Real estate negotiation is tough. Sellers want to get the most for their home based on its perceived value, and buyers want to negotiate down to get a good price. It can lead to a tough battle for the best deal.
Negotiation doesn’t come easy for most people, and it requires practice, which is why many people hire real estate agents to do the negotiating for them. It’s one of the top benefits of using a Realtor®.
But even if you’re not the one sitting at the negotiating table, there are a few things you should know as a buyer or seller about the real estate negotiation process.
#1) The Market Determines Your Negotiating Power
Even if you hire a Realtor® specifically to help with real estate negotiation, the market in your area might not be suited in your favor.
During a seller’s market, a homeowner might get several offers. There could even be a bidding war on the house with cash buyers. This means that as a buyer, you can’t negotiate a low price because the seller will just choose a better offer. Conversely, in a buyer’s market, a homeowner might have to take any offer they get or risk keeping the home on the market for several more months.
Research how other homes are selling in your area to determine who has the power and who can afford to negotiate during the buying process.
#2) Each Buyer or Seller Has Different Negotiation Levels
While the real estate market plays a significant role in how much power your buyers or sellers have, so do the individual factors leading up to the negotiation.
Consider these two homeowners and how flexible they might be on price:
- Homeowner A: just got a job in a different state and needs to move within a month. They want to use the equity from the sale to buy a house in their new home state.
- Homeowner B: recently retired and is considering moving into a condo. They want to sell their home sometime in the next few years.
Of these two examples, the first homeowner might be significantly more open to negotiating a price. They want to sell the home faster than the second homeowner, who is more likely to wait for a better offer or a more competitive market.
Understanding the personal factors of each person involved in the negotiation can help you and your Realtor® make smart offers.
#3) You Are More Likely to Get Responses With Reasonable Offers
If you are planning to make an offer on a house, consult with your Realtor® on a fair price to start with. If you approach a homeowner with a lowball offer, they might not even counter with a negotiated price. The homeowner could assume that you are not serious or ignore your offer as an insult to their home.
Similarly, sellers need to know when they should negotiate after receiving a bid. Ignoring offers because you expect the full price for a house can cause other Realtors® to ignore your home entirely, leaving it on the market longer.
When you list your house, talk to your Realtor® about how you plan to negotiate and what is the lowest price you think is acceptable. This will allow them to field reasonable offers and will prepare you for the real estate negotiation process.
#4) Real Estate Negotiation Is a Very Emotional Process
When you think about negotiation, you might picture dramatic boardroom scenes with stoic, tight-lipped businessmen. This makes negotiation seem like it is a strategic, logic-based process. This, however, is completely untrue – especially when you are negotiating over something as sentimental as a house.
In an article for Forbes, Michael Blanding says that anyone who has engaged in a negotiation, whether it be while buying a car or compromising with a significant other, knows the emotions that come with negotiation: fear, anxiety, competitiveness, anger, and even annoyance.
These emotions influence us in different ways. Buyers are fearful that they will lose the home they want, and they also feel anxious and nervous about overpaying. Sellers are annoyed by lowball offers and sad because they are leaving a space that means a lot to them emotionally. (They may even believe that the house is worth more than it is because of their emotional attachment.)
Understanding your emotions and the emotions of others can make the real estate negotiation process easier on both sides. You can learn when to check your feelings or understand why you feel them. This will help you find a price that works for both parties of the negotiation.
Find an Expert at Real Estate Negotiation
The good news is that you don’t need to be a negotiation expert to buy or sell a house. You can find a Realtor® who is an expert at real estate negotiation to do the work for you.
Use EffectiveAgents.com to find a real estate agent who can help you get the best price as a seller or the best deal as a buyer.
The EffectiveAgents.com platform uses an advanced data-driven algorithm to pair Realtors® with the right buyers and sellers. Don’t limit yourself to a basic Google search to find an agent. Use our platform to find the perfect Realtor® who can best negotiate on your behalf.
Photo credit: Photo by Ralph (Ravi) Kayden on Unsplash