1. Get – and stay – clear on your deal points (must-haves and deal-breakers), and keep them to a minimum. If you’re trying to get a chunk off of the asking price, as a buyer, or trying to be a stickler to your bottom dollar, as a seller, you’ll be much more effective if you can aggressively negotiate on a small number of items. If you must have ten different things your way, you’ll come off as unreasonable and impossible to satisfy. If you have just a couple of musts but can offer flexibility on other items, you’ll be much more likely to get your way (or close to it).
Be extremely clear, going into the negotiation, exactly what would make or break the deal for you – then, you can state your position clearly and know, in the words of the great Kenny Rogers, “when to hold them, when to fold them, when to walk away and know when to run.”
2. Don’t take it personal. If you are trying to be a hard-core negotiator, it’s best not to get overly emotional about the offers you make and receive from the other side of the bargaining table. Homesellers: if you get a low offer, understand that the buyer is simply trying to get the best deal they can – they are not insulting you or your home, or trying to throw a monkey wrench in your financial plans. (Also understand that for every lowball offer you receive, there are a dozen of your neighbors who wish and pray every day they could get such an offer.)
Buyers: if the seller counters or rejects your offer, understand that they are more concerned with paying off their mortgage or receiving what they believe to be the true market value of their largest asset. This is the place where they might have lived and raised their family; it’s also the largest investment they have probably ever made, and they want to be certain they don’t recoup too little for it. Even if the seller does have unreasonable expectations about what their home is worth, don’t take it personal and begin slinging insults (e.g., “you must be nuts!”) or get worked up into a tizzy because you think they are attacking your personal American Dream.
If you’re tempted to flip all the way out and exhaust your repertoire of curses at the buyer/seller, revisit #1. Be clear on what does and doesn’t work for you, respond to the other side accordingly, and keep your communications business-like. If they want too much, or offer too little, it’s okay for you to walk away. Note – it’s also okay for you to budge a bit, depending on what works for you!
3. Investigate what is negotiable (and what’s not!) on the other side of the table. Have your people (i.e., your agent) ask their people (i.e., their agent) what’s important to the folks sitting across you at the bargaining table. They have the right to decline, but nine times out of ten, you’ll get some information that will empower you to tailor your offer or response in the vein of a win-win. If the listing agent says the seller ‘s top priority is cash (hint: it always is!), but that the ability to move on without doing any more work to the home is a close second, consider making an as-is offer (subject to your right to obtain inspections, so you know what you’re getting yourself into, before you remove contingencies).
If the buyer’s broker says the buyer’s top priority is getting the lowest possible price (hint: it always is!), but that they sure would like that flat-screen TV hanging over the fireplace and the desk in your office, consider throwing them in. Personal property can bridge a much larger negotiating gap than the property was worth in the first place. (And who wants to take down the flat screen and patch the wall anyway?!)
4. Sellers: work with a very reputable agent who has a strong track record of success at your type of transaction. If your home is a short sale, look for an agent with a strong history of closing short sales – they will have skills of . If it’s a “regular” equity sale, look for an agent who (a) has a good, recent track record of closing deals in your area, and (b) whose closed sales have a high list price-to-sale price ratio (LP:SP ratio). The LP:SP ratio is a number that reflects how close to the asking price their listings have sold for, on average. Agents with a higher LP:SP ratio than the area average tend to have very strong skills of pricing properties appropriately for the market, and for negotiating their clients’ deals. Plus, once you know that your agent is an LP:SP rockstar, you’re more likely to treat their advice with more trust and less skepticism, resting assured that you’re working with an expert!
5. Buyers: boost your “closeability” factor. Many a seller would take a lower offer that seemed highly likely to actually close over a higher offer that has a snowball’s chance in you-know-where of ever actually closing. Make sure your offer has a high “close-ability” factor by insisting that your broker or agent submit it in a complete package that includes a well-written, detailed loan approval letter that verifies that you have sufficient cash to close the transaction, that your credit checks out and your job tenure is robust.
If you’re putting a larger-than-normal amount of cash down or possess other extraordinary loan qualifications, the letter should state that as well. Your agent should also be one with a good reputation in the industry (check references!), and should prepare your offer via computer (vs. handwriting) if that’s the standard of practice in the local community.
6. Get educated. There’s much more that can be negotiated than just the purchase price. Ask your agent to educate you about the full range of items that are up for negotiation, as well as the implications of giving or taking on repairs, contingency periods, closing costs and included items. Also, collect as much background info as possible before you make or respond to an offer to buy a home. Are there multiple offers? How long has the place been on the market, compared with the area norm? Such things should be factored into an offer or a response.
7. There’s no such thing as a national rule of thumb. One of the most frequently asked questions among home-buyers is: “How much (below or above) the asking price should I offer? What’s the rule of thumb?” Sophisticated real estate consumers know that real estate is a hyperlocal phenomenon; trying to make an offer on the basis of a national rule of thumb is not just naive, but also results in ineffective offers with a low chance of being accepted. Have your agent brief you on the local area’s pricing trends and negotiation standard practices, as well as the all-important recent comparable sales data, and use that, along with your personal priorities, values and opinion of the property, to formulate your offer or, if you’re a seller, your response to a would-be buyer’s offer.
8. Be respectful. Didn’t your grandma ever tell you that you’ll draw more flies with honey than with vinegar? Well, mine did, and although she said that in the context of my teen-era negotiations vis-a-vis my Dad for phone privileges, the advice is equally applicable to negotiating a real estate transaction. It’s never a good idea for buyers to gush over how much they love the house, and can’t live without it, and so forth; that can certainly put you behind the 8-ball in terms of your bargaining power. But it certainly never hurts to accompany your offer with a polite letter about yourself and /or your family to the seller, explaining what you do like about the house and asking them respectfully to consider your offer in the spirit it is made.