Guide to NEGOTIATINGList your Home for Sale
There's a reason negotiation is referred to as both an art and a science – and a reason hundreds of books and advice columns have been written on negotiation strategies and techniques. Fortunately, with a bit of preparation and practice, you can negotiate your FSBO home transaction like a pro.
Keep Your CoolSelling your home brings out strong emotions, but taking things personally won’t help you at the negotiating table. Remember: It’s just business, so keep your demeanor detached and your manner businesslike. The more you’re attached to a certain outcome, the less power you have during negotiations.
This rule is especially important when you receive a low offer. Though you may find it insulting, don’t take offense and dismiss it out of hand. Instead, send a counter-offer. You may want to (politely) ask the buyer how he determined this offer and point out several comparably priced homes in the area to back up your point. This lets the buyer know that you’re not taking that low offer seriously, and that it’s time to get serious.
Counter OffersUnless you’re selling your home in a hot seller’s market, most of the time the first offer you receive won’t be for the price that you were hoping for. This is normal and not a cause for outright rejection or despair.
Instead, take the opportunity to make a counter-offer. What you choose to offer is your call, but it shouldn’t be so close to your original asking price that the potential buyer gives up and walks away.
Pay attention to contingencies included in the offer or in subsequent counter-offers. These are also fair game on the bargaining table and may be used as leverage by either party.
One of the more common contingencies included in offers is one that only allows for a closing date once the buyer’s existing home is sold. While this contingency may be good for the buyer, it’s bad news for you, as it may result in a delayed or even canceled transaction. Protect yourself by including what’s known as a “kick-out clause” in your counter-offer. Kick-out clauses specify that the seller can consider other offers if the buyer’s house isn’t sold within a certain period of time.
Play It CloseAt the negotiating table, knowledge is power. Increase yours by doing your homework, and decrease the buyer’s by keeping certain information close to the vest during the home selling process. The buyer and her agent don’t need to know why you’re selling your home.
They don’t need to know that your new job -- in a new state -- starts next month and that you need to move ASAP. They certainly don’t need to know that you want to sell as quickly as possible to avoid having two mortgage payments. Treat your motivation to sell like a state secret.
Detective WorkJust as you don’t want the buyer to know too much about your motivations for selling, you should engage in a bit of sleuthing to uncover their motivations for buying. The more information you have, the more of an upper hand you’re likely to gain.
When engaging with would-be buyers, try to tease out answers to questions such as:
• Why they are buying at this particular time
• If they seem to be in a hurry to buy
• Have they recently sold their current house or is it on the market
• Do they have the funding to meet your asking price
• Their maximum mortgage amount
• Their planned down payment amount
• Whether they're more concerned with a good deal or a quick transaction
While some of this information is available to the public through tax and property records as well as online, other questions may be more difficult to answer. Think strategically; tactics such as asking a potential buyer when he'd like to close by will give you some idea of his sense of urgency.
You can also glean valuable information from an offer. Even if the offer is too low, before you counter-offer, use the data it contains to inform your decision, such as:
• Down payment amount
• Closing date
• Mortgage amount
• Any requests
If you know the extent of the buyer’s commitment level, you’ll have a better idea of how strongly you can push to keep the purchase price where you want it to be.
On GuardAccept only written offers. Buyers or their agents may make a verbal offer simply to get a reaction or “test the waters,” because they’re doing their detective work, too.
Any responses you give to the buyer’s agent will be passed along to the buyer -- and the buyer’s agent does not have your best interests at heart. Her job is to get the lowest price for her client. Any information you give an agent may be used against you during negotiations, so play your cards close.
Watch out for negotiating tactics designed to make you slip up, such as “trial balloons,” or questions that attempt to force you to disclose information. A good way to thwart trial balloon questions is by answering them with another question. For example, if the buyer’s agent asks you if you’d consider carrying the note yourself, respond with, “If I did, what would your offer be?”
Keep your eyes open for a tactic known as nibbling or whittling, in which buyers attempt to get more than what has already been negotiated for. For instance, they may say something like, “The refrigerator stays, right? That’s the only reason I agreed to that price.” Nibbling usually involves a “faulty memory” on the buyer’s part as to verbal agreements that may or may not have already been made. Protect yourself by disallowing any verbal offers or counter-offers. Get everything in writing.
Wiggle RoomDon’t back yourself into a corner when it comes to price. Instead of fixating on one price that you feel you must get at all costs, come up with a mental range of acceptable prices. This will provide you with some wiggle room when it comes time to talk price with a potential buyer.
Similarly, don’t get trapped by deadlines. Avoid committing to “must sell by” dates in your FSBO process. It’s not going to do anything but increase your feelings of stress and anxiety, and might even make you accept a lower asking price out of desperation.
Tactics and StrategiesAdd a few time-tested negotiating tactics to your arsenal before you enter the battle. One of the best? The strategic use of silence.
Say you’ve made your price clear and you’re waiting for the buyer or his agent to respond. Simply sit back, close your mouth and remain silent. Many people feel very uncomfortable with silence and will begin changing their position.
If you want to convey a negative reaction without breaking your silence, try responding through body language. A painful wince expresses your position without using revealing language. If the other parties attempt to use the wince on you, the best reaction is no reaction. Simply counter with silence to increase your power.
Above all, remain detached, cool-headed, rational and objective. Focus on your goal while remaining flexible enough to stay open to the other party. Negotiations rarely end with one person getting everything they want, so prepare yourself for that possibility ahead of time to avoid frustration and disappointment.
Common PitfallsThe negotiation literally makes or breaks the deal, but you can take steps to avoid the deal-breakers:
• Saying too much – Say only what you’re required to by law during negotiations. Before you speak, ask yourself if it’s really necessary. Even information that seems insignificant can be used by the buyer and her agent to gain the upper hand.
• Countering too quickly – Don’t rush to make a counter offer. Give the offer a day to cool down and take the time to think critically about the price and the terms. Have your real estate attorney review it before making any decisions.
• Throwing perks in too quickly – If you’re still in the beginning stages of the negotiation process, don’t offer to throw in features or items such as appliances, fixtures and window treatments simply to sweeten the deal. Hold back until later, when you might need some leverage, or when you might not need to include additional perks at all.
• Choosing the wrong battles – Keep the big picture in mind. You may love that chandelier, but giving up some of the small things – light fixtures, appliances – may make the buyer happy enough to give in on the larger things, like price. Don’t lose a sale over what, in the long run, are insignificant details.
• Not doing your homework – Arm yourself with facts and specifics before you begin to negotiate. Have comparable home-selling prices, tax records, appraisals and inspection documents handy so you can counter any vague or emotional arguments with hard, cold and indisputable evidence.
Discuss this guide below!