Buyers: Tactful Negotiations

It's no secret now that it's a full blown "buyer's market" just about everywhere you go. So I thought I'd share a few thoughts with you that might help when your Realtor (hopefully me!) is ready to negotiate that perfect home for you!

Everyone wants to think that they're getting a good deal and lately buyers are telling me that they'll only buy something if they can "steal" it. Always remember that there's such a thing as "fair market value". The definition of fair market value is this: the price that a buyer is willing to pay and a seller is willing to sell after reviewing comparable properties that have sold and that have similar characteristics to the subject property.

Here are some steps to take before negotiations:

1. Gather all comparables and prepare a buyer's Comparative Market Analysis. Your Realtor will help you with this.
2. Assemble all information about the history of the property, i.e., how long it's been on the market, how many price reductions, sales transfers, etc.
3. After you've reviewed the above, arrive at an offer price that is lower than the highest price you would be willing to pay. This should be a fair price based on facts…not just a price you pulled out of the air.
4. Determine what other factors in the offer might help in your negotiations.
   1. Cash or financing? If you can pay cash, or have a large amount of money to put down, then you are in a stronger negotiating position
   2. A letter of approval from your lender should always accompany your offer
   3. Will you pay the title insurance or will the seller? This is completely negotiable. I always suggest that if the offer is substantially lower, say 10% to 20% than the asking price, it would help negotiations if the buyer were to pay the title insurance.
   4. Warranted items. The Florida contract allows for 1.5% of the purchase price to correct warranted items. If you feel the property is in good condition, you can always limit that to a set dollar amount. 1.5% of $700,000 is $10,500. Warranted items are structural parts of the home, like roofs, pool screens, windows, window screens, electrical wiring, plumbing, etc. These items must be in working order and if they're not, the seller has to put them in working order before closing day.

Making the Offer

Now you're ready! The details have been ironed out and your agent (again, hopefully it's me!) has written the Purchase & Sales Agreement for you to sign. Be sure to read it. I can't get over how many buyers don't want to take the time to read the contract. Read it! It's the single biggest investment you'll probably make in your life, so please read it.

I recently made an offer on a house that was listed for $850,000. It was grossly overpriced, based on my research. But, it was the house my buyers wanted. I gathered all the information as outlined above put the offer together ($170,000 less than asking), then I wrote a letter to the sellers.

Make it Personal

In my letter I introduced the buyer. The first paragraph explained who he was and where he worked and lived. The second paragraph explained that the buyer was engaged to be married and that he and that he and his fiancé were both avid golfers (it was a golf course community) and were looking forward to a wonderful life together in their new home. I told the sellers that the buyer was purchasing the home as a wedding gift to his fiancé.

Then I complimented the seller by mentioning some nice comments that I heard the buyer make during the initial inspection of the home. I closed by saying that I was looking forward to working with their agent toward a successful close.

Use Psychology

So now you have everything prepared to give to the seller. Have your agent (me?) put together a file folder with all the documents and back up documents, along with the letter. I do this for every offer. On the outside of the folder, I write the name of the seller, then the name of the buyer. Example: Gorgenson to Royls. Then I staple my business card on the outside of the folder. This folder is the first thing a seller sees. His name and the buyer's name are right out there in front of him. And, with my card stapled to the front, it shows that I am proud to make the offer and that I'm a professional agent. When the seller's agent opens the folder, there is a personal letter to the sellers and they are immediately introduced to the buyer. It puts a personality to the offer. A real person with real needs is offering to buy their home.

Fair Negotiations

If the seller doesn't take your first offer, but makes a fair counter offer, you should do the same. Remember, you have that highest number. So make the counter wisely and be fair. If the seller came down a substantial amount, then you need to come up a substantial amount OR, give the seller something else….more money down, a quicker closing date, you pay the title insurance, etc. When it's time to close the negotiations, just tell the seller's agent that the price is the final price you're willing to pay.

Always remember, knowledge is power. You are in a much better negotiating position when you know all the facts about the home you're purchasing.

More Information

Here are a few links to some great articles about the art of negotiating.

Everyone Negotiates

The Top Ten Negotiating Tactics Everyone Should Know

Letting the Other Guy Have Your Way

I hope this article helps you next time your ready to buy a home.

Call me anytime

Nicki