The Art of Negotiation

The most valuable skill your agent can possess is to be excellent at negotiating the terms of the contract. A good negotiator can save you a lot of money, and a lot of worry that you could have done better. In a fast market, a good negotiator can get you the property. In slow markets, he may be able shave thousands of dollars off the purchase price.

There is much more to the art of negotiation than throwing out a low offer. The objective is to get you the property at the bet possible price. As a buyer, you have invested a great deal of time and energy to get to the point where you are ready to make an offer on a home. All of this effort is worthless if you lose the home of your dreams because of poor negotiation.

Fundamental to the art of negotiating is to understand the market in which you are competing. There are two markets, retail and wholesale. The retail and wholesale markets are often mixed and hard to distinguish. It has everything to do with both you and the property owner's personal circumstance. Treating the retail market as the wholesale market is the most ineffective strategy, and in most cases, leads to disappointment.

The retail market is generally characterized by homes that are well maintained, priced to sell at what similar properties had sold for and the owner has the financial ability to keep the property on the market for a reasonable period of time. Very few properties meeting this criterion will sell at wholesale prices. With these properties, presenting low offers will generally be flat out rejected with a hint of disgust. A very low offer on a home that you love will in most cases cost you the home.

If you want a really good deal, you need to focus on the wholesale market. The challenge is to know where to find wholesale properties. These homes may be well maintained, or may be in ill-repair. There is always a reason that a property owner is willing to sell at wholesale prices. The reasons may include financial hardship, an unbreakable deadline, some perceived defect in the property or neighborhood, or a perceived trend in the market.

Negotiating the terms of a contract is an art because each situation must be carefully analyzed and treaded differently. Key to this process is to determine the market in which you are competing and amble research and preparation. In order to be fully prepared to successfully negotiate the terms of a contract to the seller's advantage, the following information should be gathered and carefully analyzed.

First, the general market trend:

How is the current housing market? Are homes in the area trading at a premium or at a discount? How quickly are they appreciating in value? How many pre foreclosure or bank owned properties are flooding the market? How quickly are building materials increasing in price?

Next, the individual property:

How long has the property been on the market? What price did comparable properties in the neighborhood sell? How long did it take for comparable properties to sell?

And next, try to figure out the seller's personal circumstance:

Why are they selling? How long have they owned the property? What other properties does the seller own? How much did the owner pay? How much did they finance? How much do they owe? Is the owner suffering a financial hardship? Is the property encumbered with a lean or judgement?

And finally you, the buyer:

Are you pre approved for financing? How disappointed will you be if you lose the property?

The presentation:

All of the information gathered is to try to understand the motivation of the seller. In the retail market, the seller is generally calling the shots. Because of this it is important to build a solid case as too why the owner should sell at a particular price. It must be thoroughly supported with sound reasoning. The original offer should anticipate giving a little back. This can be done by asking for personal property or offering a calculated amount under your desired purchase price.

Our agents prefer to present offers in person, instead of just sending the offer via fax. Presenting the offer in person allow us to explain the offer in detail and build a solid case. The presentation, interaction and undertones of this personal meeting are powerful. Communicating the reasoning behind your offer is almost as important at the offer itself. This is because our reasoning will play over and over in the mind of the seller.

Most home buyers lack the time and resources to successfully negotiate a contract. This is why purchasing a "For Sale by Owner" without professional representation may turn out to your disadvantage. Our agents have access to all the tools and past sales information and market trends and are skilled professionals in the art of negotiation.

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