Today I'm going to write a little bit about negotiating. As a listing Broker it's one of the things I enjoy most about my job. I would be perfectly happy to never do anything but sit at my desk and negotiate deals over the phone.
Negotiating is an acquired skill that anyone can learn. It's one of those things that the more you do it the better you get. I also think everyone has their own way of doing it so I'm just going to try to explain what works for me and then you can tweak it or add to your current way of doing things so that it works for you and your market. And hopefully, you will be able to add some suggestions or techniques, in the comments, that will help me to improve. So here goes:
One of the first things I learned about negotiations is, unless the offer is acceptable, I always suggest to my Sellers that they counter offer. We never out right reject an offer. Actually, this assumes they aren't asking us to do something illegal. I've had offers that were extremely low, that the Sellers wanted to reject, they countered instead and the Buyers came up. So you never know. Sometimes Buyers just have to get the low ball offer out of their system. It's just an offer. Don't let the Sellers take it too personal and get upset over it. Counter it.
When I receive an offer on one of my listings, the very first thing I do is call the REALTOR® and go over the offer with them. I do this for two reasons, one I want to make sure I have the entire offer and I'm not missing an addendum that may have additional terms on it and secondly, I want to open up communications and get friendly with them. Why? Well, it's simple, they may tell me something that my Sellers and I can use while negotiating. You would be surprised at the things I've learned during the course of a conversation.
The next call I make is to the loan officer or mortgage broker. Same strategy, ask questions and listen. You can find out quite a bit of information. But most importantly, I want to make sure the Buyers truly are qualified. You can usually tell if the LO is being truthful with you or not.
Now folks, I have to say, I am not working for the Buyer. I work for the Seller and my goal is to get as much money as I can for my Seller's property. There is nothing wrong with me asking questions. If the Buyer's side chooses to answer something they shouldn't, well that's their problem not mine.
Once I have taken these two steps, and I'm satisfied with the answers, I prepare a Net sheet and transaction outline for my Sellers. Now I'm ready to get with my Sellers and go over the offer. Personally, I prefer to present the offer via Email or by phone. At this point in the negotiations I've just found it easier on the Sellers if I'm not burying them in paperwork right up front. I present the offer by using the Net sheet and transaction out line that I have prepared. I want them to concentrate on the things that are important to them, at this time, not 10 pages of useless disclosures and addendums. We can go over that stuff later.
Now, I like to present a strong counter offer. I usually counsel my Sellers to counter just a few thousand above an acceptable offer. We want the Buyer to be tempted to accept our counter. I also suggest they agree to as many minor things as they can i.e warranties, closing costs contributions, closing dates and the such. If they are within reason, accept them. The reason is we want our price so give the Buyer the small stuff. Plus it's easier to get a counter accepted if you are not changing or denying every little thing the Buyer is asking for. If the Buyer wants closing costs and warranties, we are just reflecting it in the price anyway. So why not leave them in?
Once the Seller has decided on a counter offer I make the changes on the contract and mark where the Buyer needs to initial. Now my next step, may be a little controversial and some may not agree but here goes, my Sellers do NOT sign or initial the counter offer. I Email it to the Buyer's agent with no signatures or initials. "But Broker Bryant, why do you do that?" Well, let me tell you, I want the Buyer to commit before my Seller signs off on it. My Seller ALWAYS signs last. I keep the property on the market and take showings and offers until the Buyer has agreed and signed and initialed everything AND put up his escrow deposit. I want my Sellers to be in a position to negotiate and accept another offer if one should come in that's better. I don't want the Buyer to sit on my Seller's counter for two days while they decide whether or not to accept it or counter it.
OK, this post is getting long, so I'm going to wrap it up. Oh, I did want to mention, NEVER give an ultimatum in negotiations. Don't say, "This is my Seller/Buyers final offer, take it or leave it." It slams the door shut on any further negotiations and it's not true anyway. I can assure you, if my Seller comes back within $500, your Buyer will probably accept it. So just don't give ultimatums. I negotiate until the deal is accepted or dead and buried. Here's a few links to some other posts I have written about negotiations.
OK, that's it for now. So what am I doing wrong?