 Personal Finance PowerPoint Presentation Home Sale Negotiating Strategies Get ready to get financially fit by practicing personal finance. Most of this information can be found at Investopedia 5 Negotiating Strategies When Selling Your Home, which you can find online. Take a look at the references, resources, continue your research from there. This is by Amy Fontinier, Updated April 11, 2022. 5 Negotiating Strategies When Selling Your Home. So we're on the sale of the home side of things. Selling your home is likely one of the biggest financial transactions you'll undertake in your lifetime. So clearly, with the home, the purchase of the home, and the selling of the home, some of the biggest financial transactions individuals deal with, given the dollar amounts involved with them in relation to other types of financial transactions for an individual. And the price you agree on with a buyer, along with the real estate commissions you pay, will determine how much money you'll walk away with. So clearly we want to spend a little bit more time with these larger type of transactions that have a more long-term impact into the future going through a more formal process. These negotiating strategies could put you in the driver's seat and help you get a top dollar in any market. So clearly, negotiation is going to be part of the game whenever you're trying to sell the home, because it's a market. We're putting it out on the market here. So number one, counter at your list price. As a seller, you probably won't want to accept a potential buyer's initial bid on your home if it's below your asking price. So typically, you could try to put a firm price out there when you're going to price something and say, hey, look, I'm not a negotiator person. Here I'm going to say, this is my price. I'm putting it out there. And that's what I expect for the offer. That's one way you could try to do it. Or oftentimes, you're going to put it out there at one price and you expect to be haggled with in the market. Of course, how much haggling will take place will depend on the type of market. Is it a seller's market? Is it a buyer's market? If you're expecting for someone to come back and haggle, which is often the case in a market type of situation, then you might set the price higher than the price that you actually would be okay with settling at so that you can expect other offers to come in below that price and then get into the negotiation process here. And so buyers usually expect a back and forth negotiation so their initial offer will often be lower than your list price. So again, you don't really have to accept that term or that metric or that way of doing things if it's like a seller's market and you're basically saying, hey look, I'm in the driver's seat here. In that case, I have the advantage in the market conditions. I'm going to set the price and that's what I expect to sell it for. You might be able to get it in that point. Obviously, if it's not a seller's market, if it's a buyer's market, the buyers are more likely to have more leverage and likely to get a lot more haggling type of things, which is a kind of traditional way of dealing with any kind of market condition. But it may also be the lower than what they're actually willing to pay. So clearly, from the seller side of things, if we were going into something that we know is going to be a haggling situation, we would set the price high. We want to put the bar high and then expect it's going to be pulled down. Then on the buyer's side of things, they would try to low ball it for the initial offer and then expect that it would be going up from there. And of course, you meet somewhere in the middle. So you want that initial anchoring price to be higher, to set the mindset, to set things up generally if you're going into that kind of negotiation. But however, the downside of that, of course, is that then you're listing the price at a higher price and you're going through the whole haggling kind of process versus listing it at the price you actually want to sell it for and just saying that's what I'm going to sell it for. So at this point, most sellers will make a counter offer with a price that's higher but still below the list price because they're afraid of losing the potential sale. So they want to seem flexible and willing to negotiate to close the deal. This strategy does indeed work in terms of getting the property sold so that thousands of dollars can attest, but it's not necessarily the best way to get top dollar. Instead of dropping your price counter by sticking to your listed purchase price, someone who really wants to buy will remain engaged and come back to you with a higher offer. So you might say, okay, if I'm going to start at my list price, someone comes back and they gave me a price below that, which is what I expect, but I still want to sell to them. So instead of saying, okay, I'm going to bring my price down and we'll meet somewhere in the middle, maybe you just say, I'm going to stick to my listed price and see if they do something from there, right? You're playing more of a hardball kind of strategy. I'm going to stick to the listed price and see if they give you another counter offer upper and upping their bid again. So assuming that you've priced your property fairly to begin with, countering at your list price says that you know what your property is worth and you intend to get the money you deserve. So again, you could have a strategy of saying I'm going to put my money on, I'm going to put my property on the market at what I basically expect to receive and then I'm going to be way less flexible with this kind of negotiating stuff. I'm not playing games here. I didn't set the price at absorbently high so that I can, so that I can haggle with someone. I said it at what I expect to sell it for and then you could try to, and then you could try to be more firm in that case. That would be one method that you can use. So buyers may be surprised and some will turn turned off by the unwillingness to negotiate. So clearly some buyers like the haggling process. That's kind of what, you know, what they expect. So if you don't come down on the price, they're going to say, well, you're, you know, you're not playing the game right or something like that. But again, you're setting the rules to the game as the seller. And if you're, if it's a seller's market, you have the capacity to set the rules at the game and say, well, no, that's not how I'm doing it here. I'm putting