Successful negotiation is based on following some well-proven steps. Negotiating is, essentially, 'selling' what you want to achieve to the other party in such a way they understand and accept because it also helps them to get what they want. When you approach negotiating this way, it becomes a positive process, avoids negative emotions, is an efficient use of time, and minimizes the risk of the seller simply rejecting your initial offer or any counter-offer you make.
How to Be Best Prepared to Negotiate
To succeed, you (the buyer) should have all your ducks in a row before you make your offer on the property you want. Talk things over with your realtor and your loan officer so everything is clear and in place. For example:
- Be clear about your needs, desires, and things you absolutely do not want in your ideal home. That way you will balance your offer and any counter-offers against what you are prepared to do, accept, or reject in any negotiations. It is common for buyers to get too involved and emotional in negotiations. Avoid that by keeping everything in perspective.
- Know the market as it applies to the home you make an offer on. Have your real estate agent prepare a comparative market analysis (CMA) before you make the offer, so you and the seller understand how you landed on both your offer price and other conditions you include in your offer.
- Be pre-approved for your mortgage. There is a big difference between being pre-qualified and pre-approved. Being pre-approved is a more comprehensive and definitive process which requires a formal application, whereas being pre-qualified is only based on information and does not guarantee anything. Being pre-approved puts you in a much stronger position. Sellers are less likely to lose a pre-approved buyer by making an unattractive counter offer.
- Have your realtor explain how they will represent you. Realtors must act in accordance with state law and the Realtor Code of Ethics. Are they working as a transaction broker, standard agent, limited service agent, etc? Different forms of agency determine what your realtor can do for you. Each state has different rules, so ask your agent to explain everything.
What Your Realtor Does for You During Negotiations
An experienced agent will be able to advise you and make suggestions when you make your offer and what your options are if the seller makes a counter offer, etc. When you make your offer, your agent should present it clearly with any supporting details such as:
- The CMA, to justify your offer price. CMAs tell everyone not just about market value, but also how long similar properties have been on the market, what price adjustments there have been, etc. Many sellers are not up to date with such details, so explanation and proof can make all the difference about how they respond.
- Proof that you are "ready, willing, and able" to buy within your offer timeframe.
- Telling the seller's agent, or the seller, as much about your motivation as you want them to. Realtors may not say anything they have not been authorized to say, so make your instructions clear.
- Communicating all details from you or from the seller in a timely manner so you can decide how to respond.
Your agent should learn as much about the seller's situation, motivation, etc. as possible. The seller's situation can affect your negotiation strategy. Is the seller working to a tight deadline because they need to sell this property to close on their next home? Have previous offers failed, and if so, why? Details such as these tell you something about the seller's possible motivation to accept or make a counter offer. Remember, the seller's agent is also bound by what their client instructs them to do. If your agent is experienced enough, they may infer these things about the seller just by keeping their ear to the ground.
Time is of the essence. Your offer and any counter offer will come with time limits. This is why everything must be communicated, considered, discussed with your agent or loan officer, and then communicated back to the seller within those time limits. Your agent will advise you, each time, on what is required as well as what is sensible. This is particularly important if you are in a multiple offer situation, and competing with other buyers for the same property. If anyone misses a deadline, the other party may walk away. This is another reason for working with a professional, full-time, experienced agent.
What Your Loan Officer Will Do for You
Your loan officer plays a key role in successful negotiations. Sellers want the sale to go smoothly, and that means accepting an offer from someone who is fully approved for a loan. Your loan officer will have given you a letter confirming you are good to go.
That letter will put you in a leading position when you make your offer. Many buyers are only pre-qualified, and many work with an out-of-state mortgage broker who may not know specific rules and standards in a particular state the way we do. Working with one of our loan officers who are licensed across six states as well as the District of Columbia, available to answer questions, and give specific advice ensures everyone that all is in order.
The Bottom Line
Successfully negotiating with sellers demands proper preparation, knowledge, experience, and choosing the right professionals to work with to support, advise, and work together on your behalf. Sellers and realtors want ready, willing and able buyers to make offers. By working with First Savings Mortgage, you take an important first step that puts you in the driving seat.