What Should I Offer?
Another question we often hear from both Buyers and Sellers is, “What should I offer?” As agents, we are here to provide you with sound, informed advice in advocating for you in the negotiation process, however ultimately the decision will be yours to make. Each individual has unique circumstances and needs to be considered. Here are some areas of focus you will want to have an honest conversation with your agent about in order to arrive at the best possible price and terms for your purchase or sale.
UNDERSTANDING LEVERAGE:
Simply put, leverage is an advantage one party has over another in a negotiation because of one or more factors. For example: Imagine someone advertises a boat for sale and 5 people show up to view it. All of them express interest in the boat. One potential buyer states that this boat is perfect for him and that he has been looking for a boat just like this for 6 months. Another potential buyer tells the owner that if she doesn’t come back with this boat, her family will be very disappointed! Having multiple parties interested in the boat puts the owner in a great position, and knowing the motivation of the buyers also gives him a distinct advantage in negotiations, "Leverage".
SOME LEVERAGE POINTS IN REAL ESTATE:
- Market Conditions: Do your homework! Understanding the concept of supply and demand and current trends are truly critical in negotiations. When the demand for an item exceeds the supply of the item, prices will rise. If there is more of an item available than there is a demand for the item, prices will fall. As I write this article there are fewer homes available for sale (Low Supply) than there are buyers looking to make a purchase (High Demand), for that reason, prices remain high despite the increase in interest rates.
- Use Professional Representation: Having a qualified real estate agent to advocate on your behalf, assist in researching market trends, and guide you through the process is your best opportunity to negotiate favorable price and terms. A good real estate agent is worth his/her weight in gold when they are able to assist you in finding creative solutions when it appears that you might have reached the end of the negotiation road.
- Emotional Detachment: Try not to allow emotions cloud your decisions in the process. Negotiations can be intense. Be sure to make decisions based on facts rather than emotion. Being, “Too attached” to the house could weaken your negotiating position.
- Use Silence Effectively: Sometimes silence can prompt the other party to provide more information or reconsider their position. Sometimes the best response is a delayed one.
- Set Clear Expectations: Before entering into negotiations, have a real understanding of your objectives. Go into it knowing the terms and conditions might you be willing to concede on, and which are absolutely non-negotiable.
- Be Prepared to Walk Away: It is important for both the buyer and seller to have a goal in mind and be prepared to walk away if it becomes increasingly obvious that an agreement won’t be reached. Consider: What is the best alternative? For the buyer, a similar house might be available now, or soon? For the seller, do you have other showings lined up, or is this buyer your only option at this time?
- Motivation of Both Parties: I typically will ask my client, “How disappointed will you be if you do not get this house, or if your house doesn’t sell?” For an agent to properly counsel you, we need to have a strong understanding of what is important to you. It will certainly impact the advice we provide. Look for indications of motivation that might be evident in the property itself, or in the offer terms. Knowing why someone is selling or why someone is buying is invaluable information for the other party to the transaction.
- Build Rapport: Establishing a respectful and friendly rapport with the other party can set the tone for a negotiation that is mutually beneficial.
CONCLUSION: At the time of this article, Single Family Homes in Kennebec County sold at 101% of their asking price in July. (Source: Maine Listings), so if you are looking to negotiate well below the asking price, now is not a great time to do so. You will want to do your research, evaluate your financial situation, evaluate where you might have the benefit of leverage, or as important, what leverage the other party might have. If you can stay emotionally neutral, are well informed, respectful, have clear objectives, and are prepared to walk away if needed, the negotiation process will be considerably more effective and less stressful.
