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Real estate is one of the few places in American life where negotiation
is the rule rather than the exception. It takes a keen understanding
of the homebuying process to be good at negotiating. Be sure you
have it down before you make any offers on homes.
Recognizing that shrewd negotiation doesn't come naturally to
most people is the first step in becoming a good negotiator. Here
are tools and information the best negotiators use.
The most important factors in effective negotiation are:
Information Preparation
Realism
Information
CMAs--Comparable Market Analyses
Once you've found a home you want to buy, the first step in negotiation
is to get the fair value. Your real estate agent has access to
Comparable Market Analyses (CMAs), which show you what similar
properties have sold for. Generally, CMAs list houses in a particular
location that are currently on the market, have sales pending,
have expired from the market or have sold. It is the "sold" properties
you need to look at. What a house is on the market for or has
an offer for doesn't mean that's what it will sell for. There
can be a big discrepancy in the two figures.
The CMA often gives you general information about the houses being
compared: number of bedrooms and baths, square footage, the listing
price and the sold price. Make sure the CMA focuses on houses
similar to the one you've selected - both in description and location.
Also, the more recent the data, the better.
Condition
Once you have the CMA, drive by all of the properties listed in
the "sold" column. Condition has a lot to do with the ultimate
selling price of a house. Does the home in which you're interested
shine above or fall below those sold? Make a realistic comparison
of condition, then adjust your thinking up or down according to
what you see.
Extra amenities
Does the house you've chosen have more or fewer amenities than
comparable homes? Although amenities won't affect the value as
much as location or condition, they can be a factor. Be wary,
though. An outdoor hot tub may have been a major motivating factor
in your choice of a house, but it won't add much to the value
of the property.
Motivation
A good negotiator gathers as much information as possible on the
house and the sellers. The seller's reason for selling is at the
head of the list. Has to sell? Wants to sell? Just throwing it
on the market at a high price to see if it'll move? If your agent
represents you in the transaction as a "buyer's agent," they can
try to secure this information for you. If you're working with
an agent representing the seller, they typically can't disclose
this information without the seller's consent.
Preparation
Great negotiators always prepare themselves. The most important
factor is your emotional frame of mind. Never let emotions override
common sense. Excitement is normal, but keep it in check during
negotiations or you'll lose the value of the information you've
gathered.
In addition to your emotional frame of mind, your finances should
be in order. An offer carries more weight if there are no dangling
financial problems and if you're prequalified for a mortgage.
You can't be afraid to let the house go. Convince yourself that
if the price isn't to your liking or is outside your budget, you'll
walk away. Set a realistic limit and stick to it. Overpaying for
a house is epidemic among buyers who let their emotions rule their
better judgment. It's a mistake you'll regret every 30 days for
years to come.
Finally, organize your information and have it readily available.
Realism
Don't throw away all your information gathering and preparation
by making a ridiculous offer on a well-priced home. Nothing turns
a seller off more than a low-ball offer on a house that is realistically
priced. Often, negotiations will stop, rarely to be revived again.
An example: Mr. and Mrs. Buyer find the perfect house after looking
for months. The house is listed at $155,000. Mr. and Mrs. Buyer
have a CMA that shows average selling prices in the neighborhood
to be $148,000 to $153,000. Ignoring the CMA, they offer $120,000.
Mr. and Mrs. Seller, annoyed at the low offer, counteroffer at
full selling price, $155,000. The Buyers, still wanting to "steal"
this house, make a second offer of $125,000. The Sellers, very
frustrated, don't move from their $155,000 price. Suddenly, there
is word that another offer is forthcoming to Mr. and Mrs. Smith.
In fear of losing the house, Mr. and Mrs. Buyer up their offer
to $154,000 and the Sellers accept. A realistic first offer in
the $150,000 range (remember, the CMA showed $148,000 to $153,000)
may well have been accepted by the Sellers. If this were the case,
the Buyers paid $4,000 more than they had to.
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COPYRIGHT ©
2003-2006 Melissa Conrad, Florida REALTOR. All Rights Reserved!
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