You’ve listed your home, found a prospective buyer (or several), and have started accepting offers. At this stage of the home-selling process, you will likely want to negotiate incoming offers to ensure you receive the best return on your investment.
Luckily, we are currently in a seller’s market, where buyer demand is high and home inventory is low so that negotiations can work out nicely in your favor.
Before you begin negotiating, make sure you have a strong offer to start with. Some things to look for are:
- A sufficient earnest money deposit
- Sizable down payment
- Fair home price offer
- Mortgage pre-approval/funding
- Proposed move out date
- Contingencies (Are buyer’s requests odd or reasonable?)
Once you have narrowed down your quality offers, you can begin negotiations. Note, though, there are definitely some do’s and don’ts to this process, and there’s a fine line between keeping buyers interested and making sure they don’t walk away.
This article will provide tips on tricks on how sellers can negotiate with buyers to get the best price possible for their property.
Real Estate Commission
Before even listing your home, you can start saving money by negotiating with your real estate agent on their commission fees. Realtor fees vary by state, from Florida to California, but are usually between 5-6% of the final sale price, split between the buyer’s and seller’s agents. Traditionally, the seller is expected to cover both their own agent’s fees and the buyer’s at closing. Therefore, any money you can shave off of your own agent’s commission will help you in the long run.
Discount brokers such as Clever Real Estate are a great agent alternative for sellers looking to save money, with fees as low as 1%. This can translate to approximately $5,000 in savings for sellers, based on national median home value. Clever only uses top-rated local agents, so sellers can rest assured they are working with someone who will get them the best price possible.
Crafting a Counter Offer
Once you receive an offer, you have a few options:
- Accept it
- Reject it
- Make a counteroffer
Here, we’ll be focusing on how to make a counteroffer.
Negotiating Selling Price
A buyer’s initial offer may not be the full amount they’re actually willing to pay. If you think you can get more out of them, or if their offer does not meet your requirements, don’t be afraid to ask for a higher price. Knowing how to negotiate home price is a balancing act, though. If your home was not fairly priced, to begin with, or if you come back asking for too much, the buyer has the right to walk away.
Buyers may also include a laundry list of contingencies in their offer, but only one or two might truly be deal-breakers. If there are contingencies that you do not accept, you can cross them out. If there are others, you partially accept, feel free to modify them.
For example, if the buyer wants specific repairs made by a certain date and you do not want to take on the responsibility, you can offer them a credit to cover all or part of the renovation so that they can do it themselves.
Changing The Terms
Buyers are usually purchasing a home with a new loan and plan to make a cash down payment. However, it is not uncommon for buyers to ask the seller to carry part of the financing (e.g., taking out a second mortgage to help pay for the down payment). If you are in a position to help with their financing, you may agree to their proposed terms but can still add in your own requirements (i.e., define the length of the loan, set a higher interest rate, require monthly payments, and include late penalties for failure to pay on time).
If you are looking to sell your home quickly, you should be flexible with your move out date. Understand that closing the deal might mean changing your personal schedule.
Understanding Closing Costs
Both buyers and sellers will have a plethora of fees at closing that they will have to cover. The seller is usually expected to cover a large portion of the buyer’s closing costs and expect fees to range between 8-10% of the final sale price. These costs include home appraisals, home inspection, transfer tax, title insurance, outstanding bills and liens, and escrow costs.
It is important to keep this in mind as you are negotiating terms and prices with your buyer.
In the current seller’s market, homeowners may have more leverage to reject paying all or a portion of the buyer’s closing costs. However, refusing to pay any closing costs is risky and can put the buyer in a position where they cannot negotiate. Look at the proposal as a whole before writing off any closing costs.
A Word On Concessions
During negotiations, the buyer may ask for seller concessions, which are contributions from the seller to offset the buyer’s costs. Concessions usually come in credits for inspections or repairs and are capped at around 6%.
If a buyer chooses to get a home inspection (which they usually do), the inspector will provide a detailed report of defects in the home. Although the buyer will try to use this information to get a better deal or ask for credits, sellers can frame any needed repairs or renovations as an investment opportunity. This strategy can work particularly well when there is a high competition or if there are multiple offers on a home. Be mindful not to trade pennies for dollars, though.
If your strongest offer requires you to provide some reasonable concessions, that isn’t necessarily a bad thing.
Bidding War Tactics
In the current seller’s market, owners may find themselves in a bidding war. Some owners may even create conditions in which a bidding war is generated, such as listing their home below market value.
If you do end up at the helm of a bidding war, make sure you know how to negotiate with multiple offers in the hopper. Although some sellers may choose to accept the highest offer and reject the rest, you can also ask all other buyers to come back with their best offers. You’ll have to be careful, though, because this tactic could end up causing all of your prospects to walk away, including your initial strongest offer.
Selling your home is an emotional process, but negotiating requires you to keep your ego in check and a cool head. That’s why working with a third-party real estate agent who does not have an emotional stake in the deal is invaluable. To get connected with a top local agent today at a discounted rate, visit listwithclever.com.