For sellers only: How to play your cards right
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Selling a home in a buyer's market can feel like you're playing a game you can't win. But buyers don't necessarily hold all the cards. "You have to be able to see it from both sides of the table," says Jeffrey Stanton, who teaches a Realtor certification course in negotiation. Armed with information and a smart strategy, you can play your hand wisely and get the best value for your home.
First, determine the best price you can reasonably expect given the home's market value and the minimum you can accept. All negotiation will take place somewhere in between those two limits. Your goal is to stay as close to the top of that range as possible.
Next, count your bargaining chips. A buyer's position is weakened and yours is strengthened by anything the buyer wants that you're able to provide or withhold. "Price is one of the many things you negotiate for, but you need to make the pie bigger," says Stanton. Additional slices might include flexibility with the closing or move-in dates, extra items for sale, cash concessions, bragging rights - even the deal itself, since you can always walk away.
Finally, map out your strategy - privately. "The seller should make a plan: These are the items I really want, these are my giveaways," says Stanton. Seemingly unimportant items may turn out to be valuable, so remember two rules: Never reveal what they're worth to you and never give any away. Trade them - grudgingly. You can offer your chips to get stalled talks moving again, to preserve your bottom line or even to use as a deal-closer.
With a plan in place and your chips in hand, you're ready to talk turkey.
WHEN TO USE IT: Throughout the process.
HOW TO PLAY IT: The first time the price chip comes into play is when you list your home. Look up similar homes that have sold in the area recently with online tools such as the sold properties link on the Multiple Listing Service site (mlsli.com/search sold.cfm) or Newsday's recent home sales search tool (longisland.newsday.com/real estate/sales_search.php). Use those prices to zero in on your home's market value and to weed out lowball offers. Padding your asking price to leave room to haggle is not helpful, says Lynne Kleinman of Daniel Gale Sotheby's International Realty in Manhasset - instead, price it to attract multiple offers. "You're putting yourself in a position to be bid up if you've chosen the correct number."
When you receive a written offer that's in the ballpark, you may use a price adjustment as part of your counteroffer. A small move tests the water; a big reduction announces your willingness to negotiate, Stanton says. You can reduce the price more than once to nudge the discussion along, but in a strategic pattern: Your price concessions should get smaller and smaller as the deal progresses. This signals to the buyer that you're approaching the bottom.
2. Bragging rights
WHEN TO USE IT: When the buyer shows a competitive streak.
HOW TO PLAY IT: "Sometimes in order for you to win, you have the make the other party feel as if they've won," says Stanton. "A lot of people are competitive negotiators who want to win by taking that very last thing off the table."
And it's not just about ego - it's also about nerves. Buyers who fear they could have gotten a better price are more likely to get cold feet, which could jeopardize the deal.
Satisfy the buyer's need to win with a pattern of increasingly stingy price concessions. This creates the reassuring and gratifying impression that you've scraped the barrel and given up every last crumb of value - even if you haven't.
To enhance this effect, trade away any other chips with conspicuous reluctance, regardless of their actual importance to you - and try to get something you secretly do care about in return.
3. Financial incentives
WHEN TO USE IT: When you've got a serious buyer and lack of funds is the only obstacle.
HOW TO PLAY IT: Consider a seller's concession to bridge the gap: If the price is $300,000 and the buyer needs $6,000 for closing costs, you would pay those costs upfront but raise the price to $306,000. "The purchase price is artificially inflated so the buyer can finance an additional cost," says Chandra Ortiz, an attorney on the Nassau County Bar Association Real Property Committee. This allows the buyers to make a bigger down payment, or pay points for a lower interest rate, which could increase their purchasing power to close the deal.
There are limitations and risks: The lender will appraise the home and restrict concessions to a certain percentage of the appraised value, which may turn out to be less than the purchase price you and the buyer agreed to. "When it doesn't appraise at that figure, the bank won't give additional money to cover the concession," cautions Ortiz. Include language in your contract to protect yourself from having to pay the concession if the appraisal is low, she advises. Also note that a higher price will cause your transfer tax payment to go up - make sure the buyer agrees to pay for that, she says.
WHEN TO USE IT: When the buyer is on a deadline and you can be flexible - for a price.
HOW TO PLAY IT: "The way it works is whoever has the shorter time frame isn't negotiating from a position of strength," says Stanton. Buyers often want or need to close or move in by a certain date - they may be trying to get into their new school district before September, for instance.
If you have the ability to help them meet their deadline, you've got currency. Keep it in your pocket and remain noncommittal about dates until you need that extra push.
For instance, if your buyer is considering a competing property but the other sellers can't vacate soon enough, that closing date could become the deciding factor. It can also help your bottom line, Stanton says. "If I know you have to be in by the first, that may be more important to you than price."
WHEN TO USE IT: Periodically offer these in place of price reductions, or along with smaller reductions.
HOW TO PLAY IT: This chip could fall into your lap during talks - or it could take some creativity on your part. Pay attention; if a buyer shows interest in something, such as a piano or window treatments, you've got yourself an unexpected chip.
The best kinds of extras are those that are of little value to you, but could matter a lot for the buyers. For instance, if you're leaving a grassy two-acre property for a maintenance-free condo, you won't be needing that ride-on lawn mower anymore - but your buyers sure could use it. Swap it for a more favorable deal. A home warranty is another good one; it may only cost you a few hundred dollars, but it provides a benefit that could be far more valuable to the new owners. Get something in return for it, even if you planned all along to include it in the sale.
6. Your Plan B
WHEN TO USE IT: When you've exhausted your chips without reaching an agreement - or you suspect the buyer is bluffing.
HOW TO PLAY IT: "Buyers feel like they have all the time and all the choices, but when they feel a sense of urgency because another couple wants that house, then the seller holds the cards," says Diane Saatchi of Saunders & Associates.
Use smart marketing to level the playing field. Pricing, staging and photography are key to attracting buyers - and offering a higher fee will get the agents' attention, Kleinman says. "Brokerage fees speak very loudly to the agents who will be showing your house." More showings could translate into more offers - and a better bargaining position.
Reserve the right to keep showing your home if the deal is contingent upon the buyer's home getting sold and look into the possibility of renting out the place. This will ease your pressure - and, if all else fails, it allows you to walk away. It's not easy, but sometimes that's your best option - either your buyer will reconsider, or you'll get yourself out of an unacceptable deal.