The negotiation of a deal is more art than science. Many factors come into play when determining how to structure a bid to make sure you actually get your offer accepted, while ensuring that you actually get a good price on the home.
Come in too low, and while the seller may ultimately agree to terms with you, they may be so irritated with your initial offer that they fight you harder and insist on more than if you had taken a different approach from the outset. If the ‘brass tacks’ business person inside of you is rattling the cages insisting that it’s “just business” and people shouldn’t take it personally, I’d respond with a healthy dose of the truth. And the truth is that it’s “just personal” if you want to succeed in business.
Over the years (and hundreds of sales) we’ve learned 2 things when it comes to offers…..
The first is that what constitutes a good deal can definitely be calculated if you know where to look for the data, but varies house to house based on the circumstances. Second is that “how” an offer is presented is just as important as what the amount is. What most don’t realize is that when you’re presenting an offer, along with your terms you’re sending the seller a message about who you are. If you’re skillful, you can tailor that message to suite your ends. In the hands of a novice, you’re just as likely to cobble together the box in which you’ll be buried. Metaphorically speaking of course. 🙂
Consider the following 2 approaches….
1. On a $250k home that seems to be priced pretty well, you offer $230k secretly hoping to get it for $240k with an explanation of the low offer that “although the kitchen is ‘functional’ in order for the home to suite your tastes you’ll have to gut the kitchen and re-do the counter tops.” In this case, the message you’re sending is, “this home was fine for you, and might be fine for someone else, but it’s not good enough for me, and I want you to give me $10k for the trouble of making it fit to live in. To which the seller rightly reacts with “Go pound sand. If you want to buy this home, you’ll pay full price” or “I’ll let this home foreclose before I sell it to such an inconsiderate *#*$*XX !” After being told no, you grudgingly come back 2 times at different increments with the same result, finally having the seller tell you yes on the 3rd attempt at $247,500. Pretty much the opposite of what you wanted.
2. On the same $250k house, you offer $245k and ask for $5k in settlement assistance. In this case, you explain that you’ve seen dozens of homes over the last few months, and this is the only one that you’ve really felt like home in. (And it’s TRUE isn’t it???) You go on to explain that you feel the home is fairly priced and would understand if the seller just told you to “go pound sand” after such a low offer, but this is the best you could do and would never forgive yourself for passing up the chance to own such a beautiful home and hoped it would be possible to find a win/win. In THIS scenario, the sellers anxieties over someone not liking the home enough to want it have been soothed. You fairly gushed over the home which struck an emotional chord validating their own feeling about their home. It made them really like you, and really want to sell it to you. Additionally, you AGREED that it was fairly priced thus removing all argument over the validity of their numbers. Finally it allows them the opportunity to be magnanimous and give the house to you at a discount out of pure generosity of spirit letting them feel GREAT about selling it to you. Heck, it even gives them a story to tell their friends about how benevolent and generous of heart they are.
And they are, aren’t they?
Weren’t they moved to generosity by the opportunity to do a good deed? Couldn’t they just as easily said NO? Of course! So they SHOULD feel good. And so should YOU because you made it possible.
And at what real cost? They were likely always willing to lower the price “some”. Most sellers plan for that. And while they could probably find another buyer it might take longer which would burn another mortgage payment and delay their move further. Heck…it might even be 2 mortgage payments. By creating a story in which they write themselves into the narrative as being sensible and generous at the same time, they get to feel quite grand about the whole situation.
In this scenario…you end up with a $240k equivalent. You just accomplished it in a more skillful way. You put a face value of $245k giving it the “feel” of a higher offer, even though there was another $5k coming off the back end. You presented it in a way that was designed to make them feel GREAT about taking the offer while neatly voiding the “guilt” of saying no to such a heartfelt offer. Finally…you presented terms that were ‘slightly’ less than they’d hoped, but close enough that they were left considering saying “yes” vs. thinking about a counter. It’s a win/win. You get the house and the deal you want. The seller gets to sell and feel great about it because they got to give the gift of home ownership to someone who they felt would appreciate it.
The secret to successful negotiation is all in the “ask”. Ask in a way that makes the other party feel great about saying yes to you and you’ll make a friend who is willing to bend over backward to work with you. As in a way that upsets them and “IF” you get the deal, you’ll have succeeded in making an enemy who is forever sharpening their knives waiting for the opportunity to take back the pound of flesh you extracted from them in round 1. Remember that the initial offer and acceptance is merely the beginning, and ANYTHING can happen in the weeks leading up to settlement. Who knows…you may find yourself in need of a favor before the deal is done.
Do you Have a house that you like but are uncertain of how to structure the deal? Negotiation is what we’re best at so don’t be shy. Drop us a line!