Issue III: Negotiation
By Howard Taub, Certified Buyer Representative (CBR),
Realtor (R)
You have been looking for a house.
Now you have found the house that is just right. However, other people are
also interested in buying the same house. How can a potential buyer make
a strong offer that will be accepted by the seller?
Any negotiation, contract,
or deal - particularly in real estate - involves three key items:
- Price
- Circumstance
- Personalities
Price
Many homebuyers assume, particularly in an active real estate market,
that the seller of a house will automatically take the first offer, or
the highest offer made on a house. This situation is not the case. The
owner will review offers made and accept, reject, or counter each offer
on its merits. Not only can sellers reject full price offers, they can
reject offers over asking price. Offering a house for sale is a unilateral
offering by the seller, not an offer made to contract with anyone who
meets the price.
Circumstance
Price certainly is a key component
of the sale - people have financial needs and expectations they want met.
But home selling and home buying are intensely personal situations, and
circumstances other than price come into play.
For example, the seller of a house might need to sell the home very quickly
due to a work transfer out of state. An offer that meets that schedule,
even if the same or less in price than a similar offer, might better meet
the circumstances of the seller. Conversely a seller might need longer than
typical time or special flexibility of schedule on the part of the buyer,
say if the seller is building a new home (which is going much slower than
expected because the subcontractors have not all shown up on time). You,
the buyer, are renting an apartment and can extend out the closing date
to move into the seller's house; the next person making an offer just sold
a house and must move into the seller's house at a very specific time, and
soon. In this situation, your offer may very well meet the needs of the
seller more appropriately than the offer of the next person.
A very common timing issue is the school year. Sellers want to have their
children complete the school year in their current school or school system,
and also need to be settled in the new school district in time to start
the next season.
Two offers of the same or similar
amount do not have the same weight if the circumstances do not mesh. In
making offers of homes it is important for your buyer broker to determine
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much
as is reasonable about the needs of the sellers. RealTime works with you
to make your offer the strongest and as accommodating as possible to the
seller, while still meeting your objectives.
In a previous article, the importance was stressed of being pre-approved
by a bank or mortgage company in making strong offers. In almost all negotiation
situations, sellers request a pre-approval letter with the offer itself
or immediately following. Even if a potential buyer makes a strong offer
but cannot produce a pre-approval letter, sellers really tend to look to
other potential buyers with pre-approval letters in hand.
Personalities
Personalities really enter into negotiating - the personalities of the buyers
and sellers, the personalities of the brokers, and the personalities of
the attorneys. If both buyers and sellers are totally intractable, negotiations
are likely to break down, even over the simplest and inconsequential items
- both sides must unequivocally have their way. When both sides are reasonable
and willing to listen to and accommodate the needs of the other side, negotiations
can proceed.
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Price...Again
Let's get back to
price. One of the most frequently asked questions is, "How much should
I offer?" or translated "How much below asking price should
I offer?" The answer is, "that depends." Before or when
the buyer is ready to make an offer on a home, RealTime will provide you
with listings of all properties sold within the last six months in the
area. This information will provide a basis of data regarding the actual
selling prices of properties, not just the asking prices.
Also, by checking out the properties on the market in your range of interest
(town, neighborhood, style, asking price, etc.), you will develop an understanding
of which asking prices are reasonable and which asking prices are off
the mark. Based on hard facts provided to you by RealTime, the assistance
of RealTime in checking out the market, and your own observation, the
informed consumer can decide what he or she thinks a property is worth
and make an informed offer accordingly.
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