it on there basically at what I want to sell it for. I think there's buyers out there willing to pay that for it. So you do risk having a buyer walk away when you use this strategy. However, you'll also avoid wasting time on buyers who make a low ball offers and won't close any deal unless they can get a bargain. So oftentimes you deal with people that people that really like to negotiate and haggle might not always be the best person we want to sell to anyways because as we go through the negotiation, they might be nitpicking. You know, they're more likely you would think to try to go after any, any kind of, any kind of concession throughout the whole process, right? As opposed to, as opposed to being able to say, look, I set the price. I think it's fair right there. It's a seller's market. I want to pick someone up that agrees with that and basically is willing to make the deal at that point and not, you know, possibly haggle every, every step through the process. But it just depends on, again, if it's a seller's market, buyer's market and the conditions of it as well as your kind of strategy or feeling towards the negotiation strategy. A variation on countering at your list price is to counter just slightly below it conceding by perhaps a thousand dollars. So you're going to say, okay, I'm going to just drop it by a thousand dollars just to keep this other person hooked. And then we, and then we play the game, right? Then we keep on going. Use this approach when you want to be tough, but are afraid that appearing too inflexible will drive away buyers. Number two, reject the offer. If you're gutsy enough, you can try a negotiation tactic that's more extreme than countering at your list price. So in other words, we had the list price before and we said, well, we could just simply counter at that list price or lower it by a very low amount like a thousand dollars, or you could just say that I'm going to reject the offer outright if it's below the list price. And again, if it's in a seller's market, you might be able to do that. You might be able to put the impression out there and say, I'm setting the terms here. The selling price is what I believe is fair. And I'm just going to look for an offer for the selling price. In other words, I'm not going to play the whole negotiation strategy. And if you're able to do that, maybe you'll get the offer then and maybe you'll be working with someone that's less likely to try to get an edge on every kind of piece of the negotiation if they think the offer is fair. So reject the buyer's offer, but don't counter at all to keep them in the game. You then ask them to submit a new offer. So you could say, basically, I'm going to reject the offer. You can send another offer and possibly simply say, hey, look, I set the price at what I think is a fair price to sell it at. And I'm trying not to do the I'm not doing the negotiation thing. I think I will be able to sell it at that price. It is what it is. So if they're really interested and you haven't turned them off, they will. This strategy sends a strong signal that you know your property is worth what you're asking for it. So if that is the case, again, if you're in a seller's market and you're saying, I know what the property is worth, I think I can get this price for it. I think there's buyers out there that will give me that price. Then I'm just not going to be flexible. I'm not going to do the whole bargaining thing. You might be able to do that in certain situations. If the buyer resubmits, they'll have to make a higher offer unless they decide to play hardball back and submit the same or even a lower offer. So obviously they can send whatever other offer they want to do at that point and then you can go back and forth with it from there. When you don't counter, you're not ethically locked into a negotiation with a particular buyer and you can accept a higher offer if it comes alone for the buyer knowing that someone may make a better offer at any moment, creates pressure to submit a more competitive offer quickly if they really want the property. So clearly if you just reject it outright and say, I would accept another offer, this is basically the price I'm asking for. I think I have other people out there that would be willing to go at this price if they really want the property. Then clearly and they're willing to pay the price that is fair if you think that was a fair price and they might give another offer. This strategy can be particularly useful if the property has only been on the market for a short time or if you have an open house coming up. Number three, try to create a bidding war. Speaking of open house, make them an integral part of your process. So after listing the property on the market and making it available to be shown, schedule an open house for a few days later, refuse to entertain any offers until after the open house. So we're going to have the open house. Hopefully that will put some competition, put some vibes out there in the market that people, this is a house people want out there. Potential buyers will expect to be in competition and may place higher offers as a result. If you get multiple offers, you can go back to the top bidders and ask for their highest and best offers. Of course, the open house may yield only one offer, but the party offering it won't know that. So you'll have a psychological edge going forward with counter offers. So clearly when people make offers to you, then they don't know who else is making, who else is in the market. So you have a bit of an edge in terms of the information gap on your side than what they have. So you might have only one person you're dealing with. That's the only offer I got, but as far as they know, I just had an open house. They saw some people walking through there. They might think there's a whole bunch of people in line for this piece of property. So number four, put expiration date on your counter offer. So this is a classic selling strategy that offers limited. The time is limited. Act now. So we got to have a sense of urgency involved there. Say a buyer submits an offer that you don't want to accept and you counter their offer. So now classic kind of negotiation or contract kind of law here, they give us an offer. We don't accept the offer. We give the counter offer, which basically negates the original offer. And then you have a new offer on the table, which the other person can accept or deny, give a counter offer. You'll then involved in a negotiation