How to Negotiate the Best Price for Your Home
How to Negotiate the Best Price for Your Home- Pine Bluff Real Estate
Everywhere you look these days the headlines read: “Buyer’s Market!!”. Home values across the country have fallen 20%+ over the last 4 years, and in some places it is as much as 50%. People aren’t buying houses like the used to, and add in all the foreclosures and you’ve got an over-supply that gives buyers lots of choices and a lot of competition for the sellers. So, the logical question for you to ask would be, “Can I still actually negotiate a fair price for my home?”. As long as you have realistic expectations of fair, then the answer is definitely “YES!”. Today’s definition of fair doesn’t mean what you could have gotten in 2006 at the top of the market, it means getting a better price than your neighbor who is also selling their house.
The thing to keep in mind is people are still buying houses. In fact, over 5 million homes were sold in 2010, and that was in one of the worst real estate markets in history. Most of those people are buying houses because they want to, not because “interest rates and home prices are at record lows”. They are buying houses because they got married, or they got a great new job, or because they had a baby. Life goes on even in a poor economy and for most people one of their greatest joys is becoming a homeowner. That means that there are buyers, plural, who want to buy your home. And anywhere there are at least two buyers you have a chance to make a little more money selling your house.
The point is don’t assume that you have no leverage, and no ability to negotiate just because we are in a tepid real estate market. Negotiation has never been more important for sellers that it is right now, because for many people it’s the difference between being handed a check or writing a check to the bank at the closing table.
Tip #1- Change your mind(set)
For most people, their home is the largest investment they will ever make. You spend hundreds of thousands of dollars on your home, and it often appreciates (or depreciates) more than most stocks. For many people it takes on a personality, almost like a member of the family. When you look through your pictures, and think about old times, many of those memories were made in your home. Also the myriad of different reasons you may be selling your home are likely to be deeply personal things like we discussed above. If you are getting a divorce or your kids have gone off to college these things can really be doing a number on your emotions, and add to that the stress of moving, this really can be a situation primed for a meltdown. And then if all of that were not enough you are trying to sell a house in a down market, and your house is not worth what you expected. Phewwww…. Well as long as these buyers don’t try to steal this house from you then you’ll be ok. Oh wait, they are going to low ball you. You’ll feel like you are in the looney bin or at least you want to go there.
Many sellers I worked with took everything personally. “What do you mean people don’t like zebra-striping on their walls? I wouldn’t even want to sell my home to such an uncultured wretch”. Or “$90,000? Are they kidding? Did they even see the deck out back? Do you know how long it took me to build that deck? You couldn’t even rebuild half of this house for $90,000. Maybe I should just cut it in half like King Solomon in the Bible and I’ll sell the other half to someone else for another $90,000. Then at least I’d be getting CLOSE to what it is worth”. All of these things are verbatim quotes from some of my sellers, and I didn’t even have the crazy ones. The point is this, selling your home can be stressful and emotional, but the fastest way to cost yourself money or possibly even losing a sale is by taking the negotiations personally. This is a business deal, even if its not for a buyer, even if you’ve lived in this house for 30 years, even if you are being forced to sell because you lost your job…selling your home is an investment transaction and the only thing that matters is…do the numbers make sense?
Let’s say your buyer wants you to pay $3000 in closing costs? Don’t get mad, don’t say things like “No one helped me when I bought a house, so why should I help them?” Just look at this offer for what it is, roughly $3000 less than the purchase price they’ve proposed. If you are asking $110,000 and they offer $105,000 with $3000 in closing costs included in the deal then they’ve basically offered you $102,000 for your home. The question to ask yourself is, “Would I take $102,000?” You shouldn’t even consider the closing costs, because at the end of the day it all reverts back to money in your pocket. The same is true when buyers ask you for certain personal property items. It is not uncommon for a buyer to ask you to throw in the refrigerator, swingset, or maybe your television. I’ve never seen a seller so mad as the day a buyer asked him to include his riding lawnmower as part of the deal. “So you mean even though I am literally giving them the kitchen sink that wasn’t good enough, now they want lawnmower as too?” Folks we are talking about a 10 year old mower and a near full price offer, and he not only got mad…he refused to negotiate with the buyers at all. This is what is called, “being mad at your money”.
People get so emotionally wrapped up in something that they let it cloud their judgment and see it as a personal attack against them. How much was the lawnmower worth? Maybe $300, and even if you had to replace it with a brand new one? Maybe $1300. Ok so would you have accepted an offer that was $300 less than the purchase price they offered? Yes. Would you have accepted an offer that was $1300 less than offered price? Yes. So then why not accept the offer and then go buy a new mower. The thing he said next nearly floored me. “Well we are actually moving into a condo, so I was going to have to sell the mower anyway” HOLY COW!! Don’t be petty, don’t be insulted, and don’t take it personal. I guarantee you will lose money every you make a decision for any reason other than…what brings the most money in on this sale.
