Home buyers want the best deals and home sellers want the highest price. How do buyers and sellers get there? Negotiation. “The premise, the very foundation of negotiation is looking at all the data (to develop the best price and the best deal)…then it becomes this dance of personalities…the two agents and the parties of buyers and sellers,” Allison Turk, realtor associate at EWM in Miami Beach.
Obviously, the objective of all the parties is to arrive at an agreement on the terms of the deal…the price, time lines, contingencies, etc. And within that shared objective, one party always has the upper hand because it’s either a buyer’s market (he can walk away from the deal because there’s always another house/deal) or it’s a sellers’ market(she can be as picky as she wants because she knows she’ll get bidding wars and/or multiple offers.)
Here are 11 things to help prepare your buyer for the negotiation:
- Price – “Buyers and sellers try to negotiate the best price possible for their own self interest but “best possible price” often means different things,” says Cara Ameer, broker associate and realtor with Coldwell Banker Vanguard Realty in Ponte Vedra Beach, FLA. “The seller wants the highest price and the buyer wants the least amount to pay…usually it ends up somewhere in the middle.”
- Closing Costs – Buyers usually prepay closing costs for the mortgage amount that the bank lenders hold in escrow for taxes and insurance. Costs can be up to 3% of what’s included in the mortgage. If the seller pays closing costs, the buyer will likely have to pay over asking to net the seller what they want – particularly in a sellers market.
- Closing Date – Sellers will negotiate for speed when they need to get their capital out quickly. If buyers can be somewhat flexible, this can be a great negotiating plus for them in a multiple offer situation.
- Financing Contingencies – Since financing adds 30 to 60 days onto the closing timeline, buyers competing with cash offers need to have a rock-solid pre-approval letter and may want to consider how else they can sweeten the deal for the seller.
- Home Warranty – The buyer can ask for and the seller can offer a protection plan to cover appliances and systems needing repair or replacement.
- Lease Back – “If the seller needs extra time to get into (her) new home, the buyer can offer zero-cost rent-back for 30-90 days.” Mazen Fans, CEO, OpenHouse in Santa Monica, CA.
- Home Repairs – The seller can market the house for sale in “as is” condition. The buyer can then negotiate for a lower price due to needed home repair costs.
- Appraisal Contingency – Even if the buyer needs the appraisal for the loan, the seller may ask them to remove the appraisal contingency. In other words, if the appraisal falls short of the contract price, the buyer ponies up the funds anyway.
- Furniture – Furniture is up for grabs. Whatever is included/excluded must be in writing when the contract is finalized. Usually all appliances are included except the washer/dryer and sometimes even the refrigerator. This too can be negotiated and must be in writing.
- Inspection – Most lenders want home inspections. Most buyers should want them too. Allow 5-10 days for an inspection to be completed and make sure all findings are in writing.
- Condo/Co-op Assessments – These assessments are used to maintain common areas such as the roof, exterior paint, landscaping, pool, etc. Sellers need to be currently settled with these bills. Don’t wait until the last minute to find out the seller has an outstanding balance, as this can delay the final financing approval and/or the actual settlement date.