Learn about rules and etiquette in real estate negotiations

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.

Stay polite

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.

The one seller that got offended

Our experience is that most sellers don’t get offended that quickly. Since 2009, we have experienced such a situation rarely. In once case, we helped a buyer who was somewhat motivated to find a home. After seeing a number of homes in one day, the buyer found a home which was suitable, yet not considered a dream home. The evaluation showed that the home was priced within a fair market value. It had been on the market for a rather long time, considering the market at that time. Since this was not considered a dream home, the buyer decided to ‘throw a lowball offer’, well below asking price. As expected, the seller gave a counteroffer. However, the counteroffer was $5,000 above asking price. It was a clear signal from the seller that he had been offended. Then the buyer decided to counter again, but now with an offer that was much higher, closer to list price, yet still under asking price. After all, the home had been on the market for some time. We did receive a counteroffer again from the seller, as expected. However, the counteroffer stayed the same: $5,000 above asking price. Now, the buyer’s motivation changed, and the buyer decided to offer full asking price. Not surprisingly, the seller was already upset and didn’t want to sell the house to this buyer. He decided to take the home off the market and rent it out. So, although it doesn’t happen very often, a seller can get offended. This was an exceptional situation with dire consequences for the buyer.

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.

Getting personal can also go side ways

In our 4th year in real estate, we helped a family find a new home. During the negotiations, we suggested the buyer get more personal in the hope the sellers would appreciate the buyer’s position. This strategy had worked before. So, with the permission of our client, we told the seller’s realtor that this was a young family coming from Africa. They loved the home and were looking forward to having their 2 children grow up there. The response to this ‘revelation’ was not quite as expected. The sellers had instructed the selling agent to ask what color their skin was. The selling agent was very reluctant to ask; however, the instructions from the sellers were clear. We were a little flabbergasted, to say the least, and very hesitant in relaying this to the buyer. We did decide to relay to the buyer the question the sellers had asked. At first, the buyer laughed a little, shrugged the question off and instructed us to just tell them. We hung up the phone but, not a minute later, the buyer called us back. It literally took the buyer a minute to comprehend what the actual question was and asked us to repeat it. Needless to say, the buyer was completely stunned and walked away from the negotiations. So, the suggestion to get personal does not always work out the way we think it will. This was an exceptional situation, and a rather rude, offensive one. In general, some sellers are more receptive to a personal note than others.

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 & Ariette van Pelt Calgary Realtors 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!

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