|
Negotiation is the process of
communication back and forth in order to
reach a joint agreement. There is no
"one size fits all" strategy
of negotiating a real estate contract.
Many of our clients have been very
experienced negotiators, and we have
learned a great deal from them, as well
as from books on the subject. We would
like to share some of our thoughts on
negotiating with you:
What do we want to achieve in a
negotiation?
The best negotiators bring an
attitude of high expectations to the
table. They are hard on the problem and
soft on the people. Letting the seller
know what you need, in a clear and
reasoned way, is the first step toward
getting it. We try to keep all of these
goals in mind:
Enable you to move into your new
home.
Obtain the lowest possible price for
the property.
Close within an acceptable time
frame.
Solve any repair issues fairly.
Have no title, survey or loan
problems, or solve any that do arise.
Develop a good working relationship
with the seller.
Have no future problems after
closing.
Is a cooperative or combative
approach more effective?
Our experience shows that the
cooperative style is the most effective
and efficient way to complete a
transaction. Professional negotiators
usually try to preserve the relationship
between the parties, and work together
to resolve problems. The goal is not to
reach an impasse in which neither the
seller's nor the buyer's needs are met.
Buyers sometimes submit a letter to the
seller describing why their house is not
worth what they are asking, pointing out
deficiencies, etc. This almost always
backfires, and starts the negotiation
off with a defensive seller. It is best
to anchor your price to the marketplace,
while remaining very complimentary of
their home.
How do you work with a combative
strategy by a seller or agent?
The combative style is sometimes
encountered. This strategy includes:
negative comments, emotional statements,
table pounding, threats to walk out, ego
involvement, and stated positioning.
Creative solutions and trade offs are
not as likely to be found in this
environment. Working with a combative
style negotiator requires a considered
approach:
Do not respond emotionally. An angry
or defensive response will escalate the
negotiation into a no-win battle.
Do not argue. Arguing usually
positions them more strongly and drags
the negotiation process off course.
Do not ignore their arguments or
statements. Listen carefully, but do not
accept or reject.
Firmly anchor pricing and other terms
to outside data. Show that the price has
not been chosen arbitrarily.
Reduce misunderstanding by following
up with written summaries of
discussions.
Do not allow hazy or unclear
proposals to stand.
Offer some "wins" on some
of the terms. Face saving is very
important.
Look for ways to meet their
underlying interests.
Remember that they may have a
beautiful home that satisfies the
buyer's goals.
Is every point in the contact
negotiable?
Yes. However, one of the most
effective means of coming to an
agreement is to rely on consistent
standards or norms when possible. For
example, it is common practice for the
seller to pay for the title policy and
for the buyer to pay survey cost. Using
accepted standards prevents buyer and
seller from haggling over every point.
Working within the accepted
"norms" for our area helps to
legitimize offers, and focus the
negotiation on just a few points. On the
other hand, all the points in an offer
can be used to help structure the deal.
They offer trade-off opportunities for
both parties to get what they want from
the negotiation.
The value of trust in a negotiation
cannot be overstated. Most people are
fair minded and reasonable. They respond
well to respectful treatment and to
having their concerns heard. If the
seller feels that the buyer and agent
are acting with integrity, their
attitude will be much more cooperative.
Contract negotiation is a sensitive
area, and anxiety can be high. The
buyers may have had an unpleasant past
experience with buying a home. The
seller may be under pressure, with
future plans at stake Acting with
integrity does not mean that all
"cards have to be put on the
table." It is not proper to discuss
personal issues that affect the buyer,
such as your financial ability or
urgency to move in. It is valuable to
develop rapport because trust increases
your leverage. Here are ways:
Listen and understand what the seller
has to say.
Express appreciation for the seller's
home, gardens, decorating.
Respond within a reasonable time to
counter offers.
Reassure the seller of your ability
to close.
Reveal some personal information
about yourselves.
Finding common ground with the seller
can be a very powerful tool in the event
of multiple offers. I can think of
several instances in which sellers
selected their contract for very
personal reasons. (The family reminded
them of themselves when they moved in
with young children years before. Or,
they were both of the same religion. Or,
the new owners would care for their
gardens.)
Understand your leverage.
The more we can find out about the
seller's needs, the better chance we
have to find solutions to negotiation
hurdles. We will be able to offer
information or concessions that appeal
to the seller's deepest concerns.
Obviously, if the house has been on the
market for 300 days, you have a lot more
leverage than you would with a brand new
listing. If their time frame is
immediate, and you can meet it, you have
some leverage. If they have multiple
offers, you have very little leverage!
How much under list price should you
offer?
Buyers usually offer less than list
price, unless it is a strong sellers
market. There is no standard percentage
"under list price" that can be
used. A market analysis will show recent
sales for the neighborhood, which is the
best way to establish the offer price.
It is usually counter-productive to
offer so low that the seller will
automatically reject the offer. This
will set a negative tone, and may result
in an emotional response from the
seller.
What if we have a multiple offer
situation?
Occasionally the seller receives more
than one offer on their property. The
Austin Board of REALTORS® has a policy
that allows two options: disclosure to
all parties that multiple offers have
been received, or disclosure to no one
that there are multiple offers. We
prefer disclosure to all parties.
However, the listing agent and seller
will make the decision as to how they
will handle offers. By simply disclosing
that there are multiple offers, they are
not "shopping" your contract.
Shopping occurs when the seller
discloses the terms of an offer to
induce a buyer to submit a better offer.
This can result in major distrust of the
process by the parties, and the
likelihood of loss of the buyers.
Usually the procedure is to notify
each party that multiple offers have
been received. Each party is then given
the opportunity to raise or adjust his
offer by a certain time. After that
time, the seller is free to review all
offers and choose one to work with. They
are not obligated to choose the
"first" offer that came in.
The selected offer may be countered, or
accepted as is.
|
