Negotiating the Real Estate Contract
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Negotiation is the process of communication back and forth in order
to reach a joint agreement. There is no "one size fits all" strategy
of negotiating a real estate contract. Many of our clients have been
very experienced negotiators, and we have learned a great deal from
them, as well as from books on the subject. We would like to share
some of our thoughts on negotiating with you:
What do we want to achieve in a negotiation?
The best negotiators bring an attitude of high expectations to the
table. They are hard on the problem and soft on the people. Letting
the seller know what you need, in a clear and reasoned way, is the
first step toward getting it. We try to keep all of these goals in
Enable you to move into your new home.
Obtain the lowest possible price for the property.
Close within an acceptable time frame.
Solve any repair issues fairly.
Have no title, survey or loan problems, or solve any that do arise.
Develop a good working relationship with the seller.
Have no future problems after closing.
Is a cooperative or combative approach more effective?
Our experience shows that the cooperative style is the most
effective and efficient way to complete a transaction. Professional
negotiators usually try to preserve the relationship between the
parties, and work together to resolve problems. The goal is not to
reach an impasse in which neither the seller's nor the buyer's needs
are met. Buyers sometimes submit a letter to the seller describing
why their house is not worth what they are asking, pointing out
deficiencies, etc. This almost always backfires, and starts the
negotiation off with a defensive seller. It is best to anchor your
price to the marketplace, while remaining very complimentary of
How do you work with a combative strategy by a seller or agent?
The combative style is sometimes encountered. This strategy
includes: negative comments, emotional statements, table pounding,
threats to walk out, ego involvement, and stated positioning.
Creative solutions and trade offs are not as likely to be found in
this environment. Working with a combative style negotiator requires
a considered approach:
Do not respond emotionally. An angry or defensive response will
escalate the negotiation into a no-win battle.
Do not argue. Arguing usually positions them more strongly and drags
the negotiation process off course.
Do not ignore their arguments or statements. Listen carefully, but
do not accept or reject.
Firmly anchor pricing and other terms to outside data. Show that the
price has not been chosen arbitrarily.
Reduce misunderstanding by following up with written summaries of
Do not allow hazy or unclear proposals to stand.
Offer some "wins" on some of the terms. Face saving is very
Look for ways to meet their underlying interests.
Remember that they may have a beautiful home that satisfies the
Is every point in the contact negotiable?
Yes. However, one of the most effective means of coming to an
agreement is to rely on consistent standards or norms when possible.
For example, it is common practice for the seller to pay for the
title policy and for the buyer to pay survey cost. Using accepted
standards prevents buyer and seller from haggling over every point.
Working within the accepted "norms" for our area helps to legitimize
offers, and focus the negotiation on just a few points. On the other
hand, all the points in an offer can be used to help structure the
deal. They offer trade-off opportunities for both parties to get
what they want from the negotiation.
The value of trust in a negotiation cannot be overstated.
Most people are fair minded and reasonable. They respond well to
respectful treatment and to having their concerns heard. If the
seller feels that the buyer and agent are acting with integrity,
their attitude will be much more cooperative. Contract negotiation
is a sensitive area, and anxiety can be high. The buyers may have
had an unpleasant past experience with buying a home. The seller may
be under pressure, with future plans at stake Acting with integrity
does not mean that all "cards have to be put on the table." It is
not proper to discuss personal issues that affect the buyer, such as
your financial ability or urgency to move in. It is valuable to
develop rapport because trust increases your leverage. Here are
Listen and understand what the seller has to say.
Express appreciation for the seller's home, gardens, decorating.
Respond within a reasonable time to counter offers.
Reassure the seller of your ability to close.
Reveal some personal information about yourselves.
Finding common ground with the seller can be a very powerful tool in
the event of multiple offers. I can think of several instances in
which sellers selected their contract for very personal reasons.
(The family reminded them of themselves when they moved in with
young children years before. Or, they were both of the same
religion. Or, the new owners would care for their gardens.)
Understand your leverage.
The more we can find out about the seller's needs, the better chance
we have to find solutions to negotiation hurdles. We will be able to
offer information or concessions that appeal to the seller's deepest
concerns. Obviously, if the house has been on the market for 300
days, you have a lot more leverage than you would with a brand new
listing. If their time frame is immediate, and you can meet it, you
have some leverage. If they have multiple offers, you have very
How much under list price should you offer?
Buyers usually offer less than list price, unless it is a strong
sellers market. There is no standard percentage "under list price"
that can be used. A market analysis will show recent sales for the
neighborhood, which is the best way to establish the offer price.
It is usually counter-productive to offer so low that the seller
will automatically reject the offer. This will set a negative tone,
and may result in an emotional response from the seller.
What if we have a multiple offer situation?
Occasionally the seller receives more than one offer on their
property. The Austin Board of REALTORS® has a policy that allows two
options: disclosure to all parties that multiple offers have been
received, or disclosure to no one that there are multiple offers. We
prefer disclosure to all parties. However, the listing agent and
seller will make the decision as to how they will handle offers. By
simply disclosing that there are multiple offers, they are
not "shopping" your contract. Shopping occurs when the seller
discloses the terms of an offer to induce a buyer to submit a better
offer. This can result in major distrust of the process by the
parties, and the likelihood of loss of the buyers.
Usually the procedure is to notify each party that multiple offers
have been received. Each party is then given the opportunity to
raise or adjust his offer by a certain time. After that time, the
seller is free to review all offers and choose one to work with.
They are not obligated to choose the "first" offer that came in. The
selected offer may be countered, or accepted as is.
Roselind Hejl, CRS
Top 25 Agents in Austin - Austin Business Journal
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