Negotiating Real Estate Offers

Often when you find a house you love, it is nerve-racking to decide how much to offer. Every situation is different and so a negotiation tactic that works in one situation might not work in the next. Here are a couple things to think about when writing an offer and negotiating a contract. 

What type of market are you in? It’s important to remember who has the upper hand in your market. Is it a seller’s market, a buyer’s market, or is it well balanced? Is the seller motivated after being on the market for a long time, or is it a hot new property with a great price? These factors can make a big difference in how the negotiations will go.

A SELLER’S MARKET is caused by a lack of low inventory and means that there are likely to be multiple offers on the table for any desirable well-priced home. When there are multiple offers coming in most of the time the seller asks for “best and highest” offer, meaning you’re only going to get one shot at getting the property so you need to put your best foot forward. The seller will most likely just take the best offer on the first round. One technique that can work in a multiple offer situation is what’s called “an escalation clause”. This means that you will write an offer for one price, but with a clause that states that you will pay a certain amount over any other offer up to a certain ceiling price.

For instance: “Sales price to be $300,000, but Buyer will pay $1,000 over any other competing offer up to a sales price of $310,000.”

 We include other language to protect against false claims of higher offers, but the basic premise in this example would be that the seller could raise your sales price to $306,000 if, say, there was an offer for $305,000.

This allows a buyer to write an attractive offer for the seller without having to pay much more than other offers on the table. However, there are some Realtors and sellers who don’t like to use escalation clauses and will tell buyers not to present them. So, you should be prepared to just make your best offer and hope it’s enough. Either way, we will work with you and research comps to make sure that you’re not overpaying for the house, just because the spirit of competition sweeps you away. 

Other ways to make an offer look more attractive to a seller include:

  • Cash offer – This will be the best way to beat out any offers that have to have financing, even if your offer is for a lower sales price.
  • Large amount of earnest money
  • Short inspection period
  • Tailor the offer to the seller’s needs in terms of closing and possession dates, including inexpensive rent back for the Seller after closing.
  • Confirm which appliances and fixtures the seller intended on leaving with the property, then only ask for those.
  • Pay your own closing costs and pre-paid expenses. 

A BUYER’S MARKET will then give you the upper hand and you’ll be much more likely to get a house at below the list price with the terms that are best for you. We will help research the history of a home to see how long it’s been on the market and if there were any other offers before yours that didn’t work out. This will help determine how much “wiggle room” there might be in the price and other concessions that the seller might make. Concessions also might be made by a “motivated” seller in a seller’s market if they have a house that has simply proved difficult to sell.

Other than simply reducing the price, concessions that a motivated seller might make include:

  • Seller contributions towards closing costs and pre-paid expenses.
  • Inclusion of appliances and personal property in the sale. 
  • Tailoring closing and possession dates to the buyer’s needs.

However, the price and concessions ultimately all come down to the seller’s needs and personality. Some sellers won’t lower a price or make concessions even if it means that ultimately they don’t sell the house.

The offer and counter offers are only the first round of negotiations. Keep in mind that the sales price and concessions that are accepted are not the last word. After your inspections a whole new round of negotiations will begin. If necessary a new price, new concessions, repairs, and adjustments to the closing date can all be negotiated at that time. If the buyer and seller can’t settle on terms at that time, the buyer still has the opportunity to walk away from the sale with earnest money in hand.