Three Things a Buyer Can Negotiate
A great negotiator can assist you in buying under market value in many cases. Meanwhile, a poor negotiator can cost you thousands.
These are typically the three main areas of focus in real estate negotiation:
- Know Your Market: Let's face it, in order to get the very best deal possible, you need to know what the market value is. A professional agent is going to be a market expert. And he or she will educate you on the market value of a subject property. Once we establish market value, we try to negotiate to get better than market value.
- Present Your Knowledge to the Seller: Negotiating begins with the presentation of the offer. Simply putting an offer on a property with no setup is going to leave you with limited leverage in negotiation, and many times you'll be perceived as a shark who is simply trying to take advantage of the seller. Whereas, a powerful offer presentation will tell your story and humanize you to the seller, which allows them to be more flexible for you, and perhaps not your competition.
- Let Them Know You Love the Home; But: In order to negotiate the best price, you have to bring the seller back to reality. The seller knows you like the property because you put in an offer. It is then important to remind the seller of the shortcomings that you are willing to overlook, as long as the price-to-value ratio makes sense.
- The Concession Phase Started with the Presentation: When you set up the offer with a powerful presentation, you laid the groundwork for the seller to make some concessions on things that may need to be updated, upgraded, repaired, or replaced. As you move through the transaction process, all of these are topics are potential tools for bargaining.
- Changes vs. Cash Back: Once you're close to where you want to be financially, you can refer back to these bargaining items. Most sellers know there are things that not everybody is going to like in their home. Especially knowing that items will come up in another negotiation (all material flaws must be disclosed), sellers will often be willing to reduce their price for identified necessary repairs and updates.
3) Closing Costs
- The Sure Fire Price Reduction: Sellers are not surprised when a buyer asks them to pay for closing costs. Similar to concessions, closing costs in general offer a good avenue for the savvy buyer to negotiate a better price, by minimizing the cash they have to bring to closing. Closing costs can be a great negotiating tool, whether you need them to complete the closing or not, as long as you know how to present the offer.
- Know the Guidelines and Limits: It's important to know the rules. There are limits to what you can and and cannot ask for and your agent or mortgage lender can educate you on these important items.
- The Biggest Closing Cost Mistake: Sometimes the biggest mistake a buyer can make is asking for closing costs on cash deals. Some would argue that it makes the seller feel like they are getting a higher price. Just like you the buyer, the seller is only concerned with the the total net proceeds. Most sellers are completely confused and feel taken advantage of when closing costs are requested on cash deals. When they are confused many shut down negotiations.