The home seller’s negotiation cheat sheet
Here are tips and tricks you can use throughout the process, from finding an agent to sealing the deal.
So you’re thinking about selling your house. But how much do you really know about negotiating a home’s sale? Jump into this unprepared and you could leave thousands of dollars — maybe tens of thousands — on the table.
You need to go back to school briefly and become a student of the fine art of negotiation. But how does a home seller get smart fast? You need our crib sheet, with negotiation tips you can use throughout the home-selling process, as taught by some of the savviest and most experienced real-estate teachers.
And don’t worry — no one’s going to call you to the principal’s office for keeping this cheat sheet close at hand.
As you’re getting started
Smart negotiating starts early — even before you’ve gotten an offer from a buyer, the experts say. In fact, it starts when you choose a real-estate agent.
1. Beware the "Mr. Nice Guy” agent. When deciding upon a real-estate agent, "I want an agent who represents me to be hard-nosed, irritating and determined; to have learned his or her business in the backrooms; and to tell it like it is and get what he or she goes after,” writes Robert Irwin, author of "Tips and Traps When Negotiating Real Estate” and "Tips and Traps When Selling a Home,” among other books. "I want the other guy to have the ‘nice’ agent.” The lesson: Don’t choose just on personality, but effectiveness.
2. Negotiate that commission. "In all parts of the country, the rate of commission paid to a licensed agent to list your house is entirely negotiable between you and the agent,” Irwin writes. "There is no set rate. It’s whatever the two of you agree upon.”
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3. Ask for more than you expect to get. Once you’re ready to price your home, aim a bit high from what you’d be comfortable settling on, say Mike Summey and Roger Dawson, authors of "Weekend Millionaire Secrets to Negotiating Real Estate.” That may seem pretty basic, but people often don’t do the basics.
Why aim high? A few reasons: "The obvious answer is that it gives you some negotiating room,” the authors write. There are other reasons, too: You just might get that high number. And by giving yourself room to come down in a subsequent negotiation, "this is the only way in which you can create a climate that allows the other person to feel that he or she won” — and it’s often important for the other side to think they’ve "won” in order to agree to a deal, the authors say.
4. Understand "forward pricing.” When pricing your home — the first step in the negotiation process — "don’t simply take what the last home in the neighborhood sold for and make that your price,” Irwin writes. Instead, use forward pricing: If homes in your area are appreciating by, say, 10% annually, and the last comparable home sold six months ago for $300,000, then yours should be priced at $315,000 (half of 10% of $300,000 equals $15,000, which is the amount that should be added to "forward price” for this home). "That’s pricing it forward to the current market,” Irwin writes.
5. Start a war (if you’re in a hot market). Now for a completely different tactic: "One thing you can do — it’s a little risky — is offer your home below market (price), in the hopes you can start a bidding war,” Irwin said in an interview. "I’m seeing it all over the place: Savvy sellers are doing it in places where there are buyers.” He mentions several markets along the West Coast such as Los Angeles and San Francisco. "The idea is that you’ll get a number of offers, and buyers will start competing against each other, and you’ll get a quick sale.”
Of course, there is a caveat: "In an area where there’s nothing but foreclosures, this obviously isn’t going to work,” he says, mentioning more inland places such as Stockton, Fresno and Bakersfield, Calif.
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Once the offers start coming in
6. Stay out of it. Though the occasional homeowner will feel expert enough at negotiations to handle the sale of the home himself, experts generally say it’s wiser if homeowners stay out of sight during the negotiation process and let their agent do all the talking. That doesn’t mean you don’t play an active role — but you stay behind the scenes. "They definitely need to not be seen. It needs to be the agents battling it out,” says Richard Courtney, author of "Buyers Are Liars & Sellers Are Too!: The Truth About Buying or Selling Your Home” and managing broker of Nashville real-estate firm Fridrich and Clark Realty.
7. Get the conversation started. Let’s say you put your home up for sale at $300,000, and a would-be buyer offers $200,000. It’s tempting to just dismiss the offer out-of-hand. Don’t do it, Courtney says.
