Real Estate Negotiation Strategies From An Expert

Understand the Market Conditions

• Buyer’s Market: In a buyer’s market, there are more homes available than buyers. As a buyer, this gives you an advantage because sellers may be more willing to negotiate on price, repairs, or other terms to close the deal. Sellers, on the other hand, need to be prepared to make concessions or price competitively to attract offers.
• Seller’s Market: In a seller’s market, there are more buyers than homes available, meaning sellers have the upper hand. As a buyer, you may need to act quickly, offer above asking price, or be flexible on contingencies to make your offer stand out. For sellers, this is the time to maximize profit, but overconfidence can sometimes backfire if the home is overpriced or if negotiations become too rigid.
• Balanced Market: In a balanced market, supply and demand are relatively equal. This scenario often leads to more level-headed negotiations where both buyers and sellers have some leverage. In this case, being flexible and focusing on win-win solutions can help close the deal efficiently.

Set Clear Goals and Boundaries

• As a Buyer: Know your budget, how much you’re willing to stretch, and what your non-negotiables are. It’s important to get pre-approved for a mortgage to understand exactly how much home you can afford, and this number should guide your offers. Also, decide in advance what terms are deal-breakers, such as repair requests or closing timelines.
• As a Seller: Set your desired sale price but also determine your bottom line. Be realistic about your home’s value based on comparable sales and market conditions. It’s also important to decide what concessions you’re willing to make—whether it’s negotiating on repairs or being flexible with closing dates. Sellers should also be prepared to consider all offers, even those below asking price, and negotiate from there rather than dismissing them outright.

Do Your Research and Know the Numbers

• For Buyers: Research comparable sales (also known as “comps”) in the neighborhood. These are homes similar in size, features, and condition that have recently sold in the same area. Knowing what other homes have sold for gives you a solid basis for making an offer. Also, understand the home’s condition and any potential repair costs, which can give you leverage during negotiations.
• For Sellers: Sellers should be just as informed about the comps in their area. Pricing a home too high could cause it to sit on the market, but pricing it too low means leaving money on the table. Understanding what similar homes in the neighborhood are selling for can help you set a competitive price that attracts buyers while giving you room to negotiate.

Build Rapport and Communicate Effectively

• For Buyers: When submitting an offer, consider including a personal letter to the seller explaining why you love the home and how you envision yourself living there. In competitive markets, this human touch can make your offer stand out among others that may be similar in price or terms.
• For Sellers: While you may receive multiple offers, it’s crucial to respond to each professionally and promptly. Even if you receive a lowball offer, maintaining a respectful tone when countering can keep the negotiation open and lead to a higher final price. Buyers often respond better to a positive and professional seller, making them more willing to compromise.

Leverage Contingencies Wisely

• For Buyers: Contingencies protect you, ensuring that certain conditions are met before you fully commit to the purchase. A home inspection contingency, for example, allows you to renegotiate if significant issues are found. However, in a seller’s market, removing or waiving some contingencies (such as the home inspection or appraisal contingency) can make your offer more attractive. Just be cautious about what protections you’re willing to forgo.
• For Sellers: Sellers typically prefer fewer contingencies because they simplify the transaction. If you receive an offer with multiple contingencies, you can negotiate to limit them or adjust the timeline. For instance, you might agree to make repairs up to a certain amount rather than leaving it open-ended. In some cases, sellers may counter with an “as-is” offer to reduce the scope of negotiations around contingencies.

Know When to Walk Away

• For Buyers: It’s easy to become emotionally attached to a home, but if negotiations aren’t aligning with your budget or the seller is unwilling to address necessary repairs, walking away might be the best decision. You don’t want to end up with buyer’s remorse or a financial burden. If the terms of the deal don’t meet your expectations or protect your interests, it’s better to keep looking.
• For Sellers: Sellers should be willing to walk away from buyers who are asking for unreasonable concessions or making offers that don’t meet your minimum requirements. However, before walking away, it’s worth considering how quickly you need to sell and whether there’s potential to negotiate further. If you’re not under pressure to sell quickly, standing firm on your price or terms can sometimes lead to a better deal with another buyer.

The Art of Real Estate Negotiation