The whole point to putting your home on the market is to sell it! Getting an offer is one of the first steps of getting your home sold. Sometimes just the right offer comes in and it is exactly what you want other times you need to carefully assess and negotiate an offer into something you can accept.
If you hired an experienced listing agent, their services will be invaluable when it comes time to assess and negotiate an offer. Your experienced, full time agent spends part of everyday handling and negotiating offers. It is a daily part of their business and thru negotiating hundreds and potentially thousands of deals can offer quite a bit of insight when it comes time to assess an offer and than negotiate an offer.
Your Mindset to Assess and Negotiate an Offer
Let’s talk about your mindset when it comes time to assess and negotiate an offer.
Buying and selling a home is a business transaction between two parties. Its that simple. Emotion should have no part of a business transaction and should be removed when it comes time to assess and negotiate an offer.
There is no need to get “offended” by an offer. Also, there is no need to belittle your home buyer. It just leads to hurt feelings and failed offers. Buying and selling a home can be highly emotional and both sides have triggers that can get them upset.
I have seen many perfectly good deals fall apart over hurt feelings. How you conduct yourself and what you say matters when negotiating an offer.
Yes, you may very well get an offer that is “offensive” in your mind. And, not every offer will end up in a closing.
But I can’t tell you how many times I have worked with a home seller and turned that offensive offer into an accepted offer by calming the seller down and getting them to negotiate wisely. Otherwise, the seller would have just shut down the negotiations….. period.
Every offer is a chance to get your house sold. Stay open minded and work every offer until it no longer works for you.
What Should Be Include With An Offer
The following are the what should be included with an offer before you begin to assess and negotiate the offer.
- A written offer. Preferably on your state’s appropriate form.
- Agency Disclosure. This will inform you of how the agent presenting the offer works or doesn’t work for you in the transaction.
- A mortgage pre-approval or proof of funds. This allows you to see that they can get financed or have the cash to fund the transaction.
- A copy of a good faith deposit check. Typically offers are submitted with a good faith deposit check to show sellers they are serious.
It is important to have all this information before you start negotiating. Otherwise finer points may be missed that could lead to trouble down the road.
Assessing the Offer
I would insist on all of this information upfront, I would also consider having all disclosures signed (lead paint, sellers statement of property condition, etc…) so that the home buyer knows what is going on with the property, making them less likely to back out.
At this point you have hopefully verified a buyers financing. You should write down the important details of the offer. There is more to negotiate than just price.
- Purchase Price- At the crux of the offer is obviously purchase price and the higher the better. But there are other things to consider.
- Good Faith Deposits- Is the home buyer stepping up and putting a fair amount of money into escrow as a good faith deposit? Typically by the signing of the purchase and sale, a total of 5% of the purchase price should be tendered.
- Closing Date- The closing date is the day you transfer the property and you should receive your funds. Does the closing date line up with your goals?
- Home Inspection Contingency- If they include a home inspection contingency when is it up and what does it include?
- Mortgage Financing Contingency- When will they have firm commitment from the bank to close on your home?
- Personal Property- Are they including personal property in the offer? Some buyers may try to include lawn equipment, furniture, etc… in an offer that may affect your bottom line.
- Closing Costs- It is not unusual for a buyer to ask the seller to pay some or all of their closing costs again cutting into your bottom line.
- House to Sell Contingency- Is the buyer of you home making the sale contingent on the sale of their home by a certain date?
- Miscellaneous Contingencies- There can be any number of contingencies a buyer can include in an offer. May sure you review and understand what they are.
Go thru and decide what is acceptable in the offer and what is not. Anything can be negotiated. The goal is to put an offer together that satisfies the buyer and is acceptable to you.
The Verbal Offer
Real estate agents are bound to present every offer to a home seller. It can be a formal offer, it can be a verbal offer or it can be written on a dirty napkin. But as real estate agents we are legally bound to present it.
