In the last series where I talked about the number one thing buyers must do before approaching any negotiations, which is to do market search in order to find the fair market value of the home and use that as a baseline price for your negotiation. Now that you have established the baseline price and have reviewed all of the disclosure information about this property, you are now ready to decide on your final offer price to put down on the offer contract. You know your number is going to be right at the listing price or below the listing price or above the listing price.
Set the right expectation before making an offer
Whether you are getting a good deal or not here really depends on what a ‘good deal’ means, and that really depends on what kind of market you are in. So a good deal doesn’t always mean less than asking price, even though that’s what most of us tend to think like. So again, this ties back to doing your market search in order to have realistic expectation of what a good deal you can shoot for.
In a red hot seller’s market, asking for anything less than the asking price for a home that’s priced right and have great condition isn’t realistic. If you can get a property by overpaying $30K where people normally would overpay $40K or more for similar homes (and still may not get it), I would say that’s a steal.
Buyer’s market, quite the opposite. When there are more homes for sale and not enough buyers, you can afford to be picky. A good deal would be whatever that makes you feel good, because you as a buyer are more in control.
Know what the seller wants
Seller wants to sell a home, but there could be many reasons behind seller’s decision and what seller is looking for. A seller who has compelling life event that leads to home selling are going to want a buyer not only who offers decent price, but more importantly, have solid finance and seriousness for purchasing the house. There are many ways for buyer to show their readiness, it can all be reflected on what kind of terms the buyer offer and how accommodating it is to the seller. Price of course is important, but what makes seller believe that you are going to close on time, that your financing is solid is definitely huge plus.
Find out how many other offers are
In a seller’s market, sellers are typically looking at multiple offers in order to pick the best one. Do a little research, find out from the listing agent how many offers are they getting. Of course, listing agent isn’t obligated to communicate to you about that level of details. But if you have a skilled real estate agent that represents your offer, your agent should be able to get more information that help you judge the situation. Knowing your competition is the key to your negotiation.
Don’t ask your agent to guarantee your deal
I have run into this question a lot. It goes like this: Agent Jones, if I offer x amount, can you guarantee that I will get the place?
Look, your agent is helping you put together an offer and managing your risk. Agents don’t decide on how much this home will sell for. It is entirely up to the seller. Agents can’t guarantee. However, agents can use their experience and expertise to analyze the situation for you and tell you the likelihood of your offer getting accepted or not, if not, how close did it get. So don’t get emotional if someone else beat your offer. Learn from it, adjust the expectation, use this experience to gain more insight of the market and get better prepared for the next one.
Timing
Depending on the listings. If the seller reviews offer as it comes, you might consider submitting your best offer as soon as possible and immediately communicate to seller that your offer is the best. This can avoid seller having too many offers to look at as time goes by, avoiding more intense bidding war. Some sellers would only look at offers at certain deadline, then obey the rule. Wait until the last minute and communicate to the seller about your offer and find out as much as you can about your competition. Timing can play a factor, an experienced agent will be able to strategize for you.
Learn to let go
Buying and seller only happen when both parties come to an agreement. There are a lot of variables that determines the outcome of the negotiation. Realize that not every seller is going to be willing to work with your situation. Sometimes, the best thing to do is walk away if the negotiation doesn't go anywhere. You have nothing to lose by walking away. Don't let this experience cloud your mind. Understand that when the market gets very competitive for buyers, it does happen all the time that your first few offers don't get through. You will learn and get better prepared next time and get closer and closer to getting your dream home.