Tip #2- Size up your buyer before you make a counter
I’ve seen hundreds of different offers come across my desk, and I’ve met with hundreds, if not thousands, of home buyers and I can tell you for sure that no two are exactly alike. That is why I get frustrated with real estate agents and real estate books that try to give you a cookie cutter approach to selling your home. If you adhere to these “rules of the game” then you’ll often hurt your chances of selling your home. Don’t treat all buyers the same way, and don’t make across the board decisions based on well known real estate “truths”. When a buyer makes a low ball offer, some real estate agents are quick to say things like, “Don’t even dignify that with a response”. I was in a real estate class once and we were all discussing how we handled low ball offers, and one older agent in the back offered, “Low ballers are like terrorists, you should never negotiate with them”. This is actually a widely held opinion among real estate agents, and it is rooted in the belief that if you don’t make a counter to a low ball offer then it is a show of strength. “If they are serious buyers, they will realize we aren’t going to play around and if they don’t come back and make a reasonable offer then they probably weren’t serious anyway”. There is some truth to that, and a significant number of low ballers are just wasting the seller’s time, but again…not all buyers are alike. If you receive a low ball offer, don’t immediately reject it. You should have your agent ask the buyer’s agent why the offer is so low. Some times the buyer has made the offer based on bad information. I once had a buyer make an offer on the seller’s property based on a price per square foot offer. They’d looked at a comparative analysis of the area and seen that the seller’s house was priced much higher per square foot than the other recent sales. The problem was the buyer’s agent had pulled the wrong information and showed the seller’s home to be much smaller than it actually was. The price per square foot was actually cheaper for this home than the other properties and the buyer made a new, much more reasonable offer…which the seller accepted. This is a unique circumstance, but it proves the point that you should try to understand your buyer’s perspective before writing them off as a waste of time. I’d also recommend that you make an effort to negotiate with anyone who already has their financing in place. If you get a low baller who doesn’t have a pre-approval letter, I’d be very unlikely to suggest that you make a counter offer because they don’t even know if they can get the financing to buy the home even if you do sell at a bargain basement price. That person is unprepared and likely to waste your time. But if you know you have a serious buyer then I’d recommend making a counter offer that you can live with, because pre approved buyers are a valuable commodity in today’s market and you’d be surprised.
Tip #3- Don’t give them a reason
When you are selling your home, the negotiating actually begins well before the offer is made. It actually starts the second that the buyer first sees your property, even if its in a picture on the internet. The buyers are looking for every little thing that is wrong with a property, and then subconsciously (or consciously) they assign a dollar value to repairing or replacing that item. Burner on the stove is out? -$500, Carpet is stained? -$2000, What’s that smell? -$1000, Cluttered and messy? -$2000. Every buyer wants to think of their home as fresh, clean, and like new…regardless of the age of the home. Everyone is looking for a reason to justify making a lower offer, so if you don’t give them any reasons then you will
If you were furniture shopping and you noticed that a chair you liked had a little nick in it what would you do? You’d likely bring it to the attention of the sales clerk and then you’d expect them to reduce their price right? What if you were shopping for a car and you noticed that it had a scratch, you might expect the dealership to fix the scratch, but you’d definitely expect them to lower the price right? Why? Because we are rational people, and rational people need to rationalize a lower price. I rarely had a buyer sitting in my office who just said, “I’m going to offer $50k less than what they are asking” without offering an explanation. On the flip side of that I regularly had buyers in my office trying to convince themselves and me why they were making a lower offer. “Did you see the peeling paint outside” or “The carpet was very dingy, we will definitely have to replace that” or “What was that smell? It will cost thousands to get rid of that smell”. They are rationalizing why they are going to make a lower offer. So, I say if you want to get more for your home…don’t give them a reason. If you have completed any obvious repairs, perhaps given it a fresh coat of paint, and have it sparkling clean when the buyer sees the home then it will be very hard for them to rationalize making you a low ball offer.
If you read this article hoping that I would give you some psychological mind tricks to use on a buyer, then I’m sorry to disappoint you. The truth is you as the seller are at decided disadvantage when negotiating because the buyer is likely to know everything about you and you will probably know nothing about them. They will not only know how much you paid for the property, but also how long its been on the market and very likely why you are selling the home. All of this information is likely to play into the buyers negotiation strategy, and a smart buyer with a good real estate agent is going to come armed to the teeth with reasons for you take less for your home. The tips I’ve outlined above will help you to put your best foot forward when trying to sell your home, and if you apply them to your situation I will guarantee that you’ll be way ahead of the other homes on the market.