How do I negotiate with buyers when selling my home?
Price and contingency negotiation when selling a home can be a complicated process. That is one of the many reasons the vast majority of people selling a home should use a Realtor. Even if you have great negotiation skills and are familiar with the ins and outs of purchase agreements and real estate law…and are you really? …there are specifics to the home selling process which can eat away at the profit that you just negotiated with your buyer if you are not careful.
In addition to the natural complications of the process, selling your home can be a very emotional situation and if there is one thing that can make a negotiation more difficult than it needs to be…it is emotions. Having a professional represent you at the negotiating table allows you to emotionally process this major life change without allowing those emotions interfere with you getting your home sold for the best price and in the shortest amount of time.
That said, even when working with a Realtor it is important that you and your real estate agent have a negotiating game plan from the first day you list your home.
So where do we start?
Your needs when selling your home. The first thing you have to know before you can begin negotiating your home sale, is what outcomes you need to come from the process. The two primary focuses for most home sellers is the net price and the timeline to closing.
Both of these issues should be discussed in depth with your listing agent the day you hired him to get your home sold. If the broker was of any quality, he would have asked you a lot of leading questions during that conversation which would have given him this exact information. As with anything that involves more than one person, communication here is key. Your agent needs to know what your bottom line price is, and how soon you need to get your home sold. Those two things will determine the approach taken throughout the home selling process….especially pricing and negotiation strategy.
Once we have determined the how much money you need to walk away from the closing table with, and how long you have before you need to close the deal; we need to take a look at the broad market.
What do the current real estate market conditions say about how you negotiate your home sale? Aside from your needs, there are very few things that will dictate to you how you handle your negotiation plan as much as the over all housing market in your area.
If there are a ton of houses for sale and few buyers (a buyers market), you should be prepared to be flexible and you should understand that you can expect lower selling prices and a longer absorption rate (the amount of time it takes for homes to sell in a given market).
On the other hand, in situations like we currently have in Indianapolis, where there are a shortage of homes for sale and buyers are numerous and aggressive (a sellers market)…then you can aspire to selling your home near the top of its value range with a quick turnaround in addition to not giving as many concessions to the buyer at the closing table.
This is another area where a quality home broker will make a huge difference in your success level while selling your home. Professionals Realtors pay close attention to our market and we work hard to make sure that we give sound advice based on our knowledge of them.
Now that we have gauged your net price needs, the desired timeline and the current housing market conditions; it is time to discuss what we are actually negotiating when we are selling a home.
What items are we negotiating for in a home purchase agreement? For starters, I want to be clear that the purchase agreement is for “real” property only. This is the land and the structures which are affixed to the land only. If personal property (furniture, window dressings, light fixtures, and such) is involved in the transaction at all, it should be dealt with as an addendum and not part of the main contract.
So what are we negotiating then? The purchase agreement here in the MIBOR (Metropolitan Indianapolis Board of Realtors) lists 16 specific areas of contention (and a few others which are automatic) to be agreed upon in order for the home sale to take place. All of these items are 100% negotiable. I should note here that realty laws vary from state to state and this list is specific to Indiana and MIBOR. They are:
- Improvements and Fixtures– This section identifies appliances and fixtures (awnings, antennae, and the like) will be part of the real estate transaction. As the seller you have the first card to play here, as you can list items specifically on the multiple listing service. As with all sections of the purchase agreement is it is important that you read this closely to ensure you are not giving away anything you intended to keep.
- Sales Price– This section is very straight forward and self explanatory. This is the price the buyer will pay for your house.
- Earnest Money– This itemizes how much the buyer will pay down to validate the contract and show good faith that they can close the deal. One percent earnest is typical and anything over that demonstrates a motivated buyer.
- Method of Payment– The method of payment demonstrates how the buyer will pay for the home at closing. Some of the options are cash, a new mortgage, assuming your mortgage, or a sales contract. This area also discusses who will be paying for what portions of the buyers financing and is a key area for review by the seller.
- Time to acquire financing– How long the buyer has to acquire financing before the deal is dead.
- Closing date– In this area you will find when the buyer plans to close the transaction with you and will set terms for what may change that. It also identifies whether or not the buyers offer to purchase is contingent on the sale of another property.
- Possession– This section tells when you will be expected to give possession of the home to the buyer, and itemizes fees for late delivery.
- Survey– Here you will find whether or not the buyer will be receiving a survey of the property at closing and WHO WILL PAY FOR IT.
- Flood area assessment– You can pretty much assume that every buyer will ask for release in the event of the property being in a flood plain…but it is in fact negotiable.
- Home Owners Insurance– This section tells how long after the agreement is reached that the buyer has to acquire homeowners insurance.
- Inspections– Another area that is pretty basic. It just gives how long the buyer has to have any inspections performed and the appropriate response times for each party.
- Home Warranty– This area states whether the home will be sold with a warranty or not, and who will pay for it if it does.
- Title Approval– This section determines what type of title the buyer will receive at closing, and who pays which fees that are associated with the title search.
- Taxes– In Indiana, all property taxes are paid in arrears. This section determines how they will be divided between the buyer and seller as they are brought current.
- Homeowners Association– This section just identifies how long the seller has to provide the buyer with HOA information and how long the buyer has to escape the purchase if the covenants are disagreeable to him.
- Further Conditions– Hopefully this section of your purchase agreement is blank, but there are sometimes write ins. Beware of anything that could affect your bottom line or the timeline of the transaction.
As I am sure you noted, 9 of those 16 can potentially affect how much you net after the sale of your home and 6 of them have the potential to affect the date that the transaction closes. Each and every section of this contract deserves special attention during the negotiation process…which brings me back to my original thesis of the importance of having a professional at your side throughout selling your home.
There is a lot more consider when negotiating the sale of your home than how much you would like to get for it, and how to find a buyer. A professional Realtor such as myself gives you the best opportunity to navigate this transaction with the most money in hand and the least headaches for you. If you still don’t want to use one, at least please take the advice of review each of these areas carefully…and good luck selling your home.
If you want to buy or sell a home near Indianapolis, Indiana and want to work with someone who will take care of these details for you…give me a call at 317-657-8059 or email me at email@example.com to set up an appointment.