Welcome back to America’s #1 Daily Podcast, featuring America’s #1 Real Estate Coaches and Top EXP Realty Sponsors in the World, Tim and Julie Harris. Ready to become an EXP Realty Agent and join Tim and Julie Harris? Visit: https://whylibertas.com/harris or text Tim directly at 512-758-0206.
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Negotiating has become more complicated now that the market has shifted. Currently, there’s a mixture of homes selling quickly, sometimes with competing offers, and homes that are taking longer to sell, with perhaps only one offer. Many are even expiring after having zero offers or rejecting offers that could have worked.
This means you’ve got to sharpen your skills if you want to win every time!
Mistake #1: Lack of Communication between the Buyer’s Agent and the Listing Agent. If you want to win, you need a meeting of the minds. The definition of negotiation is the reaching of a mutual agreement that all parties are satisfied with. You have to talk to each other to make this happen!
Example 1: Listing agents; if you want to receive offers that are easy to say ‘yes’ to, put the desired terms into the agent-to-agent comments in the MLS, and/or call all those buyers’ agents back who haunt you looking for the details that will help them win!
Example 2: Buyers’ agents, read all comments in the MLS and counsel your buyers to comply with as many of the terms as possible if they intend to actually win!
If there are comments, you must find the listing agent and ask them, other than price, what it will take to win. Does the seller want a specific closing date, a lease back, or to keep the fancy chandelier? Find out and see if you can deliver a contract they’ll accept.
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Mistake #2: No lender’s letter or proof of cash, a weak lender’s letter, or a boilerplate letter. If your buyer has financing, their lender’s letter needs to show ideally that they are loan-committed or at least pre-approved. It must state that their ratios, credit, employment, and downpayment are adequate and verified. Additionally, the lender should call the listing agent and ‘vouch’ for the buyer’s ability to close.
**Make sure you can accurately describe the differences between pre-qualification, pre-approval, and loan commitment. They are not the same!**
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Mistake #3: Not being specific about the seller’s concessions. This can range from asking for a specific type of home warranty for a specific price to asking for thousands of dollars toward the buyer’s closing costs.
The first issue is straightforward. Check the box on the offer stating that the buyer wants a home warranty, then state which warranty, that it’s for one year, and that it will cost $X.
All home warranty companies have online FAQs and salespeople who can answer your questions.
The second issue is more tricky. If you ask the seller to contribute $5,000 towards buyer closing costs, state (after speaking with your buyer and their lender) what those funds will go to. Buying down the interest rate and paying prepaid expenses like taxes, homeowners insurance, and prepaid HOA deposits are appropriate. Ask for a good-faith estimate so you can be specific. Note: some lenders will inflate costs when they know the seller contributes thousands to the deal.
Failure to be careful when you’re dealing with dollars will almost always bite you in the butt before closing, and guess who’s going to pay the price if there’s confusion!
Mistake #4: Escalation Clauses, Escape Clauses, Appraisal Waivers, oh my! These are grouped together because the mistake is the same. There are two levels to this. The first one starts with the agent understanding these clauses or waivers and what they mean, and the second part concerns the buyers’ and sellers’ understanding. It shouldn’t be in the contract if you can’t explain it yourself.
Example #1: Escalation clauses. If your contract states that your buyer will go $1000 above the highest and best other offers, it also needs to state, ‘not to exceed $____.’ Otherwise, when your buyer finds out the price they have to beat, they may not qualify or be willing to deliver, and thus, you’ve wasted everyone’s time. Note: Make sure the buyer is actually qualified to go that high.
Example #2: Escape Clauses: These come in many flavors, the most common being a home sale contingency. ‘Seller accepts with the following contingency: Home will still be marketed, and if an equal offer with no home sale contingency is presented, the buyer will be given 72 hours to remove their home sale contingency and proceed to close., or become a backup offer.’
Example #3: Appraisal Waivers. This is fine if the buyer is all cash (25% of recent sales have indeed been all cash!), but if there is financing involved, the lender better be ok with the waiver as well; otherwise, you’ve got your buyer into contract on a home that the lender may not approve them for if it doesn’t appraise. If it’s an appraisal gap your buyer is guaranteeing, make sure they have the cash to support that, and up to how much before they’re dipping into their down payment money!
Prepare Buyer Net Sheets and Seller Net Sheets, depending on which side you’re on. Failing to discuss the real numbers can create uncomfortable pre-closing conflict.
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