with that party. And generally it is considered unethical to accept a better offer from another buyer. If one comes along, if one comes along, though it is not illegal, it is possible as noted above to be involved in multiple negotiations with several buyers at the same time. It is the seller's prerogative to disclose or not disclose this information to the prospective buyers. So the seller clearly has some advantage in terms of who they're dealing with and it's up to them to be as to whether or how open they want to be with that information. And obviously there's pros and cons to being open or not open with that kind of information. So disclosure can result in higher offers, but it can also frighten off a buyer. The seller is legally allowed to counter more than one offer at the same time, but they must include appropriate language letting all the parties know of the situation. In the interest of selling your home quickly, consider putting an expiration date on your counter offers. So again that timeframe. This strategy compels the buyer to make a decision so you can either get your home under contract or move on. Don't make the deadline so short that the buyer is turned off, but consider making it shorter than the default timeframe in your state's standard real estate contract. So you're going to tighten it up a little bit, but not make it like ridiculous, right? Act now, you got to click on the button, right? Within the next five minutes or the thing is over. So if the default expiration is three days, you might shorten it to one or two days. In addition to closing the deal quickly, there's another reason to push sellers to make a fast decision. While their counter offer is outstanding, your home is effectively off the market. Many buyers won't submit an offer when another negotiation is underway. So clearly you want to be able to kind of mitigate the timeframes if it's not a good match. So and if the deal falls through, you've added time to the off to the official number of days your home has been on the market. The more days your home is on the market, the less desirable it appears and the more likely you are to have a lower, you have to lower your asking price to get a buyer. Number five, agree to pay closing costs. It seems like it's become standard practice for the buyers to ask the seller to pay their closing costs. These costs can amount to about 3% of the purchase price and cover what seem to be a lot of frivolous fees. Buyers are often feeling cash strapped from the down payment, moving expenses, the prospect of redecorating costs and maybe even from paying the closing costs on the home they sold. Some buyers can't afford to close the deal at all without assisting closing costs. So again, it kind of depends if it's a seller's market or a buyer's market. If people are strapped for cash, then you might be able to close the deal by lightening up the cash flow burden with those upfront closing costs. So while many buyers don't have or don't want to spend extra cash upfront to get into the home, they can often afford to borrow a little bit more. If you give them the cash they want for closing costs, the transaction may be more likely to proceed. When a buyer submits an offer and asks you to pay the closing costs, counter with your willingness to pay but at an increased purchase price, even if it means going above your list price. So in other words, if you're going to say, okay, they're strapped for cash, they can't play the closing costs, that's because it's an upfront cost and it's not rolled into the loan. So you could say, you could say, okay, well, I have the cash flow, maybe I can give you the cash for the closing costs but I'm going to up the price of the home, which means the buyer is still kind of responsible for the closing costs in essence but it's going to be rolled into possibly the loan in that situation which should help with the cash flow problem that they're facing, that's one negotiating strategy. So buyers sometimes don't realize that when they ask the seller to pay their closing costs, they're effectively lowering the home's sales price. Obviously that's a form of lowering the home's sales price in that case. So as the seller, of course, you'll see the bottom line very clearly. You can increase your asking price by enough to still get as high as your list price after paying the buyer's closing costs. If your list price is $200,000 and the buyer offers $190,000 with $6,000 toward closing, you would counter with something between $196,000 and $206,000, right? So then you'd say, okay, you want me to pay your $6,000 closing costs and you want the sales price to be $190,000 instead of my asking price of $200,000, but I'm paying your closing costs, so I'm going to up it to at least your offer plus the $6,000, $196,000, or my offer $200,000 plus the $6,000, and that way, so why would the buyer be okay with that? Because they'd still be able to get the closing costs basically rolled into the loan instead of having to pay them up front because they don't have the cash flow to pay them up front. So a catch is that the price plus closing costs must be supported when the home is appraised. So then when you go through the appraisal process, the appraisal could appraise for something less than what you have the listing price for, and if that happens, that can be a problem to get the deal done. So that's something to keep in mind when you're raising the price from the closing costs that could put a wrench in the works as they say. So otherwise you'll have to lower it later to close the deals because the buyer's lender won't approve an overpriced sale. So the bottom line, the key to executing these negotiating strategies successfully is that you have to be offering a superior product. So clearly, you'd like to be able to say, I'm confident with the home I'm selling, I'm confident in the value of it, and therefore then you can go into the negotiations feeling secure about it. So the home needs to show will be in excellent condition and have something that competing properties do not if you want to have upper hand in negotiations. So if your property is valuable, then you can move forward with it. And plus if it's a seller's market, if the market is just leaning towards the seller's side of things, then you have a bit more leverage to be more stringent in your negotiation process. If buyers aren't excited about the property, your offering, your hardball tactics won't cause them to up their game, they'll just walk away.