If someone comes in at $200,000 on a $300,000 home, "You come back at $290,000,” Courtney says. Make some movement. Get the conversation started. By moving — a little bit — you send a signal that you’re willing to negotiate, but you’re not desperate. And that frequently will get the would-be buyer to play ball and counter with a more serious offer, he says.
8. Remember, it isn’t personal. "Lots of times the first offer from a buyer will be a lowball offer — just testing the waters,” Irwin says. "Let’s say it was offered at $300,000 and they offer $210,000 — some ridiculous amount. Well, the seller gets insulted,” he says. "The worst thing that can happen in a negotiation is that you take things personal.” Remember: It’s just business.
9. Keep it moving. Time is a key element of negotiation, Irwin says. "The longer you can keep someone at the negotiating table, the more likely you’re going to come to a conclusion that’s satisfactory to you.” Why? Because the more time and effort people invest, the more they feel invested in getting the deal done and buying your property.
So what to do? "No matter how bad the offer is, always make a counteroffer – and always give a concession — maybe it can’t always be on price, but maybe it can be on financing,” Irwin says. "Or, maybe there’s something in the property the buyer wants (that can be thrown in as a concession). ... Just the act of keeping it going, keeping the deal alive, actually helps make the deal.”
One psychological tip: "If you’re going to counter (offer), it’s usually a good idea to make the counter on the same document as the original offer,” Irwin writes. "When the counter is on the same document, even though the other party knows that his or her original offer was rejected, it makes it seem like the same deal is still being negotiated.”
As the negotiation continues (or drags on)
10. Don’t split the difference. It might be tempting to make a deal happen by just saying, ‘Let’s split the difference between offer and counter offer.” Don’t do it, the experts say. Why not? Because you’re being too generous, and you’re leaving money on the table.
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First, never entertain any offers to split the difference early in a negotiation, the experts say. Next, never be the first to offer to split the difference, but encourage the buyer to be the one who suggests it, authors Summey and Dawson say. (Then when you reluctantly agree, the seller thinks he or she has won by making the suggestion.)
But most importantly, if the buyer is willing to split the difference once, then he or she may be willing to split the remaining difference when you approach again and say the original split isn’t workable.
11. He who can walk away holds the cards. In a negotiation, "Power goes to the side that has convinced the other side that it is prepared to walk away from the negotiations if it can’t get what it wants,” authors Summey and Dawson write.
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How can you show that as the seller? One way is what they call the "withdrawing the offer" gambit: backing off on a last price concession, or withdrawing an offer to sweeten terms. It’s a gamble, because it’s possible that this will only irritate the other side, "so use it only on someone who is grinding away on you," the authors write.
12. A small concession can be big at the end. As you’re getting close to closing a deal, but you’re still not there, consider giving a small concession near the final moment, Summey and Dawson write. The concession could be moving back the closing date a week, or leaving a piece of patio furniture that the buyer admired. Why? The other side’s need to think they’ve "won” the negotiation may be what’s holding up the deal … so throwing them a small win can seal the larger victory. "Because timing (of the concession) is more important than the size of the concession,” they write, "the concession can be ridiculously small and still be effective."
And there you have it — a crib sheet that ensures the only thing that won’t be cheated the next time you sell a home is you.
Caution! Take these articles as entertainment! Some good advice yes, some bad and very miss-leading. Remember you are paying a realtor, they work for you not you for them. Listen to their advice but never forget who ultimately makes the decision. Realtors want commissions even at your expense. Most are airheads and frantic know it alls be cautious. Price Wars?? ---Never if you want to be respected.
Most real estate is Overpriced, -----caution!!! I've sold 6 homes throughout the East in less than 6 months each by NOT listening to Airhead greedy realtors. NEVER redecorate at a realtors suggestion, nor store furniture,etc. Remember most realtors act as though they are high school drop outs!!! Stay in Control It is Your money, and Your home-----not theirs.
Real Estate can be a wonderful venture, It is what you make of it. Many homes can be bought without ludricrous schenanigans touted by of course self serving realtors. Remember these are not Rhodes Scholars, Caution, Keep in control If you don't trust it don't do it!!!
