Negotiating a Sale
Reasonable Market Price
Before doing anything else you need to know what a reasonable market price is for the home you hope to buy. Have your real estate agent run a Comparable Market Analysis for you on similar homes that have sold in the last year in your target neighborhood. Although an appraiser will only use the last six months of comparable sales when figuring appraisal value, it is helpful to have a more overall trend for the neighborhood to determine that prices are rising and that your investment will be protected in the long run.
Then you must figure out what YOU are willing to pay for this home. If you are willing to pay market value or more for this home because you don’t want to risk losing it, please let your agent know up front! Most good agents will try and negotiate a below market sales price for you because they want to please you and retain you as a future client. But only you can determine how you might feel if you lost this home to another buyer for a few thousand dollars!
You must try and determine what is most important to your particular seller. If possible try and find out the answer to why he is selling his home. It may give you some insight as to what he is or is not willing to take or where he is willing to make a trade off. Although this may sound obvious, sometimes the reason “why” may not lead to the sales price you would expect.
Major factors in a seller’s willingness to bargain may be the length of time the house has been on the market, a death in a family, job instability, homesickness, etc. Once you have determined the seller’s probable motivation then it is time to position yourself so that you can give the seller most of what he wants so that you can get what you want – the lowest possible price!
Improve Your Negotiating Position
Don’t show emotion when previewing the home. Be polite, but if you let the seller know what you are really thinking it doesn’t matter what else you do! He knows he’s got you hooked. Get totally loan approved. A pre-approved buyer (not just pre-qualified) is almost as strong as a cash buyer. And if you are totally certain of your ability to obtain the necessary financing you may even want to remove all financing contingencies except appraisal so that you are exactly like a cash buyer.
By letting the seller know that you are willing to risk your earnest deposit in this fashion he can assured you are serious and confident of a timely closing. And if you can be flexible about moving dates that may also be a main factor in the seller’s decision to take less than he really wanted.
The final step is to “guess” what the seller was “hoping” to get, based on the information you have gathered about the seller and the property. If you offer too low he may be insulted and retaliate in kind on his counter offer. The key is to try and figure out an amount that is slightly less than what he was hoping to get, but that is close enough that he gets more nervous about losing a possible sale and a strong buyer than he is about lowering his sales price.
Remember, while your agent can advise you on possibilities, the ultimate decision on what to offer is yours. But if you use the above techniques you should almost always be able to negotiate a better than average deal!
Article by Diann E. Tonnesen, Realtor®
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