Note: This is a chapter in my new ebook called The Ultimate Guide to Buying (and then Selling) Your First Home. I will post a chapter a week. If you like what you read, you can pick up a copy here for the price of a candy bar! Buy a candy bar or be a real estate guru! This chapter is deciding on what to keep in mind during negotiations with the seller. The chapter before it goes into detail about the One to Four Residential Service Contract, which is what we use to make offers. If you want to see that chapter, you will need to purchase the ebook. The last chapter to be shared on this blog you can find here.
I asked Steve and Sally, “Raise your hand if you like to negotiate for things!” Neither did so. I continued, “I imagine not many would raise their hand… In fact, I bet a both of you find the whole process distasteful. As much as it makes you cringe on the inside, negotiation is part of the process of buying your first home. It would be nice if the seller decided your offer was perfect and no changes needed to be made to it. However, this is rarely the case. Most often, you will receive a counter offer from the seller. It can be very minor like a slight change in closing costs to a major item like the property’s sales price.” I told them that counter offers can go back and forth for a while if you don’t know how to approach the process. I told to Steve and Sally to keep in mind these three things when negotiating for your first home.
1. Most likely, the seller is a stressed as you. Remember, how you didn’t raise your hand when asked if you liked to negotiate. The seller didn’t raise her hand either. Sellers are people too and are looking at offers all the time. None of them want to go through the process any more than you do. Of course, you don’t want to be walked all over during the process by taking sympathy on the sellers. After all, they will be trying to get as much for their home as they can, and you want to offer what you think is best for you and your family. However, you might want to ask me about the listing agent’s mood and tone while relaying the first counter offer. If the listing agent has a tone of finality to the counter offer, it stands to reason that the seller won’t like to go back and forth with you about your offer. With a reluctant negotiator on the seller side, it might be best to get to your final and best offer much more quickly. With no patience for the process, the seller might decide it is more trouble than it’s worth and reject your offer outright. On the other side of the coin, if the listing agent seems open, you might want to meet the seller in middle and counter the counter. It might be that your own tolerance for the process is low and your one counter might be the final and best offer despite the counter offer’s strength. Every situation is very different, and you will need to work with your real estate agent to explore every option with a counter offer. You will have several factors to consider and the real estate agent can offer you some sound advice on next steps.
2. Leave your pride at the door. If you take anything away from this discussion, please know that pride does not fit well in negotiations, especially when it comes to real estate. As much as I would love to say that real estate is unemotional task, that is the farthest thing from the truth of the matter. Emotions are high on both sides of the transaction. Pride really does not have a place in any of it. If you get caught up in getting offended, there is a good chance you will not get the house you want at the price you find reasonable. You do want to work with me to get the best for you as possible. This does not mean getting stubborn and refusing to see logic where it exists. For example, when you get your first counter from the seller. More often than not, the seller is going to readjust your offer price more closely to their asking price. It doesn’t do any good for you to stick your feet in the sand and not budge on the offer price (unless it is justified due to an external factor like condition). If you want the house, you will need to let go of the grandiose picture in your head that you will get the home for dirt cheap. Please swallow your pride and try to meet the seller in the middle somewhere. Here is another example. You put in an offer for exactly for the sales price, but ask the seller to pay for several items (ask survey, title policy, closing costs, etc.). The seller counters with the same sales price, but says no in a counter to picking up the other costs. Don’t let pride ruin the deal for you. I have had buyers who walked away from a deal simply because the seller was angling to get the most money possible. It is better to let the emotions die down and then go back with an offer that reinforces your reasons for requesting the cost coverages. Pride kills too many deals.
3. Be cognizant of the real estate market. We have gone over the current market conditions, so you should know where we stand right now. It is a seller’s market with a very tight inventory. Markets fluctuate quite a bit, even real estate. A really hot seller’s market could have cooled down somewhat which means you might have more room to wheel and deal with the seller. If the seller market is still going strong, you might have to take what the seller offers if you want the home. It also depends on the time of year. During the “slow seasons”, sellers might be more willing to negotiate the offer because the number of offers coming through the door might be less, or showings might be down. If the market calls for quick sells with houses only staying the market for two to three days, you might have to be aggressive in your initial offer and be more open to a counter from the seller. Finally, be aware of the mortgage market. Most mortgage rate locks have a limited shelf life so if the interest rates are primed to go up and your rate lock is due to expire, you might want to work with a seller more during the negotiations. No one likes to negotiate. Most agents don’t really like doing it either. However, when buying your first home, there will come a time when you are required to do it.
Please keep the above three things in mind as you find yourself in negotiations. It will help! Steve and Sally agreed, and they said they felt prepared for whatever counter we received. To our surprise, the sellers decided to go with their original offer, just changing the title company and the closing date. My buyers were ecstatic and were hopeful going into the option period.