Negotiating Price & Terms
Negotiating the purchase of a home is a skill set of its own. Even having bought and sold half a dozen homes in a lifetime while in a career unrelated to real estate will not automatically equip you for all the possible nuances of negotiating.
In four decades in real estate I have seen more mistakes made in negotiating a real estate transaction than I could possibly count. I’ve seen buyers overpay by $200,000. I’ve seen sellers chase a good buyer away. I’ve seen real estate agents give their clients bad advice about the home inspection response and kill the transaction. I’ve seen a buyer make a seller so mad, he refused to sell to that buyer at any price. I’ve seen far too many amateurs going back and forth on price until one of the parties just walks away.
Negotiating effectively requires multiple skill sets, including:
If you want to negotiate like a professional and get the best price and the best terms while protecting yourself throughout the due diligence process, you must be able to answer yes to all of the following questions:
- Do you have a solid understanding of the local real estate market and values?
- Do you have years of experience working with builders and contractors (or the equivalent) in order to judge the value of materials used in a home as well as the quality of craftsmanship?
- Do you have an ability to recognize potential defects in foundations, garage concrete floors, electric panels, flooring, kitchen countertops, appliances, HVAC systems, property drainage, private wells, septic tanks and drain fields, irrigation systems, roofing materials, and siding?
- Do you have a knowledge of legal language in covenants, easements, and contract language?
- Do you have an ability to properly deal with contingencies?
- Do you have negotiating skills on price and terms acquired over decades (not a few years)?
- Do you have the experience to deal with a large number of objections?
- Do you have an understanding of human behavior and motivation?
- Do you know how to customize the negotiating tactics for a unique buyer or seller (what works for one will not necessarily work for everyone else)?
- Do you have the knowledge and experience to accomplish the necessary due diligence?
The Key to Negotiating
The first key to negotiating is to know your limitations. If you are not an expert negotiator in real estate transactions, do not do this without professional help. You wouldn’t hire an investment advisor to handle several hundred thousand dollars of your hard earned money after taxes without checking him out thoroughly.
Second, do not ASSUME that any Tom, Dick, or Jane real estate agent has the level of negotiating skills that will protect you and get you the best price and the best terms. In my estimation, approximately 90% of real estate agents do not have the highest levels of negotiating skills buyers think they have. That is unfortunate for buyers, but it is your job to know how to search for and filter through real estate agents to find the best one for you. Very few buyers know how to filter agents online, and few know how to interview them. Few know what questions they should ask a Realtor, and few know how to interpret the answers they get to differentiate the truth from the hype.
Third, when you find that top negotiator, work with him, and do not ignore his subtle hints. A good buyer’s agent cannot tell his client what to offer or what to do along the way. He can advise and try to gently persuade, but do not take a true professional’s gentleness as a sign of weakness or a sign that he doesn’t speak with vast knowledge and competence. Talk with him, share your opinion, but listen very carefully to his responses. He has to be very careful he doesn’t take the role of telling you what to do, but that doesn’t mean he isn’t sending you huge signals about how to handle the negotiating for your retirement home.
If you instruct him to offer or counteroffer contrary to his hard-earned wisdom, he must let you go down the path of failure or disappointment. He cannot save you from yourself, so listen to him, and if he is truly good and has integrity, you would do well to rely on his counsel about the most important negotiating of your life.
Last Updated on July 2, 2019 by Chuck Marunde
