Overview
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Get It in Writing
Do all of your negotiating in writing. It may seem
cumbersome, but there are no guarantees with oral agreements or
commitments. Avoid discussing terms with the seller or the seller's
agent while your offer is on the table.
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There
are literally hundreds of points that you can negotiate in a real estate
transaction. Usually, you'll deal with just a handful when making your
offer, such as the standard financing and home inspection contingencies.
Most purchase contracts, especially if they are standard documents, contain
boilerplate language that may not fit your situation and may in fact be
unfavorable to you. These are areas you need to negotiate carefully. The
more you know about the language and art of negotiation, the better the deal
you can make for yourself, and the more money you'll save in the process.
Bargaining Strategies
|
Technique |
When most effective |
Possible outcomes |
Start low and
move
up |
Works best for properties that are overpriced in
slow markets |
Seller rejects outright or counters to get you
to increase your offer, and you move up and agree on a price that comes
close to what you want to pay |
|
Offer close to
asking price |
Works best for properties that are priced well
in active markets |
Seller may accept outright or counter to get you
to increase offer slightly. |
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Offer the top price
you can afford |
Works best in hot markets |
Seller may reject and you may have to walk away |
|
Save terms to
bargain |
Works best in situations where seller is highly
motivated |
Seller may trade price concessions for your
agreement to close sooner or take charge of repairs after the inspection |
|
Give up something
to get something |
Works in most situations |
Seller ends up taking something you don't really
want but you ask for initially to gain a lower price or other concession |
|
Move in small
increments |
Works best for overpriced properties in slow
markets |
Seller may agree to lower price if given time to
adjust to the idea |
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Focus on issues you
can resolve to keep momentum going |
Works best after several rounds of negotiation |
Seller and buyer come to terms after resolving
easiest issues first |
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Be unpredictable |
Works best after several rounds of negotiation |
Seller accepts your offer after you suddenly
make sizeable change |
Make an
either/or
offer |
Works best after several rounds of negotiation |
Seller accepts one of two scenarios you offer |
|
Split the
difference |
Works best after several rounds of negotiation |
Seller and buyer settle on price exactly between
asking price and offer |
Set deadlines
for
action |
Works best in any situation |
Seller and buyer will act more quickly and
decisively if given a time limit |
TIP: In a
competitive bidding situation, a seller may try to influence your offer
through your agent. If your offer is on the table and you hear from your
agent that the seller will accept it if you change a couple of terms,
ask for a formal counteroffer before responding. In some states, such as
California, a seller can counteroffer with more than one buyer at a
time. All states allow a seller to withdraw a counteroffer before it has
been accepted by a buyer.
Working Out the
Contract
The paper trail begins with your purchase
offer. You, your agent or your lawyer will probably use a standard purchase
contract, which will not contain all of the terms and conditions you want.
Make sure that any additions or amendments that you make to the purchase
offer are clearly typed or written into the contract with your initials
beside them. The seller should also respond in writing, either with a new
purchase contract to counter your proposal or a counteroffer penciled in on
the back of your offer. Some sellers will return the offer merely with
revisions marked up and initialed on the document. These are all valid forms
of communication during negotiations. If negotiations go back and forth
again, and the original document is heavily marked up, take the time to
prepare a fresh one that incorporates penciled-in revisions to avoid any
misunderstanding. The retyped contract is ratified, or official, when you
and the seller sign on the dotted line. |