by Jeff Knox
on Monday, April 23rd, 2018 at 5:37pm.
This article is a guide for things you need to know to negotiate a better deal on a piece of property. There are specific tips, tricks and negotiation tools only the best REALTORS® know. Here is a glimpse of what makes some individual REALTORS® shine during negotiations.
Neither the top REALTORS® nor the smartest buyers wing it in negotiations. Below are the best tips to learn how to get a seller to take less money for their home. And, these tips work!
Psychology plays a HUGE roll in the negotiation of properties in real estate, and sellers are proud of their homes. In fact, Duke University did a study on how we, as humans, price items with sentimental value. Duke termed their research the "High Price of Ownership." In fact, Duke called owners of something "predictably irrational." I cannot think of a better way to describe the emotions of most sellers. It is merely human nature. Here's the link if you're interested in watching the video - click here.
Asking a seller to discount their property with zero solid reasoning will only build a wall between you and the seller. In other words, writing an offer for a home and just saying, "hey, we want $20,000 off the home 'just because,'" isn't going to get you anywhere. In fact, an offer like this will almost put you in an almost impossible position of trying to win back the seller's trust. And, it could cost you a few extra thousand dollars just by making the seller angry in the beginning. By offending the seller about their home, I've seen sellers say "I'll sell it to this buyer, but it's going to cost extra."
Here's what I tell clients who insist on writing lowball offers in the beginning - If you don't want the house that badly, feel free to float out offensive proposals. However, if you do want the house, don't do something to anger the seller from the start.
Unfortunately, most people believe that real estate negotiations are about just going back and forth until you meet in the middle. As a professional agent, this is a big pet peeve of mine and a colossal waste of time. Also, neither party has the upper hand in this type of negotiation.
As a buyer, it is vital to negotiate from a position of power so that you have the upper hand during negotiations. One party (seller or buyer) will ultimately have the upper hand in the deal. Here's how to make it you:
Sellers already have a good idea of their expenses on the sale of their home - commissions, repairs, title costs, taxes, and more. Instead of offering a lowball price and asking the seller to pay for home warranties, closing costs, and repairs add up what you think those will cost you and build it into your original offer.
Example - factor in how much money you think things like home warranties, closing costs, and repairs will cost and then submit your offer with those numbers in mind. If you can negotiate a deal for $5000 off the price of a home, but pay $1000 of your costs (closing costs, home warranties, etc.), wouldn't you take that trade?
Keeping your contract clean means, you have a MUCH better chance at a lower price if you don't litter the contract with discounts at every opportunity - trying to nickel and dime the seller will only build the wall we discussed above.
When a seller feels right about you and your offer, a seller will be much more willing to discount a property for you. What makes a seller feel right about you as a buyer? Having all of your documents like pre-approval letters, checks for option monies and earnest monies, and presenting them with your first offer. Being transparent with the seller from the beginning by submitting your documents shows you are serious and not just kicking tires.
Here's my advice - when submitting your offer, compliment the seller's home but mention one or two things you'll need to repair once you purchase the house. Sellers are very proud of their homes and are emotionally attached, so a sincere compliment telling the seller why you like the house will go a long way. That said, there are always things that need repairing, and sellers will understand if you nicely add, "we are making this offer because we need to fix the fence." Most likely they have spotted something like the fence as well. Be sure to pick out items any buyer will see such as the fence, roof, landscape, cracked tiles, and installing stone counters. As a buyer, be careful not to take your compliments too far, or all the seller will hear in their head is "cha-ching" (like a cash register), and it could cost you thousands more!
Negotiations can continue beyond just the initial execution of a contract between buyer and seller. Any smart buyer will have an inspection performed by a licensed inspector and possibly then negotiate a bit more from issues found in the inspection report. Therefore, gaining the trust of the seller from the beginning is imperative. Doing what you say means timely following the contract from first execution - promptly delivering option monies, getting earnest monies to the title company, and immediately scheduling inspections. A seller will see your timeliness as respect for both them and their property which will psychologically make it OK to discount even more for you (after inspections) potentially. It's crazy, but sellers want to feel right about the person buying their home. This feeling is part of the emotional attachment to their property.
Oppositely, if you drag your feet and the seller starts to consider you "hard to work with," you'll most likely lose any leverage you'll have after the inspection.
In the end, sellers are very, very protective of their homes. If you treat the seller and the property with respect, you're a lot closer to getting a discount than you are if try and play hardball. Playing hardball and submitting lowball offers will ultimately mean you'll most likely end up paying more for a home you want. That is if the seller will even sell it to you!
Jeff Knox is the Broker Owner of Knox & Associates REALTORS® in DFW and the creator of most of the content on KnoxRE. Jeff was initially licensed in 2004 and has held a Texas Real Estate Broker's License since 2009. Jeff and his team of REALTORS® work all across the entire DFW Metroplex helping both buyers and sellers with condos, townhomes and single-detached properties. Jeff may be reached directly at Jeff.Knox@KnoxRE.com