other side. Information is the currency of negotiations. I have found when negotiating, we rarely learn the bottom line of the other side. Many real estate negotiators don’t disclose information about their clients; some negotiators go with the concept of giving out too much information. However, sometimes giving out information will actually turn the negotiation around.
Consider your home's appeal if you choose to sell in the future and what could negatively or positively impact your home's value. Put your seller's hat on and project five or ten years down the road. What information do you have about the area that could affect home prices in the area in the future? What is nearby the home? Is there a huge open field that is proposed to be a public park? Are there commercial buildings nearby? Consider the condition of surrounding homes as they may not live up to your home's appeal. Consider this type of information in your real estate negotiations because your future buyer will definitely consider these items.
Learn about local schools, amenities, desirability, highway access, etc. The value to you as a buyer to be in the best school districts or even a preferred school can make all the difference. Being near key amenities such as convenience stores, grocery stores, and medical facilities are often very important to buyers. Not only will it help your new home retain value, it will make resale much easier. When negotiating do not discount the value of a great location to you and your future buyers.
This is one area I see very often. Emotions are on high whether you are buying or selling. Sellers often get very emotional about the buyer's offer and take a low bid offer personally. They value their home and feel it's worth every penny they ask for and then some. Becoming overly emotional will work against you when negotiating for real estate and possibly cause you to lose the deal no matter which side you are on. But, keeping emotions reasonable is very important.
Your goal is to be able to negotiate the absolute best terms and conditions when you are buying a home. Allowing anything the seller says or does to rattle your resolve, or to become emotionally attached to a home at the expense of reason can become an expensive mistake. This is one area where effectively using your real estate agent to act as a foil against your emotions can bring great reward and success to your negotiations.
Other handy tips:
- Use the right information as described earlier at the right time to increase your negotiating advantage.
- Negotiations involve numbers; always have a calculator handy.
- The person who puts out the first offer may anchor the expectation of the other side.
- Always get a concession for every move you make.
- Never offer simply to split the difference in pricing, make sure you only move on price as a condition. If you move on your price, make it conditional on the other side moving on something.
- Never bid against yourself, the negotiation process is a series of moves.
- It is important to give reasons for the number/price you are offering before you give number, as once they hear the number, the other party won’t care about anything else.
- Negotiation is a series of concessions—you have to dance the dance. The right solution at the wrong time is the wrong solution.
- Buying real estate involves LOCATION, LOCATION, LOCATION.
- Successful negotiations involve PREPARATION, PREPARATION, and PREPARATION.
Beverly Taki is a Missouri-licensed real estate broker who has successfully represented clients for 25 years. She is a broker salesperson at Keller Williams Realty St Louis. 10936 Manchester Road, St. Louis, MO 63122. Beverly has earned a certificate in dispute resolution from Pepperdine University, specializing in negotiation and mediation. Taki can be reached at email@example.com or 314.677.6366. Her website is beverlytakistlouis.com. Her blog is realestatestlou.com.