Negotiation - Is the highest price the best price?
There is more to writing a great offer than wondering is the highest price the best price?
Here are some tips on negotiation that both Buyers and Sellers need to know.
Closing Date - This can save the Seller money if the closing is prompt. Closing by the end of the month saves a whole month's payment if the Seller has an FHA or VA loan. Conventional loans are pro-rated daily. A better purchase price offer with a closing date that is several months out might not be as financially prudent as a lesser offer with a 30-45 day closing date, or even less if it's cash. This also saves the Seller the cost of running the house and taking the chance that something might break.
Stuff - Asking for extra appliances, patio furniture, bar stools and other personal items are costing the Seller money. The Seller will have to buy these again for their next house, so this lowers the value and attractiveness of the offer.
Financial Aid - Buyers who ask for closing costs need to remember that this is coming off the price of the house. If the offer is $300,000 and $8,000 in closing costs are requested, then the offer is really $292,000 net to the Seller.
If...then - Contingencies can derail an offer, so use them sparingly and with great care. Sellers may reject an offer that comes with too many of these. The Purchase and Sale Agreement was written by attorneys with the idea that every contingency needed is already in the Agreement. Yes, a Buyer wants to protect themselves, but must weigh that against the odds of not being able to negotiate the offer.
Financing - Cash may or may not be king to a Seller, but a Buyer who is getting financing, yet tightens up the dates for receiving loan commitment is a welcome sight to a Seller. Sellers also love to see Buyers who are putting a sizable down payment, and who have a Pre-Approval letter vs. just a Pre-Qualification letter.
Timelines - Sellers love to see a Buyer who aggressively tightens all timelines, such as the Inspection Time Period, Loan Commitment and Closing dates.
Deposit - A significant deposit will get a Seller's attention and is especially important in multiple offer situations or if the Buyer is making a rather low offer. Sellers can demand that the deposit be nonrefundable "go hard" after the Inspection Period. It is customary in our market to give a $1,000 binder up to $300,000+, and $5,000 or more for higher-priced properties.
Repairs - Buyers need to look at the Inspection Summary and remember that the home inspector's job is to find not just the big repairs needed, but also the tiny ones. Buyers must major on the important things and let the small things go, especially when there is a long list. Sometimes the Seller would rather give a credit (which will go to closing costs) instead of doing the repairs. For some Buyers this is a perfect option, but others want everything taken care of before they move in.
If you are a Buyer, remember that the cleaner the offer, the more likely the negotiations will be successful. If there is one really important piece of Stuff that you want, ask for it once and if the Seller rejects it, negotiate the offer and then ask for it again at the last round of negotiating. Chances are good that the Seller won't not sell the house because of one thing.
If you are a Seller, take time to look over all the elements of the offer, not just the purchase price. A lower-than-desired offer price may just work out great when you consider that you will be out of the house in 30 days and free to move on with your life. Don't forget that your escrow account has money in it that you will get back after closing, so you can add a couple of thousand to your profits.
So just asking is the highest price the best price covers only one facet of the offer and may not be enough for successful negotiation without the other important terms.
About the Author: Sharon Alters works with her husband, Frank. They are in the top 5% real estate agents for production in the Jacksonville Florida area, specializing in Military and Corporate Relocation in the Fleming Island, Orange Park, St. Johns, St. Augustine and Beaches areas. Their local knowledge can help Relocating Buyers find the perfect lifestyle, whether it is a Castle on the Ocean, or a Cottage in the Country.
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