While all these articles can be----interesting, beware! They are more than likely written by realtors who by nature tend to be self serving, frequently misleading and more. Never forget common sense, also remember You are the customer, NOT the realtor. Your paying the realtor, not he paying you. I frequently watch programs like HG-TV when traveling and go away mad and disappointed as I see airhead realtors telling everyone how to screw everyone else before they screw you. This is part of why people fo NOT like American realtors, Misleading, deceptive and more. Know it all, who see real-estate because they couldn't get a "real" job.
It is not that they are all bad but be careful I've sold no less than 6 homes successfully in very short time periods, and not once did the realtor control the situation. Use their advice wisely, and cautiously, Remember all they want is a quick sale, big commission all at your expense. Real estate has gouged peoples pocketbooks for year. Price Wars???? Don't play this game please, are we all crooks???
Redecorating at a realtors advice to sell your house----NEVER!!!!! Storing things so the house looks spacious-----again NEVER. it is your house be proud of it, Quit letting know it all realtors do your thinking for you. Remember you are paying them.They work for YOU!
And lastly stay away fro Young Airhead realtors, and old pros-who know ----everything including picking yours and the buyers pockets.
Remember 80% of all salesmen border on being a Madoff in disguise. Read the articles, their fun, but keep a level head, most article are written BS.
A comment regarding item 3 on the list:
"Ask for more than you expect to get." Once you’re ready to price your home, aim a bit high from what you’d be comfortable settling on, say Mike Summey and Roger Dawson, authors of "Weekend Millionaire Secrets to Negotiating Real Estate.” That may seem pretty basic, but people often don’t do the basics.
This is not as good an idea as these authors might think and it can create selling problems. One of the most powerful marketing tools in the sale of a listed home on the MLS is the Brokers Tour. This is when other agents preview the property. When a house is overpriced, many agents dismiss it as overpriced and never look back. Sixty days later when the home still has not sold, it doesn't do much good to reduce the price, as most agents probably won't notice it on the computer. On top of that, EVEN if a seller can get an offer for the inflated price, what do you think is going to happen when the appraisal comes in low? It's simple. The buyers ask that the price be reduced to the appraisal price, or they are backing out of the transaction. (The appraisal contingency) I work in a town where the average home price is $1,300,000. Even people with plenty of money don't like paying more for a product that it's worth. Another factor the author of this statement may not understand is that in this real estate market, with money as tight as it is, the most powerful marketing tool for a property is "price." Selecting the right price for a home being sold is critical and I disagree emphatically with the pricing strategy advocated in this article.
PS I wrote a book on real estate too.
I'm a real estate Broker in Southern CA and this article and the comments are way off. First, I have to comment on the builder/developer from Denver. If foreclosures are the driving force in the area, that's what will be used to value your property. Foreclosures and short sales set the price point, if they are the leading properties for sale, besides who in their right mind would pay more for the same house just because it's not a foreclosure? We all have to remember that builders charged more for their home than resale homes. In my area one builder is asking $435,000 for a new home, while a foreclosed home in the same neighborhood, the builder sold it 2 years ago, is going for $280,000 in perfect condition with more upgrades than the new home from the builder. Sad thing is, as soon as the buyer closes on that new home from the build at $435,000 it's only going to be worth $280,000, just like the foreclosure.
As for the commission, what many people do not realize as a seller, agents look at commission before showing your home. You think you are doing a great deal by negotiating a lower commission with your agent, your not. Most agent only sale maybe 5 to 6 homes a year, not as many as you think, so they are going to show the client the homes for sale with the highest commission offered, not the lowest. Don't short change yourself over a few thousand dollars.
Your agent has the training, experience, AND LICENSE, if your agent gives you a far price point for your home, don't try and put it up even higher, we are not in that type of market anymore, all you will do is waste your time and the agents. In the end you will probably have to lower your price below what your agent told you to put it up at in the first place.
Guess what people, just because you watch HGTV you don't know everything there is to know about real estate and how it works. That's why agents and broker have a license and training. If you know so much, get your real estate license and sell you home yourself and see how easy and far you get.
Who wrote that article? There is some very misleading advice. Buyers today do not need to "play price games" with any seller. The competition for buyers is very tight in almost any market.
