The home seller’s negotiation cheat sheet

March 16, 2010 | 194 Comments

By Christopher Solomon of MSN Real Estate

The home-seller’s negotiation cheat sheet (© Terry Vine/Getty Images)


This is a great article that sedller’s should fread before putting their house on the market. It provides some great advice to seller’s that will help before the offer and during the negotiation process.
So you’re thinking about selling your house. But how much do you really know about negotiating a home’s sale? Jump into this unprepared and you could leave thousands of dollars — maybe tens of thousands — on the table.

You need to go back to school briefly and become a student of the fine art of negotiation. But how does a home seller get smart fast? You need our crib sheet, with negotiation tips you can use throughout the home-selling process, as taught by some of the savviest and most experienced real-estate teachers.

And don’t worry — no one’s going to call you to the principal’s office for keeping this cheat sheet close at hand. 

As you’re getting started
Smart negotiating starts early — even before you’ve gotten an offer from a buyer, the experts say. In fact, it starts when you choose a real-estate agent.

1. Beware the “Mr. Nice Guy” agent. When deciding upon a real-estate agent, “I want an agent who represents me to be hard-nosed, irritating and determined; to have learned his or her business in the backrooms; and to tell it like it is and get what he or she goes after,” writes Robert Irwin, author of “Tips and Traps When Negotiating Real Estate” and “Tips and Traps When Selling a Home,” among other books. “I want the other guy to have the ‘nice’ agent.” The lesson: Don’t choose just on personality, but effectiveness.

2. Negotiate that commission. “In all parts of the country, the rate of commission paid to a licensed agent to list your house is entirely negotiable between you and the agent,” Irwin writes. “There is no set rate. It’s whatever the two of you agree upon.”

3. Ask for more than you expect to get. Once you’re ready to price your home, aim a bit high from what you’d be comfortable settling on, say Mike Summey and Roger Dawson, authors of “Weekend Millionaire Secrets to Negotiating Real Estate.”  That may seem pretty basic, but people often don’t do the basics.

Why aim high? A few reasons: “The obvious answer is that it gives you some negotiating room,” the authors write. There are other reasons, too: You just might get that high number. And by giving yourself room to come down in a subsequent negotiation, “this is the only way in which you can create a climate that allows the other person to feel that he or she won” — and it’s often important for the other side to think they’ve “won” in order to agree to a deal, the authors say.

4. Understand “forward pricing.” When pricing your home — the first step in the negotiation process — “don’t simply take what the last home in the neighborhood sold for and make that your price,” Irwin writes. Instead, use forward pricing: If homes in your area are appreciating by, say, 10% annually, and the last comparable home sold six months ago for $300,000, then yours should be priced at $315,000 (half of 10% of $300,000 equals $15,000, which is the amount that should be added to “forward price” for this home).  “That’s pricing it forward to the current market,” Irwin writes.

5. Start a war (if you’re in a hot market). Now for a completely different tactic: “One thing you can do — it’s a little risky — is offer your home below market (price), in the hopes you can start a bidding war,” Irwin said in an interview. “I’m seeing it all over the place: Savvy sellers are doing it in places where there are buyers.” He mentions several markets along the West Coast such as Los Angeles and San Francisco. “The idea is that you’ll get a number of offers, and buyers will start competing against each other, and you’ll get a quick sale.”

Once the offers start coming in
6. Stay out of it.
Though the occasional homeowner will feel expert enough at negotiations to handle the sale of the home himself, experts generally say it’s wiser if homeowners stay out of sight during the negotiation process and let their agent do all the talking. That doesn’t mean you don’t play an active role — but you stay behind the scenes. “They definitely need to not be seen. It needs to be the agents battling it out,” says Richard Courtney, author of “Buyers Are Liars & Sellers Are Too!: The Truth About Buying or Selling Your Home” and managing broker of Nashville real-estate firm Fridrich and Clark Realty.

7. Get the conversation started. Let’s say you put your home up for sale at $300,000, and a would-be buyer offers $200,000. It’s tempting to just dismiss the offer out-of-hand. Don’t do it, Courtney says.

If someone comes in at $200,000 on a $300,000 home, “You come back at $290,000,” Courtney says. Make some movement. Get the conversation started. By moving — a little bit — you send a signal that you’re willing to negotiate, but you’re not desperate. And that frequently will get the would-be buyer to play ball and counter with a more serious offer, he says.

8. Remember, it isn’t personal. “Lots of times the first offer from a buyer will be a lowball offer — just testing the waters,” Irwin says. “Let’s say it was offered at $300,000 and they offer $210,000 — some ridiculous amount. Well, the seller gets insulted,” he says. “The worst thing that can happen in a negotiation is that you take things personal.” Remember: It’s just business.

9. Keep it moving. Time is a key element of negotiation, Irwin says. “The longer you can keep someone at the negotiating table, the more likely you’re going to come to a conclusion that’s satisfactory to you.” Why? Because the more time and effort people invest, the more they feel invested in getting the deal done and buying your property.

So what to do? “No matter how bad the offer is, always make a counteroffer – and always give a concession — maybe it can’t always be on price, but maybe it can be on financing,” Irwin says. “Or, maybe there’s something in the property the buyer wants (that can be thrown in as a concession). … Just the act of keeping it going, keeping the deal alive, actually helps make the deal.”

One psychological tip: “If you’re going to counter (offer), it’s usually a good idea to make the counter on the same document as the original offer,” Irwin writes. “When the counter is on the same document, even though the other party knows that his or her original offer was rejected, it makes it seem like the same deal is still being negotiated.”

As the negotiation continues (or drags on)
10. Don’t split the difference.
It might be tempting to make a deal happen by just saying, ‘Let’s split the difference between offer and counter offer.” Don’t do it, the experts say. Why not? Because you’re being too generous, and you’re leaving money on the table.

First, never entertain any offers to split the difference early in a negotiation, the experts say. Next, never be the first to offer to split the difference, but encourage the buyer to be the one who suggests it, authors Summey and Dawson say. (Then when you reluctantly agree, the seller thinks he or she has won by making the suggestion.)

But most importantly, if the buyer is willing to split the difference once, then he or she may be willing to split the remaining difference when you approach again and say the original split isn’t workable.

11. He who can walk away holds the cards. In a negotiation, “Power goes to the side that has convinced the other side that it is prepared to walk away from the negotiations if it can’t get what it wants,” authors Summey and Dawson write.

How can you show that as the seller? One way is what they call the “withdrawing the offer” gambit: backing off on a last price concession, or withdrawing an offer to sweeten terms. It’s a gamble, because it’s possible that this will only irritate the other side, “so use it only on someone who is grinding away on you,” the authors write.

12. A small concession can be big at the end. As you’re getting close to closing a deal, but you’re still not there, consider giving a small concession near the final moment, Summey and Dawson write. The concession could be moving back the closing date a week, or leaving a piece of patio furniture that the buyer admired. Why? The other side’s need to think they’ve “won” the negotiation may be what’s holding up the deal … so throwing them a small win can seal the larger victory. “Because timing (of the concession) is more important than the size of the concession,” they write, “the concession can be ridiculously small and still be effective.”

And there you have it — a crib sheet that ensures the only thing that won’t be cheated the next time you sell a home is you.


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