Rules and etiquette around negotiations in real estate are not set in stone. But negotiations often work out better with some do’s and don’ts. Or, as the saying goes, negotiations work better with honey than with vinegar. Also, knowing what to expect during negotiations can help a buyer or seller stand more firm, making the negotiations smoother and less stressful. Following are some pointers about rules and etiquette while negotiating in real estate.
Have paperwork ready
Both buyer and seller need to have all paperwork ready. This really helps for a smoother transaction. For the buyer, this means having a pre-approval in writing from a lender.
A seller is allowed to ask a buyer if the buyer is pre-approved. If the reply is negative, or perhaps vague, the seller may lose confidence and most likely will stop the negotiations.
On the other side, a seller must have all the proper selling documents in order. These include the Real Property Report (RPR), all condo documents, utility bills, perhaps invoices for proof of big ticket items such as a new roof, new windows, etc. For a seller, being able to respond quickly to a buyer’s request can help make the negotiations run smoother.
Expect a counteroffer
Every buyer and seller should expect a counteroffer. In most transactions, the negotiations swirl largely around the price point, rather than conditions or terms. Therefore, most buyers don’t put all their cards on the table in their first offer to purchase. Rather, the buyer’s first offer is often below asking price. Then, seller and buyer go back and forth until they reach an agreement.
If the market is a strong buyer’s market, the buyer has his/her hands on the wheel, and initial offers will often be lower. In strong seller’s markets, the seller is in the driver’s seat, and initial offers will often be higher. In any type of market, a buyer or seller should not be offended if a counteroffer is made.
Staying polite throughout the negotiations usually works best. Getting aggravated in negotiations just doesn’t help either party. That is one of the reasons why it is better to have two realtors involved, a buying and a selling realtor. A realtor can take the edge off if negotiations get a little rough and personal.
Don’t talk negatively about the seller’s property
Don’t talk too negatively about the property
A buyer should never talk the property down in such a way that it can offend the seller. It is then appropriate for the seller to say, ‘If the property is that bad, don’t buy it’. Of course, a buyer can state some facts about repairs that the house needs, but only after the evaluation shows that the home is not already priced accordingly with its shortcomings. Also, a buyer should never talk about what s/he ‘wants’ to renovate in a home. Wanting to replace a 5-year-old kitchen because it is the ‘wrong color’ usually doesn’t go over well with the seller.
Don’t get offended
During negotiations things can get feisty. Either way, neither buyer nor seller should get offended. It is never personal; it is business. Sometimes, a buyer submits a lowball offer to assess the seller’s motivation. Or sometimes the buyer submits a lowball offer because it is believed that the property is truly overpriced. Often, offers are lower if the home has been on the market for a long time. If a buyer submits a very low offer, a seller should still try to work with it.
In turn, a buyer shouldn’t get offended, either, if the seller does not want to budge much. Usually, it is nothing personal but just part of the game. Try to play it out and see where the transaction lands before deciding to walk away.
Realize that negotiations are often stressful
Buying and selling a home is a big deal and so are negotiations. For many buyers and sellers, negotiations are stressful. Big decisions must be made, often in a short time and under a certain pressure. The tension in negotiations can affect one person more than the other, and sometimes negotiations result in a battle between buyer and seller. Just realize this and expect some tension. Eventually, in negotiations the goal is to find a middle ground where two parties are happy with the end result, a purchase and a sale.
When to get personal
Sometimes, it helps if a buyer writes a letter to the seller. Telling a seller who you are, what you love about the home, and why you want to grow old in the home might help a seller select a buyer, especially when there are several buyers in the game. One side note about getting personal; in practice it can also ‘kill’ the negotiations.
Never show motivation
Motivation is nobody’s business and can hurt a buyer or seller in negotiations. For buyers, this is especially important when visiting open houses. The agent sitting in the open house is either the listing agent or a colleague who may relay the viewer’s motivation and excitement to the selling agent. A buyer should realize that a listing agent “can and will use anything you say against you”.
In turn, a seller should be careful not to show motivation, either. Being impatient during negotiations or quickly opting for a reduced price are a couple of pitfalls that may show an individual is too eager.
Stay away from social media
Social media can give away your motivation and is a sometimes overlooked in today’s world. Remember that both buyer and seller can easily google each other. Exposing yourself via social media like Facebook can affect a buyer or seller negatively in negotiations. In the past, we have seen sellers on Facebook posting that the sellers already have moved for work elsewhere. Or buyers have posted their desperate need for a new place. Exposing motivation can affect the negotiations, so keep that card folded. (image of a post?)
Disclose any concerns upfront
A seller should disclose anything significant known about the property. Although, by law, disclosure is not always necessary, chances are that non disclosures will ‘bite the seller in the tail’. First, a disclosure creates a trust between buyer and seller. Also, many issues may come out during the home inspection anyway, and a buyer may feel s/he is being taken advantage of. This can damage the transaction.
Social media can give away your motivation. Be aware before posting!
Seller and buyer have the same goal
This seems like an open door, but, in most cases, buyer and seller have certain motivations. Of course, there is always the exception and motivation may be lacking. So, sometimes a buyer’s offer is a lowball, or the seller has listed a home at an unrealistic price. However, typically, both parties have their goals; a seller wants to sell, and a buyer wants to buy. Both parties should keep this point in mind during negotiations.
Set aside your principles
Sometimes buyer and seller get stuck in negotiations over the last few thousand dollars or a negligible condition. It then becomes a matter of principle to win. During negotiations, try to stay realistic and keep your goal in mind. Ask yourself if it is worth losing the house when buying or losing the sale when selling over a relatively small amount.
Get your own realtor
In Calgary, most transactions (more than 95%) take place with two realtors, a buying and selling realtor. This way, each party has his/her own representation during the process. This is important, especially in negotiations. First of all, both realtors verify the property value independently. Usually, the seller and buyer have different opinions of a property’s value. Both agents now can represent their client from their point of view. Also, now the entire negotiations take place on a business level, with less personal involvement to potentially damage the negotiation. (add image)
Trust your realtor
Most people don’t buy or sell a home on a daily or weekly basis. Many realtors do and, therefore, have more experience. Trust in the realtor is very important. Most realtors stand with two feet in the market, they understand the type of market, they quickly have a feel about a property and about whom they are dealing with on the other side. The realtor can also lay out the possible scenarios during negotiations and is able to answer any questions. Eventually, most buyers and sellers rely on their realtor for guidance throughout the process of negotiations. Be able to trust the realtor, but, if not, perhaps find another agent. (how to pick from 7000 agents)
Learn about the real estate market
Entering negotiations in real estate well prepared is an important start. When buying or selling a home, understanding the current market is a first step. Once the negotiations have started, the number of possible scenarios is limitless. Therefore, learning more about some tips and strategies during negotiations can be helpful. Being prepared and knowing what to expect can make negotiations smoother and present a higher chance of success.
Tanja van de Kamp has been a realtor since 2009, working for both buyers and sellers. Tanja was a lawyer in The Netherlands for 12 years. She has a competitive edge amongst realtors in Calgary. Tanja has an extensive amount of knowledge on how to negotiate strategically, and to work in the best interests of her clients.
Together with Ariette van Pelt, they make a dynamic and forceful team helping sellers and buyers getting the best they deserve!