NEGOTIATION STRATEGIES

Whether you are a home buyer or seller, negotiation usually is an overlooked part of the home sale process. Too frequently home buyers fall in love with a home and pay far more than they would if they knew how to negotiate.

But home sellers often are just as guilty of failing to understand negotiation tactics, especially when the buyer holds out for an unreasonable price and terms in the current marketplace. As a result of not understanding how to negotiate, many sellers lose sales over trivial details.

Being successful at real estate negotiation DOESN'T mean taking unfair advantage of the other party. But it DOES mean accomplishing your reasonable negotiation goals.

What the Buyer needs to be aware of.
Gain knowledge about the property and the other people involved. The most successful real estate negotiators, before beginning the negotiation, learn everything they can about both the property and the other people involved.

However, no matter how much you learn you don't have to necessarily let the other party know what you know or don't know. Often it pays to act "dumb like a fox." The worst real estate negotiator-buyers don't take time to learn about the property before making a purchase offer bid. Local experts such as realty agents, appraisers, professional inspectors, city building officials, contractors and lenders can often help buyers quickly learn about a property so an intelligent purchase offer can be made.

Study the Sellers.
Out-of-town home buyers are especially "easy pickings" for sellers because these buyers often are rushed into buying before checking out the home and the vicinity. A lease with option to purchase is often ideal for newcomers to a community so they can try out both the residence and the area before purchasing. In addition to learning about the property, home buyers need to learn as much as possible about the sellers. Why are they selling? How long have they owned the property? What did they pay for it? Has the home had any major repairs or improvements? What are the home's current defects? In other words, buyers can't ask too many questions about both the property and the sellers.

Similarly, when a purchase offer is made the home sellers should learn as much as possible about the buyers. Ask about their jobs, incomes, reputations and anything else needed to decide if their offer bid should be accepted, counteroffered with new terms or rejected without a counteroffer. For example, if the prospective buyer is known to have defaulted on other purchase offers and has a bad reputation, the seller might want to reject the offer. But if the offer comes from someone known for integrity, the seller might want to accept the offer if it is reasonable.

Understanding the importance of time in negotiations.
Does the seller have a deadline? What will the seller do if the home doesn't sell by then? Must the buyer purchase a home quickly or is the buyer just shopping?

Knowledge of the other party's time schedule can be used in many ways to make a negotiation successful. For example, home buyers usually should make their purchase offer valid for only 24 hours. This prevents the seller from "offer shopping" to get a better price from another interested buyer.

Use an experienced third-party negotiator.
Another profitable strategy is to use a successful 3d-party negotiator, such as an experienced real estate lawyer. Face-to-face negotiation between a home buyer and seller can be difficult because emotions become involved with the cold, hard, financial facts. But watch out when the other party wants to make the negotiation subject to 3d-party approval, such as a CPA, attorney or even Aunt Tilly. Unless the 3d-party is fair and objective, such as a professional home inspector, the 3d-party "weasel clause" approval can be troublesome.

Watch out for non-stop negotiators.
One of the most difficult negotiators is a non-stop negotiator. Even after you think an agreement has been reached, these people keep coming back for more. For example, non-stop negotiator home buyers will come back over and over again before making a written purchase offer. They nibble away, by finding real or imagined defects, before making the offer bid. Even after a firm written contract is signed by both buyer and seller a non-stop negotiator buyer will try to change the terms, such as by refusing to complete the sale unless the seller includes the appliances or gives a decorating credit allowance.

If a weak seller is counting on a firm closing date the non-stop negotiator often takes advantage of the seller's vulnerability and the buyer's leverage before the sale closes.

The good guy/bad guy negotiation strategy.
We've all seen this technique used on TV where the tough cop tries to extract a confession but the "good guy" cop then makes friends with the suspect who blurts out that he committed the crime. The same method applies to real estate. Often the husband is the bad guy who plays tough and the wife is the good guy who acts more reasonably.

A variation occurs when all parties are not present for the negotiation. For example, if title to the home is in the name of both husband and wife, and only the wife signs the sale contract, it usually isn't binding on a husband who later refuses to sign unless the price or terms are adjusted.

One solution to this problem is to listen to what the bad guy says, but don't argue. If necessary, be prepared to walk away. Then ask the good guy to work on the tough guy to be more reasonable. In other words, let the good guy and the bad guy do your negotiation for you to make the terms more reasonable.

Beware of auctions
Finally, watch out for real estate auctions, or a situation that might not be labeled as such. For example, when a real estate agent tells you there is another party interested in buying the home you want, an auction has just been created. Or, the agent tells the seller the prospective buyers are undecided between buying the seller's home and another house. The winner is the person who has what you want. Rarely does the auction buyer get a good deal. When you see an auction developing, it's best to back away. Learn if there really is a 3d-party. If there is, wait out the situation to see what happens.

It is important to recognize the 6 negotiation techniques and methods outlined on the previous screens, and to use or combat them if you are to successfully negotiate for the sale or purchase of your home. Armed with this profitable information, you can reach your negotiation goals.