Yes, always price ahead of the market - but in today's market, which is still declining,although much slower, that means pricing lower than your closet competition. It is a race to sell before the market drops further. Once the drop occurs, and the comparable solds have set the price lower, the new value is established. If financing is involved, that is the new value for appraisal purposes.
As to appraisals. The seller has absolutely no say under current lending laws who the bank uses to establish value. Even the bank has no say - most loans are requiring that lenders choose appraisers from a rotating list of approved appraisers and they are not allowed by current lending laws to even talk to them about value. What makes you think that a seller, will be allowed to have any input what so ever. The appraiser will use what ever comps they judge to be correct. Their job is to protect the bank from lending more to a buyer than the collateral they will be holding. You can not hold them responsible for the current collapse either - because they can only analyze current value - they do not have a crystal ball into the future.
This is difficult for many people to understand - but a home is a commodity - and just like any other commodity will only sell for current market value. If stock in Apple for example was trading at $50/share today, do you think that anyone would pay $70/share? So if you price your share at $70/share just to have room for negotiations -well why do you think that will work?
Negotiations - for the typical homebuyer and seller this is very bad advice. They are not negotiators, the process is too emotional and if you have to counter more than 3 times to reach an agreement that third time will be very emotional, and the entire transaction can blow apart over something as insignificant as an appliance. In a market that is just beginning to see a return of buyers - not a good idea to stretch out the negotiations.
Buyers have access to all the data today. If they are working with a good buyers agent, a comparative market analysis will have been done prior to making an offer. They will know what the market is currently paying for a property like yours, and what a lender will most likely be willing to lend on that property. Price way off the charts and they will not even waste their time making an offer on your home. They will simple move on to one of the other 300 properties that they have to choose from.
I think that whoever wrote this article was wishing that they could sell their home this way - but wishing doesn't make it so.
As a seasoned Realtor I disagree with me2159. It may look like we make a lot of money selling your home,but you don't see all the expenses we have to accomplish that.Our commisson rate hasn't gone up in years and yes, the price of homes has increased but so have all the costs associated with that. My responsibility as an agent is to tell you the truth about what the market is doing and present you with a listing price that while giving you room to negotiate will also bring a buyer. Pricing your home right at the market value or slightly below is the best strategy. Adding $10,000 to the value will only delay the sale. In addition, remember it still has to appraise and if I can't find comps to justify that inflated price,neither can an appraiser. And by the way, I can be determined and aggressive without being irritating or hard-nosed, as suggested by Robert Irwin, who says beware
of Mr.Nice Guy Agent. One of the reasons my business is stable is because most of it is referrals from those clients who appreciated my "being nice". mzlonda1108 has the right idea -price your home right and make it move in ready slightly under the comps and it will sell!
Although there are some good points in this article, overall it is misleading to the point of being dangerous. The greatest omission was a caveat that EVERY point is subject to what is happening in your local real estate market.
Certainly, you can negotiate commission with your agent. But, compare services as well. Is the agent part- or full-time? A pro-active communicator or just answers voice mail messages? Just sticks a sign in the yard or rolls out a full-blown marketing campaign? Posts dark, blurry pictures of your home taken with a cell phone or hires a professional photographer that takes high resolution photos and does virtual tours?
Recently I analyzed sales of homes over the past year in my town. On the average, those with discounted commissions stayed on the market 19% longer than those that paid full commission. You get what you pay for.
If you want to shoot yourself in the foot, list your house too high. My buyer-clients are well-informed on market values and normally choose not to even enter into negotiations on over-priced homes. There's so much inventory, buyers often feel they can get a better deal with less tension from a home that's priced reasonably.
When a client wants to make an offer on a listing of a "hard-nosed" agent, I'll tell them my past experience with that agent, so my client can set strategy accordingly. They frequently just decide to move on to another house.
In our market, the agents that close the most deals are respected by other agents for standing up for their clients AS WELL AS being congenial and knowledgeable. Maybe it's because we're in the south, but, here, tough negotiating and congeniality are not mutually exclusive. On the other hand, a reputation for being hard-nosed is often synonymous with ineptitude and defensiveness.
One thing I've learned after 40 years in the business world (the last 10 in real estate), someone doesn't always have to lose for someone else to win. Apparently, the writer of this story has a different experience. How sad.