Hi Folks. Today I want to talk briefly about negotiating and I want to give you a real life example that I hope will help you in your business. Negotiating is our job. We start by negotiating with a potential seller or buyer to get their business. They may have objections (offers) that you need to counter. You may think you are selling but what you are really doing is giving them information about you and your services so they can make a wise decision. The wise decision of course is to hire you. You are negotiating.Then once you are hired you start negotiating with them and for them. Sometimes you are negotiating together and sometimes you are negotiating against them. Now I don't mean we are to be hostile when negotiating against them. What I mean is we are giving them the information they need to make a good decision. Buyers and Sellers hire us for our expertise. We should not just be parrots. While we want them to make the decisions it's our job to gently guide them. If we don't do this then they don't really need us do they? They just need a delivery boy. A parrot. Not an advocate. Not a negotiator. Does that make sense?
Below is a real life example from this week. The email is from me to one of my Sellers. We received an appraisal that was 12% less than the contract price. The Sellers initial response was to just place the property back on the market. It was time for me to earn my commission. In this case I needed to negotiate against my seller so that they would make a good decision based on facts....not emotions. Here goes.....
I hope this email finds you doing well. OK I received the appraisal back late yesterday. It came in low as I feared. $79,000. The appraisal is attached. Please go through it thoroughly.
My first point of attack is to dispute the appraisal if I feel it is too low. I worked on this last night and this morning and unfortunately I can not find ANY comparable sales that would justify the selling price of $89,900. In fact my analysis comes in at exactly $79,000. I have attached the MLS Analysis and the MLS Summary.
I have also attached my CMA that was done on April 19th prior to listing the property that shows a value of $75,000 to $85,000.
So as you can clearly see the value of $79,000 is spot on.
The Buyer is getting an FHA mortgage and cannot close on this transaction at a price higher than the appraised value of $79,000. Unfortunately the FHA appraisal stays with the property for 6 months. That means that ANY buyer using FHA for the next 6 months will have to use this same appraisal UNLESS the value goes down as it will since we are in a declining market. Your house with be worth less in 90 days than it is today.
So I guess you have a decision to make. Do you adjust the price based on the appraisal and move towards closing or do you just take the property off the market and rent it? I'd suggest finding another buyer but unfortunately we will have the same issue unless they are paying cash. Cash buyers have way too many options and are the least likely buyers to pay top dollar for your property.
Could the money tied up in this property be put to better use elsewhere? Is getting out now better than risking getting even less money later? If you want to do a rental you could actually take the proceeds from this sale and purchase a much better and newer house for that purpose. The advantage would be getting a block house that is newer and would be easier to sale in the future (I'm just thinking things through).
I have also attached an addendum received from the Buyer related the price and the repairs. The only lender required repairs are the wood rot and the plumbing in the bath. Those are the only ones that would be required to get the transaction closed. The others could be negotiated and hopefully removed.
Anyway, review everything and give me a call so we can discuss. END OF EMAIL
A couple of things I want to point out.
- My first paragraph is laying it out there. No need to beat around the bush. The appraisal is low and here it is.
- Then I'm showing them that I am on their side. I want to dispute the appraisal. I did my research and I'm giving it to them straight.
- I'm throwing the decision back in their court. It's their decision to make....not mine.
- I've given them the way forward. All they have to do is sign the addendum.
Now folks this would not have worked if I were just trying to sell them. That's not what I'm doing at all. I'm negotiating. They gave me their offer. "We ain't closing. Place the property back on the market". And I gave them my counter offer (my email) based on facts. Even though I was negotiating against them I was really negotiating with them and for them. The outcome is that they will have a successful sale. And that's EXACTLY what they hired me to do for them. I did my job. Do you do yours?
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