Real Estate Negotiation Tips For Home Sellers
After wrestling with the idea of selling your home, finding the right real estate agent, listing your home, and patiently waiting through open houses and showings, you finally have an offer to sell your house! This is certainly an exciting step in the process. You now have the opportunity to actually accomplish your goal of selling your home. Let’s look at the real estate negotiation tips to get you the best deal.
How to counter low ball offer?
First and foremost is price. Of course, just like you are trying to get the best deal for yourself, homebuyers are doing the same. The likelihood that they will offer you exactly what you want is pretty small, especially on the first try. However, if they are seriously interested, they should make an offer that is respectful and within a reasonable range of your asking price, signaling their willingness to engage in a real estate negotiation. There are some sharks and flippers out there who will be throwing out multiple low-ball offers and hoping to get a bite. However, some first time homebuyers are hesitating to make an offer at the price they can afford just to be on the safe side. As soon as they realize that they risk losing the house that they have fallen in love with, they may make a quick decision to increase the offer price with a big jump. Before you engage in such a long ride, ask your realtor to do their due diligence to find out more about the buyer’s position, strength and motivation prior to rejecting or countering the offer.
Homebuyers are hesitating to make an offer at the price they can afford just to be on the safe side.
The first offer is usually the best offer
However, if the buyer’s offer is not offensively low, it is time to take a serious look at it. Your agent should inform you of offers immediately, and will most often go over them with you. In some cases, the buyers may request that their agent presents you the offer or at least be present for the presentation because there are special circumstances that they feel would be better explained by their agent. The choice is ultimately up to you as to who you would like to present you the offer. Keep in mind the first offer is usually the best offer!
How to negotiate a real estate offer successfully
While price is obviously a huge factor, make sure to review the complete offer carefully. In addition to price, there are many other elements to consider. These are important to consider not only as part of the offer, but some of these may give you an idea of how serious the homebuyer is and how smoothly the closing process would likely be should you accept.
Earnest Money – Earnest money is a great indicator of interest level and legitimacy of a homebuyer. There is no hard and fast rule for the amount of earnest money a homebuyer should give, therefore it is at their discretion, and will tell you a lot. A low amount of earnest money can indicate that either the homebuyer is not extremely interested in the house, or they may not be qualified to purchase it. Generally, 5% to 10% of the offer price is a good guideline, and if your homebuyer offers this to you, you will be in good shape. If their offer is significantly lower, make sure the rest of their financing is in order. Remember, pre-approved is always stronger than pre-qualified.
The final amount of earnest money is a negotiation between the buyer and seller.
Additional Costs – There are a variety of closing costs that homebuyers are responsible for, and therefore, these may influence their offer to you. You can expect the total closing cost to be somewhere between 2-5% of the sales price and include items such as loan origination fees, appraisal cost, title insurance, and more. Since homebuyers will be paying most of these fees out of pocket, they may adjust their offer accordingly or ask for a “Seller’s Concession” at closing, money that will be essentially given back to them. This number is also negotiable and will obviously affect your net from the sale. Additionally, you should receive some money back from pre-paid fees such as taxes or association fees. Make sure this is laid out clearly in the purchase agreement as well.
A good agent, with knowledge of the market and negotiation can help negotiate closing cost requested by the buyers for her client.
What Stays and What Goes – As sellers, you will most likely be pretty clear on what you will be taking with you when you move and what you are comfortable leaving behind, and this information should be listed online, as well as in the Purchase Agreement paperwork. However, the homebuyers may have a different idea, and request to keep some items that go well with the property or that they particularly liked, such as appliances or furniture. Buyers may use what you decide to keep or leave behind as leverage for their offer, so be prepared to negotiate based not only on the value of your house but your belongings as well.
Closing Date – This is a negotiable item that can often be more important to the homebuyer than the seller, as they may have specific time-sensitive needs. Consider being as flexible as you can with this time frame in order to make the sale go smoothly. It is helpful to have your moving plans squared away before you sell, so as to have that level of flexibility and be able to adjust to an unexpected closing date based on special circumstances. If the homebuyer is not paying with cash, it often takes at least 30 days for the mortgage company to be ready to close once the offer is accepted, so be prepared for this time frame.
Consider being as flexible as you can with the closing date in order to make the sale go smoothly.
After Closing – Once the closing is completed, you as the seller are no longer the owner of the house, but may still be interested in living there for a certain amount of time based on the timing of the purchase of your new home or the amount of time it will take to complete the move. This should be negotiated as well, as most often it is the homebuyer’s preference to move in as soon as possible. If you do request to stay in the home after closing for a certain period of time, the standard procedure is to pay a daily rental rate of 1/30 of the mortgage rate, information that can be obtained from the homebuyer’s mortgage company. In addition, you may be required to put down a damage deposit. Rental rate, damage deposit, and procedure for transferring the keys to the new owner once you permanently leave should all be laid out in the purchase agreement as well.
Counter-offer – After reviewing the offer and considering these factors, it is time for you to make a decision. Rarely do offers get accepted the first time around, and a counter-offer can be sent based on a small detail such as one extra appliance or a small change in the closing date. However, when making a counter-offer, you risk losing your homebuyer. Once your counter-offer is sent, they have the option to accept, counter again, or simply leave, so it is important to discuss this with your real estate agent to make sure you won’t be left out in the cold. Consider whether you have other offers as well, how long you are comfortable to wait for other offers, or whether or not you want to inform your homebuyers that you have multiple offers, strategies that can be discussed with your agent. As the negotiating heats up, remember to keep your priorities straight. Are the things you are negotiating over worth possibly scaring your homebuyers away? In general, a good real estate negotiation ends in a compromise, so remember that while you may not get everything you want, neither will the homebuyers and hopefully you can work together so that everyone can achieve their goal: to move to a new house!