Alpharetta Real Estate » Negotiating

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26Jan

Negotiating the Sale or Purchase of Your Home in a Buyer’s Market

categories: Alpharetta Real Estate, Negotiating

I write a lot here about various properties for sale in Alpharetta, general real estate conditions and items of interest to those looking to live here. It is easy to fall into the trap that evaluating homes is our chief purpose and value add. Afterall, homes are what people want to talk about and there is an endless supply to discuss.

While I think identifying homes and neighborhoods is important because it fills the need for analysis and insight of all those house pictures that anyone can go online and see, focusing so much on just the homes overlooks an entirely other area of value add to our clients: negotiation for the purchase or sale of the home.

Many clients find looking for a home to be fun but negotiating its purchase to be nerve racking. That is one reason to have a dispassionate professional (that would be me ;->) in your corner. I dare say that I have "saved" my clients in total tens of thousands and tens of thousands of dollars over the past year. Successful negotiation requires strategy, guile, good bluffing skills and sometimes luck.

Take one of many negotiations we recently completed. I point this out because I am sometimes amazed at the strategies, or lack there of. Read this and tell me how you would have negotiated.

Negotiation Scenario

We represented the buyer on a the purchase of a $300,000 house in Alpharetta that had been on the market for about a year. Originally the house had been listed at $325,000. Believe it or not, after a year on the market, we unexpectedly got into a multiple offer situation and we were not the first to the table.

Move 1

The listing agent knew that we wanted to make an offer, but the seller went ahead and counter-offered the offer by the other prospective buyer before they saw ours. They did this because the first offer had a time deadline on it, but it was a (mis)calculated risk. I might have waited to see what the other offer - our offer - was going to be before countering the first. Yes, the first offer technically expires, but who cares? You weren’t going to accept it as is; you were going to counter it so it still needed the acceptance of the first buyer. Having countered, the seller now had to wait for the first buyer to respond and couldn’t entertain any other offers.

Move 2

We went ahead submitted a backup offer, not really expecting to get under contract. We offered full price for the house; maybe we should have offered less. We offered full price because the house had already been reduced $25,000 and we thought the house was worth it, but we also didn’t totally expect the seller to counter the first offer without seeing ours first and we wanted to have a strong offer. We were trying to buy the house after all.

Move 3

The first buyer did not accept the seller’s counter, which was a strategic mistake on their part. They had to know at this point that there were multiple offers. They were in control: If they accepted the counter they had the house under contract. Countering back like they did gave the seller the chance to re-evaluate his options. At this point, he thought that our offer was better. But then he made, in my opinion, a strategic mistake. He countered us on two very minor items…things that could have been discussed verbally between agents and amended to the contract later, like possession date.

Move 4

This passed control from the seller back to my client, the second buyer. We had to assume that the first offer was not as good as ours, otherwise the seller would not have changed ships midcourse. My client also felt like they had rushed into the negotiation a little quickly because of the multiple offer situation. Given time to think about it, they decided to counter back at $295,000. They wanted to have a "small win" in the negotiations.

Checkmate!

The seller was not stuck. He had burned his bridge with the first buyer so he had to swallow hard and concede the $5,000. We got the house even though we weren’t the first to the table and we got a small price concession.

What would you have done if you were the seller or either buyer in this case? Hopefully, you’d say: "Hire a good realtor to negotiate if for me!"

Negotiation is a challenging, sometimes stressful, but usually very rewarding part of the services we provide our clients. I actually enjoy it and find it one of the most rewarding aspects of the job. Yes, we want to help our clients achieve their goal of buying or selling the house, but we want to do it on the best possible terms for our client. We spend our client’s money as if it were our own.

Posted by Kevin Warmath | Currently 17 Comments »