When it comes to evaluating offers, the purchase price isn’t always the most important factor.
That means, in order to figure out whether an offer you receive is “good” —and whether you should negotiate — you’ll need to do two things:
- Consider your goals, and ask yourself whether this offer helps you meet them.
- Get advice from your agent, who can help get the best deal for your specific situation, wants, and needs.
So what do you, the seller, need to know before negotiating with a home buyer?
What’s a Counteroffer?
When you receive an offer, you can (1) accept it as-is, (2) reject it outright, or (3) make a counteroffer — a move that opens negotiations with the buyer.
Unless you’re being offered an amount equal to or above the full listing price, many buyers expect you to make a counteroffer — which is why buyers will typically make an initial offer that’s lower than the asking price… and lower than what they’re ultimately willing to pay.
What Should a Seller Prioritize?
Before you start negotiating, you’ll want to consider your goals and what’s most important to you in the sale of the home. Obviously, money is important. But it’s not everything. There are other factors to consider when crafting a counteroffer, particularly timing and certainty.
So, sit down with your agent and have an open discussion about your goals. Do you want more money? A faster closing period? Fewer contingencies? When you review these types of questions with your agent before you respond to an offer, and have laid out your priorities, the negotiation process will go a lot more smoothly.
Who Has More Leverage?
Consider your position on the field. How much negotiating power do you really have? The answer depends on several factors.
A lot depends on your local market conditions. If you’re in a buyer’s market — meaning the supply of homes exceeds demand from buyers — you may have to make some concessions to secure an offer. If you’re in a sellers’ market — and homes are going into contract within days of hitting the market and selling at or above list prices — you may be able to persuade a buyer to offer more money, and/or to let go of some contingencies (aka provisions that must be met for the transaction to go through).
Your timetable will also impact whether you have the upper hand. If you’re not in a rush to sell, you may be free to negotiate more aggressively. If you’re in a time crunch because you already bought your next home and don’t want to pay two mortgages, you may be a bit more motivated.
In any case: Confer with your agent. They can help you objectively assess your position and determine the right negotiating strategy.
How Long Can Negotiation Go On?
When you make a counteroffer, the buyer can either accept the new offer, reject it, or make a new counteroffer. (Sound familiar?)
This volley can go back and forth, and potentially end in a stalemate — however, these counter offers are typically left open for 24 hours and require the other party respond within this period. Stalling in negotiations can be a smart strategy for you as a seller because it puts pressure on the buyer to make a decision. It also gives you the ability to move on to the next bidder if the buyer tries to stall (chances are, they’ll do this so they can look at more homes without giving yours up).
It’s not unusual for the first offer to be best one — depending on market conditions, of course. And often, sellers see the most interest from buyers in the first month of the home being on the market.
If you get a good offer right off the bat, start negotiating. You may get a better offer. On the other hand, you may not. Understand that there is an inverse relationship between the amount of time a home spends on market, and the price it sells for… ie the longer the home is one the market, the less it is likely to sell for.
Which Negotiation Tactics Are Most Useful?
The actual negotiation is the job of your agent, who will be experienced in real estate deal-making. That said, you and your agent will strategize before they make a counteroffer on your behalf. Here are five ways you can nab a better deal:
- Avoid making an emotional decision. It’s easy to get caught up by the emotional bond you’ve formed with your home. The backyard might be where you got married. And the family room could be where your son or daughter took their first steps. But the important thing to remember is this: You have to detach yourself from your home and focus on selling your house. This is business — nothing more.
- Know your bottom-line. Before moving forward, figure out what you need to get from the deal, at a minimum. That will give your agent a baseline when opening negotiations.
- Negotiate a “clean” offer. You want an offer with as few contingencies as possible, since contingencies give the buyer the opportunity to back out of the deal. But some contingencies — such as a financing contingency, or an appraisal — can’t be waived by home buyers who are obtaining mortgages because they’re typically required by a mortgage lender in order to approve the loan. Still, if you have multiple offers to choose from, you may be able to persuade a buyer to waive certain contingencies, such as a home inspection, limiting repair requests to a predetermined amount or waiving the option to submit a remedy request at all and accepting the property “as-is”, agreeing to appraisal gap coverage, etc.
- Offer a home warranty. In a buyers’ market, a low-cost way to make a deal more appealing to a buyer is to offer a home warranty — a plan that covers the cost of repairing home appliances and systems, like the air-conditioner or hot water heater, if they break down within a certain period of time (typically a year after closing). Home buyers love this extra security blanket, and the standard one-year basic home warranty will only set you back about $500 to $800.
- Don’t overlook the closing date. Typically, the sale process — from accepting an offer to closing — takes about 30 to 45 days (sometimes a little longer). But in most cases, the faster you can close the better. Especially if you need cash to buy your next home. A quicker closing period has to be feasible for the buyer, however, and some types of home loans take longer to obtain than others.
If you have more than one offer on the table, you might be tempted to pit buyers against each other and watch them duke it out for your home. But think twice before you do: This strategy can backfire. Buyers may elect not to compete and walk away in frustration.
To initiate a bidding war your agent would simply ask all buyers to come back with their “best and final” offer by a certain deadline (say, within the next 24 hours), and then work with you to choose the one that’s right for you.
Alternatively, you could ask your agent to go back to one of, or each of the buyers’ agents to notify them additional offers have been received, and ask them if their client(s) are interested in improving their offer to better compete.
Remember: It’s Good to Give and Receive
At the end of the day, receiving an offer is a good thing! It means you’re getting closer to a sale. But remember, you may have to give a little in the negotiations, too. Keep your head on your shoulders — don’t make an emotional decision — and you’ll be all the more likely to get what you want… your home sold and moving on to your next chapter!