Some buyers for whatever reason will throw out verbal offers. As a listing agent I will present it to my sellers but I highly recommend that they respond with thank you for the offer but can you please submit a written offer.
Why, not all the details maybe covered in a verbal offer and it is too easy to be misconstrued.
A verbal offer is legal, but in court it is not enforceable. Get your offer in writing!!
Negotiating an Offer Without A Mortgage Pre-Approval Letter
I also encourage you not to negotiate an offer with at a proper mortgage pre-approval accompanying the offer.
A proper pre-approval is where a lender has verified credit, assets and income and the mortgage officer has identified a loan program that they will most likely qualify for.
The strength and details of a home buyers financing can dictate how you negotiate an offer. An offer from a financially strong home buyer might make you give up more than a less qualified buyer.
Or sometimes the devil is in the details. I have had buyers state they are paying cash for a home but on further questioning they are using a home equity line of credit they haven’t even applied for yet.
While a pre-approval is only about as good as the paper it is written on, you certainly don’t want to take your home off the market and have the deal fall through because of a buyers financing. Review the details and don’t be afraid to ask questions.
It is not uncommon for a listing agent to get permission from a home buyer to talk to the mortgage officer about the details of a pre-approval letter.
Tips On Negotiating An Offer
There are certainly many negotiating styles and every situation is different. But, I will share somethings that I have learned about negotiating offers over the years.
- Do your homework. Know what you house is worth and be comfortable with the comparable homes your agent chose. Negotiate from a position of strength by being knowledgeable about the market.
- Realize fair market value of your home is a range and not one price. Sometimes sellers get locked in on one price. Pricing a home is subjective and while you probably forget your agent gave you a range in which your house would sell.
- There is no room to be offended. Everyone negotiates differently. But I have taken offensive offers that were 50k below asking and worked them into almost full price offers.
- Negotiate every offer. Don’t shut down negotiations immediately. If you have a low ball offer thank them for their offer and say in good faith you’ll knock a $1000 or even $500 off the purchase price. Consider countering full price if you are that confident. And, hopefully you did homework on your comparable homes and state your position of why you believe the house is worth that much.
- Respond quickly. Strike while the iron is hot. The buyers are feeling angst just like you. Respond while the buyers are excited about your home and before they start to feel buyer’s remorse.
- Don’t play games. Playing games will just backfire on you. You can push a buyer too far and they will be gone in a flash. On occasion a seller with multiple offers will keep going back to the buyers squeezing more and more out of them and suddenly the seller is left with no offers.
- Don’t hang up a deal over short money. I have seen home buyers and home sellers shut down negotiations over a few hundred dollars and after it was all said and done the seller would have been better off taking that offer.
The first step to successfully negotiating an offer is to carefully assess an offer. Determine its strengths and weaknesses and what you feel you should negotiate.
Homes that are prepared properly and priced well will garner much interest from home buyers and you can negotiate with confidence getting asking or very close to asking.
Remember the goal is to sell your house…. not just list it.
- Bill Gassett How To Handle Low Ball Offers
- Abraham Walker Why Do Buyers Make Low Ball Offers
- Kyle Hiscock Top Questions for Answered for Home Sellers
- Ellen Pitts Will I Get A Full Price Offer In A Sellers Market
- John Cunningham How To Ruin A Real Estate Deal
Home Seller Tips On How To Assess And Negotiate An Offer is written by Kevin Vitali of EXIT Group One Real Estate. If you would like to sell your home or buy a new home give me a call at 978-360-0422 and let’s get the process started.
Real Estate Services in the following areas: Northeast Massachusetts, Merrimack Valley, North Shore and Metrowest. Including the following communities and the surrounding area- Amesbury, Andover, Billerica, Burlington, Chelmsford, Dracut, Groveland, Haverhill, Lowell, Melrose, Merrimac, Methuen, Middleton, North Andover, North Reading, Reading, Stoneham, Tewksbury, Tyngsborough, Wakefield, Wilmington, Westford