Okay, you’ve done your research and finally found that perfect home or condo. You’re feeling all nervous. Is this the right home for me? Can I afford this? What if (fill in the blank with your basic insecurity here)? Dozens of questions are flying through your mind making it all seem a bit overwhelming. Time to take a step back and chill. Yes, you are making a big decision and yes the fun is over for a while as now it’s time to negotiate your deal. And, the art of negotiation is extremely important in real estate.
Every transaction is different as every deal has different dynamics whether it’s a new or resale home. You have different seller motivations, business structures, sales processes and management styles – and you as the buyer are largely on your own. So, remember one very important rule – the upside of your future return on the property you are about to buy will be largely determined by how you negotiate the deal NOW. Of course, the vendor wants a full price cash deal. You on the other hand have lots of complications that make up this transaction. There could be conditions on the deal you need, availability of financing and the amount, terms of financing, possession dates, inspections. Lots to consider. This is where your homework needs to pay off.
A real estate deal is predicated based on one of two things – the motivation of the seller or the desperation of the buyer. As a buyer understand one thing. There is always another piece of real estate and another seller. You must set your conditions in stone and stick to your guns, regardless of how hard that may be when you think you’ve found the perfect home and investment. Try to understand the seller’s motivations. Is it a builder with too much inventory? How is the market? Understand your leverage in the transaction and build that leverage through “slow” pragmatic examination of the home and your own set of circumstances. Remember, when you’re the buyer – there is no deal without your money, so the ball is always in your court.
Here are some rules that I have found work well in any negotiation:
  1. Set your parameters in stone with a thorough understanding of pro’s and con’s of the transaction. Everything that can be quantified in dollars – do it – so you are clear of the true costs of the transaction as it impacts what you should pay for the property.
  2. ASK for everything you want. If forced to concede on something than get something else in return, no matter how small.
  3. Use appraisals and information to build a reasoned “value” for the property – the price is just what the vendor WANTS, it does not mean it’s what the property is worth.
  4. Know how much time you need to negotiate and use it. The deal does not go anywhere without you. Time is a great ally in a real estate deal. Let it work for you. Walking away and coming back is just fine. There is always another property.
  5. Have clear in your mind absolute DEAL BREAKERS and stick to them.
  6. Find out everything you can about the seller, their motivations and current position.
  7. Negotiate fairly with reasoned terms to maintain credibility with parties.
  8. Evaluate counter offers and listen for details to determine next steps.
  9. Try to meet with the seller often in the negotiations to establish commitment to both your best interests.
  10. A lot of the above requires you to get and evaluate many facts and details, organize a purchase plan that is financially based (not emotional), and then stick to your guns. That is hard and actually the worst feeling in the world will be walking away from a failed negotiation. But, trust me there is no better feeling than getting a deal on your terms and profiting from it in the future. Wait for that deal. There is always another property and another seller to deal with.