Very few sellers find buyers who offer to pay the listed price of a home. Instead, what happens is that sellers receive counter offers that propose a lower price or different terms to the sale.
When that happens, it's time to go into negotiations with the buyer. The results of this process will determine your profits are from the sale. Here are a few tips to keep in mind when negotiating the sale of your home.
Know the Market
The first thing any home seller should do is to understand the dynamics of the local real estate market. Is your city currently a buyer's or seller's market? How long do homes tend to stay on the market on average? What is the median price for homes in your area? The more you know about the ecosystem in general, the better equipped you will be going into negotiations.
There are various tools you can use to evaluate the real estate market in your city. Real estate brokerages often release market reports with data about home sales. You can also use Internet services like Zillow and Neighborhood Scout to get the information you need about the local market.
Set a Realistic Asking Price
Want to really accelerate the process of selling your house? Then start off by pricing your property competitively based on the market conditions in your neighborhood. If you're not sure how to price your home, you can ask your real estate agent to conduct a comparative market analysis.
Pricing your home ahead of the market does two things. The first is that it will invite the attention of a larger number of buyers. When a home gets interest from multiple buyers, it often leads to a bidding war.
Another benefit to pricing your home competitively is that sellers who do so often find themselves not having to spend too much time on negotiations. The longer your house sits on the market, the less attractive it's going to be to buyers. An expedited sale that doesn't involve protracted negotiations will more often than not lead to getting the best possible price for your home.
Be Open to Negotiations
Sellers are often emotional about their homes and how they should be priced. This emotional attachment often manifests itself in the form of hardball tactics or not being amenable to negotiations at all.
It's important to recognize that negotiations are a natural part of any real estate transaction. Instead of assuming an adversarial outlook to the process, think of it more as working with the buyer so that both of you can walk away happy with the results. This doesn't, of course, mean settling for whatever price is quoted in a counter-offer. Rather, it means being open to negotiations so that you're able to sell your home quickly and profitably.
Get a Home Inspection Done Yourself
When it comes time for negotiations, being one step ahead of the buyer is invaluable. One of the ways you can go about doing that is by investing in a home inspection yourself.
There is a lot an inspection can unearth that you may not have known about your home earlier. That includes things like its basic structural integrity, the state of key systems like the plumbing and electrical wiring, and potential safety hazards.
Getting an inspection done allows you to fix some of the issues with the property. It also equips you with key information about the property so that you're not taken by surprise when an astute buyer points out certain defects.
Offer to Pay Closing Costs
Inspection costs, appraisal fees, and attorney fees are some of the expenses that contribute to closing costs. These costs come up to around 3% of the selling price of your home.
One of the negotiating tactics buyers often use is to ask the seller to pay for closing costs. Acceding to this request can often lead to a much quicker sale. This is especially true in cases where buyers are cash-strapped and just need that little bit of assistance in order to be able to purchase the house.
What you can do to preserve your margins while also paying for closing costs is to increase the asking price by a little bit in your counter offer. But you have to make sure that the price you quote will be approved by the buyer's lender.
Handle Bidding Wars Carefully
There's nothing sellers love more than a bidding war over their home. When buyer's know that there are already multiple offers for a home, they tend to offer higher prices. While this is obviously an advantageous position to be in, you should be careful in the way you proceed when there's a bidding war over your home.
Sellers often make the mistake of asking all the buyers involved to come back with their best offer even when they have received a number of great bids. This can be a bad idea because you risk turning away the buyers who put forward the strongest offers. So make sure that you assess the situation well before deciding how to deal with multiple bids.
Provide a Home Warranty
If you're selling a home, you know well that purchasing a home is a huge expense. It can be scary for buyers to consider buying a home while having to think about all the maintenance expenses that could spring up afterward. One of the ways you can allay buyers' fears is by offering a home warranty.
Warranties generally start at around $300 to $400 a year. These aren't as expansive as home insurance, but cover major systems and appliances. It's often a lot easier to offer a warranty than to negotiate with a buyer based on the findings of a home inspection.
Don't be Afraid to Reject Offers, but be Prudent
Always remember that you are in a position to reject an offer if it doesn't meet your requirements. This is as much a tactic to be used as it is a mindset with which you should approach negotiations.
As a negotiation tactic, rejecting a bid sends the signal that a seller is confident in what they're offering. You can keep buyers interested by letting them know that they can put forward a new offer if they're really interested in the property. This is a good strategy to use early on in the sale and if you have an open house planned.
But also keep in mind that market conditions can flip on you unexpectedly. You could have a lot of interest from buyers one week and stop receiving new offers the next. Be sure to assess the state of the market before outright rejecting offers for your home.
It can be hard to know exactly how to approach negotiations while selling a house. An experienced real estate agent will be able to assist with negotiations so that you're able to make higher margins through the sale.
Clever Partner Agents are experienced negotiators who have multiple years of experience assisting home sellers. Enter your details on this page to connect to a Partner Agent who can help you negotiate the best price for your home.