The 7 Biggest Home Price Negotiation Blunders
With the national real estate market in a deep slump—and homeowners scrambling to unload properties—consumers are in a great position to save some cash by bidding down asking prices. "It's a feeding frenzy," says Glenn Kelman, the CEO of online brokerage firm Redfin. But in the often-complex process of buying a home, negotiations can be tricky, and people considering doing so should make sure they understand what they are getting into. U.S. News spoke with five negotiation experts and came up with a list of the seven biggest mistakes you can make in negotiating to buy a house.
1. Not understanding the seller. In a home price negotiation, it's essential to look at the deal from the opposite side of the table. "You want to make best use of the seller's fears," says Ed Brodow, a negotiation expert and the author of Negotiation Boot Camp. "So the question is: What are the pressures on the seller of this house?" Sellers today could be facing any number of anxieties. Perhaps the local housing market is even weaker than the sluggish national one. Maybe the seller has landed a job in another city and already bought a home there. He or she could even be facing bankruptcy. Any information you can obtain about the local real estate market or the seller will strengthen your negotiating position. When Steven Cohen, president of the Negotiation Skills Co., first visited a home that was for sale in 1981, he noticed that the property had no furniture or heat. "That gave us a little bit of a sense of the degree to which the people wanted out and gave us a heck of a lot more bargaining power," Cohen says. "We offered tons less than what they were asking." The sellers eventually accepted the offer.
2. Forgetting your homework. Some of this needed information is readily available. You can get the sale prices of comparable homes and discover how long certain listings have been on the market from a real estate professional, a multiple listing service, or an online resource, says Joshua Dorkin, the founder and CEO of real estate networking and information site BiggerPockets.com. To take the temperature of a local market, identify a couple of good real estate blogs and click through them daily. To find out the seller's motivations, try getting in touch with him or her directly. Some will refer you to an agent, but others will chat candidly. In addition, "researching who lives in and around the home you're [considering] buying is of the utmost importance," Dorkin says. By speaking with neighbors, you'll gain a sense of what life is like in the community and perhaps even pick up some insight into why the sellers are moving. "You can never have enough information," says Jim Camp, the author of No: The Only Negotiating System You Need for Work and Home.
3. Showing your cards. While looking for information on the seller, it's important to divulge as little about yourself as possible. Any knowledge you provide could be used by the seller as leverage. "For example, you may want to pay cash for the house, but the sellers don't have to know that," Camp says. If you are capable of paying cash, the sellers may hold firm to their asking price, he adds, "because it means that you are a person of means."
4. Not having options. When you begin negotiating on a specific property, make sure you have identified several other homes you'd be happy with as well. "Never negotiate without options," Brodow says. "If you find a perfect house, find another house so you are not so desperate to buy [the first] house that you wind up giving in to whatever the seller wants." Furthermore, it's to your advantage to tactfully—either directly or through your agent—let the sellers know that theirs is not the only property you are considering.
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Reader Comments
Professionals and Non-Professionals
My wife is in her fifth year as a real estate salesperson, and I can tell you that everything Melanie Poland has written here is absolutely correct. Most "bad" agents aren't bad people, they're just lazy and shortsighted, and it catches up with them eventually. On the other hand, some agents (like my wife) will not hesitate to tell their buyers that the price for a home they like is too high versus its long term value, or tell sellers that they shouldn't expect to sell their home at the inflated price at which they want to list it. They also will spend hours every week viewing and researching homes for sale in their market area, just so they can be knowledgeable and authoritative for their customers (which good customers expect and value). Guess what? Most customers who appreciate honesty and expertise stay incredibly loyal to my wife, even after deals have fallen through for other reasons, and not only stick with her until they find a deal that works, but come back to her later and/or refer her to their friends.
By the way, there are plenty of lazy, shortsighted, greedy, or otherwise sketchy customers out there to go along with the lazy, shortsighted, greedy, or otherwise sketchy agents, lenders, attorneys, mortgage brokers, etc., etc. Funny how they all seem to find each other.
Face time - it can be a good thing
CONTROLLED face time can be a good thing if you find that your negotiatons are hitting a brick wall. If you are a buyer, ask that your buyer's agent set up a meeting with you, your agent, and the seller's agent. This gives you a chance to articulate your position and have both sides represented.
If you are a seller, you can ask for a meeting involving your agent and the buyer's agent, with you present.
I do think that all parties should generally avoid buyers and sellers meeting independently, or even at all during the negotiating process. Emotions get in the way. Real estate professionals are not emotionally involved.
One thing that never ceased to amaze me as a realtor was this: Generally you are working with buyers and sellers who are working professionals or who have worked in a professional environment in the past. You would think that they would approach their real estate transactions with a level of professionalism. But often, that is checked at the door. Their ability to control their emotions (an ability that I assume they have utilized in their professional careers) often slips when it comes to the emotion-charged issue of their family's home - an extension of themselves, so to speak.
That's when a good Realtor, lender, insurance agent, inspector, appraiser, etc. can step in with objectivity and guide them to the best financial decisions.
Mandatory Continuing Education Courses
IF YOU THINK M.C.E. COURSES ARE JUST A CHANCE FOR VISITING, AND A FREE LUNCH, YOU SHOUD TAKE THE CHAMPIONS REAL ESTATE SCHOOL M.C.E. COURSE ONLINE...IT COVERS A LOT OF REAL ESTATE INFORMATION...ESPECIALLY CONCERNING NEW R.E. LAWS, R.E.TRENDS, ETC., ETC...IT'S NOT A "CAKE WALK". I'VE HELD A R.E. LICIENCE FOR 44 YEARS AND HAVE NEVER FAILED A R.E. COURSE, BUT I FIND THE CHAMPIONS COURSE CHALLEGEING...YOU'RE ALSO ALLOWED TO CHOOSE COURSES/SUBJECTS THAT YOU FEEL THAT YOU DO NEED ADDITIONAL INFO/TRAINED IN, TO STAY ABREAST OF THE EVER CHANGING R.E. PROFESSION.. AND, YOU CAN TAKE THE COURSE IN YOUR UNDERWEAR!! SOCKS ARE OPTIONAL!!
R. PALMORE
TEXAS
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