Whether you are a home seller or buyer, if you want to be successful it pays to understand the six key steps. Leave one step out and the other party can take unfair advantage of you.
If you’re the seller, you also need to be aware of “dirty tricks” that can stall or even kill a deal, or leave you with less money than you thought you were getting.
But first, the six key steps to making a deal:
(1) Gain superior knowledge. The most important rule for a top-notch negotiator is to know as much as possible about the other party’s situation as possible without revealing your personal circumstances.
As a home buyer, the realty agent will ask how much you earn, the highest price you’ll pay for a home, how large a mortgage you can obtain, your maximum down payment, and how soon you need to move. Avoid answering these questions except in a vague way.
Instead, when you find a home you want to buy, ask how long it has been for sale, the recent sales prices of nearby comparable homes, why the seller is selling, how soon the seller needs to sell, the current mortgage balance, how much the seller paid, and anything else important to the negotiation.
If you’re selling your home, try to learn as much as you can about the buyers so you’ll know if you should accept the buyer’s first offer or perhaps you can negotiate a higher price or better terms.
(2) Learn the time deadline of the other party. Time plays a critical role in negotiations. Most home sellers and buyers have deadlines.
Others use time as a negotiating tactic. For example, two years ago I sold a home to an elderly couple who made an all-cash offer close to my asking price with a 15-day closing. Or maybe they were worried another buyer would grab this house in an neighborhood where their relatives live.
(3) Never show emotions while negotiating (unless you are a great actor). Home buyers often make the big mistake of letting their real estate agent know how much they love a house and they absolutely must buy it. You can be sure that mistake will be communicated to the seller, who will probably then hold out for top dollar.
But home sellers also often become emotional, thinking they can extract a few thousand dollars more by counteroffering a perfectly good purchase offer.
(4) Adopt the “he who cares least wins” negotiation attitude. The world’s best negotiators try to make the other party think they really don’t care how the negotiations turn out. Even if you think you absolutely must buy a particular home, don’t let the real estate agent or the seller know.
If you are the home seller, although you may be very anxious to sell, try to act as if you don’t care and are in no hurry. This way you won’t convey to the agent your desperate situation which will allow the buyer to take advantage of your circumstances.
(5) Avoid real estate auction situations. When you are a home buyer and the real estate agent says, “There is another party interested in this house, so you better make a good purchase offer quickly,” pretend you didn’t hear that.
Usually, there is no second buyer. Even if there is, don’t let it influence your purchase offer or terms. The buyer who competes against another buyer creates an informal auction, usually losing by overpaying.
To the home seller, the agent might say, “The buyer is debating between buying your home or another. If you accept this offer now, you’ve got your home sold rather than risking a counteroffer.” Even if this is true, base your offer acceptance or rejection on whether or not the offer is a fair price with reasonable terms.
(6) Adopt a “win-win attitude” to make the other party feel good. When buying a home, adopt a fair “win-win attitude.”. That means not trying to bully the seller. Offer a fair price and terms under the circumstances. When the sale closes, be sure to congratulate the other party and their agent on a successful negotiation.
As a home seller, with a win-win attitude, you’ll be able to talk to the other party if a controversy develops, as it often does. However, be careful the other party doesn’t try to take advantage of your pleasant negotiation style.
Whether you are a home buyer or seller, if you anticipate dirty negotiation tricks by the other party (or sometimes by the realty agents), you’ll know how to counteract them. Here are four common tactics:
(1) The “higher authority” approval technique.The classic example involves a young couple buying their first home. They negotiate the best price and terms they can. But they make their purchase offer contingent upon the approval of a “higher authority,” usually their parents or Aunt Tillie (who will be supplying the down payment). When the “higher authority” inspects the house, he or she disapproves of something, thus reopening negotiations or killing the sale completely.
A “higher authority” variation is to make the purchase offer contingent upon approval by the buyer’s attorney.
Sellers can’t completely prohibit consulting the parents, Aunt Tillie or an attorney. The best way home sellers can thwart the higher authority negotiation techniqie is to include a short two-day time limit for the approval.
(2) The non-stop negotiator who never quits. I became the victim of this negotiation tactic a few years ago after I agreed to sell my condo. The buyer kept asking my real estate agent to reinspect, on the pretext of measuring for furniture, draperies and new carpets.
Each time the buyer was in the condo, he found something he didn’t like, such as the paint color (a freshly painted off-white), which he said was too dark. I foolishly agreed to a modest repainting credit.
On his next visit, the buyer said the fireplace brick mantel needed cleaning. He wanted a $500 credit. I refused. He threatened to call the sale off. Thankfully, I had his $10,000 earnest money deposit, which I threatened to refuse to refund. After that, I refused to allow that buyer to reinspect any further. The sale closed on schedule.
The best way to prevent this dirty trick is to keep the buyer out of the home after the sales contract is signed. Any time the buyer is on the premises the seller should worry.
If the buyer tries to renegotiate the contract, or ask for an unjustified repair credit, just politely say, “We have a firm contract; I will live up to my half and I expect you to live up to your half without any changes.”
Once I said to a troublesome buyer, “I have a very good attorney who can make your life miserable if you don’t perform your side of the contract exactly as agreed.” That buyer gave me no further trouble.
(3) The good guy-bad guy negotiation trick. Everyone has seen this method, often called the “good cop-bad cop” strategy. Husband-and-wife negotiators sometimes don’t realize they are using it. The wife is usually the “good guy” negotiator and the husband is the “bad guy” who is unreasonable.
If your negotiation opponents use this method on you, listen patiently. Take notes. Let the good guy-bad guy team wear themselves out. It may take hours, but if one of the parties wants to make the sale, that person will convince the bad guy to agree.
(4) The face-to-face buyer-seller “would-ya-take” negotiation. Realty agents strive to keep home buyers and sellers from meeting each other. To avoid face-to-face negotiations, home sellers should leave the home when it is being shown to a prospective buyer.
Another reason is the buyer might ask, “How much wouldya take for this home?” If the seller names an amount, or agrees to a price suggested by the buyer, the buyer will then offer less.
If a face-to-face meeting cannot be avoided, the best way to counteract this tactic is for the home seller, or the realty agent, to politely say, “Well, let’s put that in writing to see how it looks on paper.”
