Buying or Selling a House – Those that care least, usually succeed
Posted by Faith, 5 June 2008
We all negotiate every day. Even kids do it with their nightly haggling over bed times. Whether at home with the family, in business, shopping, meeting with friends or at school, negotiation is a normal part of interaction with other people, and an accepted way of doing business.
It seems this every-day “normal” negotiation is handled easily, often quite unconsciously. However, when it comes to buying or selling our homes, we can struggle with negotiation. Probably this is due to the size of the transaction and the fear of making a costly mistake and, no doubt, that our emotions are heavily entwined in the whole process.
Let’s assume that you’ve seen your perfect house, which is around the right price for what you can afford and in an area you want to buy in. You may have been looking for awhile and it could be tempting just to give in to the seller’s asking price.
But, have you thought that the sellers may have also been waiting a long time for an offer or have other pressures on them? E.g. a job transfer or mortgage worries? If you knew that, you would be in a stronger position.
So, the first point about negotiation is to learn as much as you can about the “other side” and the property itself. Ask the real estate agent why the property is being sold and how long the property has been on the market for. An agent might let slip useful information in their reply. They shouldn’t, because they are supposed to represent the best interests of the seller. However, it does happen and, as such, you need to listen and note all responses.
When viewing a property, make a list of any areas that need repair or a change to fit your needs. While you need to be aware of these and the cost to repair them if you are interested in buying the property, the items on the list will be invaluable in the negotiation process, especially when the agent twitters on about the features and benefits of the property. In negotiation, sellers should keep emphasising the good points about a property and why these make the house far better than any others. Buyers will emphasise the opposite points.
If you are a seller, of course you will be interested in asking the agent about the potential buyer – how long they have been looking and why.
If you have personal reasons about buying or selling that could undermine your position, then it is best to keep these to yourself. If you share your personal situation with the real estate agent they could give your position away to the other side, whether inadvertently or deliberately. If you have other reasons for selling, such as a major fault with the house, then these should be declared.
The second point about negotiation is that the most favourable result is likely to go to the party that has, or appears to have, the greater strength and position. If one party is desperate, and shows it, then they are usually in the weaker position.
So, if you are a buyer, you need to always remind yourself that there will never be just one perfect house. If you are a seller, then tell yourself there will be other buyers. If you have difficulty convincing yourself, then try to at least appear casually indifferent when beginning the negotiating process.
This leads on to point three – if you are in no rush to buy or sell, and you believe the market is on your side, then you don’t have to negotiate at all. Name your price and just stick to it. But, you must remain consistent to this stand, if you want any credibility in negotiating this particular deal. The moment you weaken on price will send a strong message to the other side that you could weaken further. Then, they will just hold fast until you do. If you are the one that is holding on, then you will need to accept that the other side may walk away from the negotiations. That’s quite OK. They may never have come close to your price anyway.
Under current market conditions for houses, some buyers think they can offer a ridiculous price for a property. Who knows - if the seller is desperate, the buyer may just succeed? But, if you are not in a rush as a seller, and there is no compelling reason to sell straight way, then don’t lower your price. Of course, you’d be wise to secure an independent valuation (not from the real estate agent selling the house) to determine true market rate of the house in order to be more sure of your position.
As a final point, whether you are a seller or a buyer never sign anything without legal advice. And, this means independent legal advice. No matter how convenient or cheap, never use a lawyer arranged by the “other side”.
Buying a home or rental property is likely to be the one of the biggest deals you negotiate in your life. Useful negotiation tactics are to research the market before you start, know your facts and what you can afford, and to keep your mouth closed about your personal motives while keeping your ears open for information about the other party. Ensure you use facts and figures to support your negotiating position and, if you don’t have to negotiate, then simply don’t.
If you can’t recall anything else that I’ve said, then at least remember to ALWAYS obtain legal advice before you sign anything. While good advice will have a cost, it will be heaps cheaper than making an expensive mistake.
---ends---
Want to know more about how to make better choices about money? Check out Faith’s Fact Sheet.
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