5 Tips for Negotiating a Successful Home Sale
The negotiation process is an integral part of selling one’s home, and the difference between doing it the right way or the wrong way can mean several thousand dollars either in or out of your pocket.
Because it is so crucial to negotiate well, I recommend you follow these 5 tips to help you negotiate the best possible deal for yourself when selling your home:
1. Create a Quid pro quo.
This Latin term means “something for something”, and in practical terms, it means setting up a negotiation where both sides feel as though they are getting something they want in the deal. In essence, you are creating a win-win situation for both parties.
The worst way to negotiate is by trying to “get over on someone”, or make a one-sided deal. Whether they verbalize it or not, the other party will invariably feel like they aren’t happy with the deal, and are more likely to walk away before the transaction is completed. That costs you time and money.
2. Always ask the other party about terms.
Did you know that the terms of a home sale are sometimes just as important as price? A common mistake during the negotiation process is to simply focus on price alone, rather than realizing that price is only one part of the transaction. The other part, which can be just as important to a prospective buyer, is the terms of the deal.
For example, does the other party need a quick closing, or do they need a lot more time to close than would be usual in a transaction? Do they insist on you including something in the home that you were planning on taking with you, such as a washer/dryer, chandelier, hot tub, or swing set? It does not pay to lose a good home sale by refusing to part with that Casablanca ceiling fan on the lanai! So it is often useful to ask the buyers, “What else besides price is important to you in this contract?”
3. Help the buyers pay for closing costs.
According to the National Association of Realtors (NAR), as of March, 2015, the Median home sales price for all of the United States was $212,000. FHA loans require a 3.5% down payment, and conventional loans require 5%. Obviously, with $6,000-$10,000 coming out of pocket, most buyers today will need help with closing costs, which generally run 3% or more. At today’s median home price, that’s another $6,360.
Therefore, a smart seller should advertise they are willing to pay some or even all of buyer’s closing costs, in order to make their property appeal to the greatest number of people. Obviously you will ask for full list price in return for paying closing costs. This is where the Quid pro quo of the negotiation comes into play. You get the desired sales price, while the buyers get their closing costs paid.
4. Be flexible and check your pride at the door.
Sure, all of us love our homes. We watched our children grow up there, shared holiday meals with the relatives, and remember the love we put into every flowering bush we planted over the years. But those memories mean nothing to prospective buyers, and they won’t be feeling sentimental about Grandma’s Thanksgiving pies when their first offer is well below your asking price.
A classic mistake made by homeowners is to feel insulted, or to rigidly hang onto an unrealistic asking price, even when the market is telling them for months that the price is too high. The longer your home sits on the market, the more buyers begin to feel there’s something wrong with it, and the less you may actually sell it for down the road.
So check your pride at the door, and at least counter, rather than totally rejecting that low-ball offer you receive. Sometimes buyers are just “fishing” to see what they can get away with, and they know full well their offer is too low. Remember, the sale of a home is just business, so don’t allow your feelings to get in the way of making a sensible deal.
5. Offer things you can live without in exchange for price.
When the negotiation stalls, and nobody seems to be budging on sales price, try offering something “extra” that you really don’t care about. That old washer and dryer you didn’t initially include in the sale may have more value to the buyer than it does to you, simply because they won’t have the money after closing to purchase a new one. See if you can nudge the price up by saying you will include it in the sale.
Another idea to move a stalled negotiation forward is to add a Home Warranty plan to the sale. The home warranty is a kind of insurance that gives buyers peace of mind, knowing that expensive repairs to the plumbing, electrical, or heating and air system will not be an issue for them. This may entice them to bump their offer higher.
To sum it up, the key principles in any negotiation are flexibility, and the ability to think outside the box when both parties are stuck, in order to make the deal work. By applying the five tips cited above to your next negotiation process, you are more likely to lock up a deal for a greater price and with fewer headaches all around. Good luck!
About the Author:
Ethan Roberts is a real estate writer, editor and investor. He’s a frequent contributor to InvestorPlace.com, and his work has been featured on Money.msn.com, Reuters.com and Auction.com. He’s also written for SeekingAlpha.com and MarketGreenhouse.com, and was one of five contributing editors to TheTycoonReport.com. He’s been investing in real estate since 1995 and has been a Realtor since 1998. He also teaches classes on investing in residential real estate.