Selling a Home that Failed To Sell Series-Part 17-Advanced Negotiation Tactics That Get the Job Done
Now that we understand the basics of the negotiation process, let’s take a look at some advanced techniques that can create a winning outcome in your sale.
1. The Kick Out Clause:
One of the most common contingencies included in an offer from a buyer is the contingency that his/her house must sell in order to buy your house. While this is common, it is not necessarily a good thing for you, the seller. Typically, a potential buyer is unable to purchase the new home until they have proceeds from their current home sale. The seller does not want to stop marketing the house while waiting for the buyer to fulfill his contingency, especially since the time period for the contingency is uncertain. So, the parties reach an agreement – a kick-out clause gives the seller the right to continue his/her marketing efforts while the contingency is outstanding.
If the seller finds another buyer, the seller gives the first buyer the option to remove the contingency and continue with the transaction or opt out of purchasing the property in accordance with the contingency. The initial buyer receives a limited amount of time to make this decision, usually around 72 hours.
For you, the seller, a kick-out clause has obvious benefits. The seller’s house can remain on the market even though the seller has entered into a purchase contract. Subject to possible state restrictions, the seller can also accept other offers during this time period. This prevents the seller from losing the opportunity to market his home for what could be an extended period of time.
2. Reject the Offer, Not the Buyer:
Woo-hoo! You just received an offer from a buyer who loves your property. You are excited that they want to purchase your home but and not thrilled with their bid.
You wonder if you should go back and forth with the buyer, just take the offer or hold out for something better. One strategy is to simply reject the offer.
Saying “no” can sometimes lead you to exactly where you want to go. But we don’t stop with just saying no. Reject the offer and invite them to submit a higher bid. It takes some of the pressure off of you and can have several different results.
Potential buyers are prepared for their first offer not being accepted. Sometimes they are simply throwing out a low number to see how low you are willing to go.
You send your own message by rejecting their first offer and keeping them in the loop- inviting them to re-submit. They’ll realize they ventured too low and if they sincerely want your property, not just a deal, they will come back with a higher bid. This strategy works when the buyer wants your property more than other.
This strategy does not work when you are dealing with an investor or someone just looking to acquire cheap real estate.
While that may seem bad at first look, it leaves you open for better offers. It also saves you time by weeding out bidders who will not pay you what your home is worth, no matter how much back and forth is done. And let’s be real, you want someone who wants you home and is willing to pay you your asking price.
3. Battle of the Bids:
Did you know that multiple offer situations are common in our low inventory sellers’ market? This technique is one that should be carefully discussed and decided upon before the home is listed and marketed (another reason research is so key).
Here is how it works:
· Pre-market the home as “Coming Soon” with no showings until the property is officially listed.
· Put your desirable home on the market.
· Schedule one or more Open Houses within the first few days of listing.
· When you put your home on the market you include a disclaimer that you will not entertain or respond to bids until the completion of the open house(s).
How does this help you to get top dollar in the shortest amount of time? Simply, human nature will take over. We have just created a prime situation for competition!
Everyone who sees the home and loves it will want to make a bid. They will be prepared for you to be looking at multiple bids, therefore they bring their best offer. Often a bidding war can ensue resulting in a higher price for your property, often over the original asking price.
In reality, you may only get one offer, even after setting the stage for multiple offers. However, the bidder is not privy to that information. The fact that they know there could be competitive offers, still makes it beneficial for the seller.
4. Closing Costs + Raising the Price:
What are closing costs? Closing costs are the thousands of dollars in fees associated with a mortgage, typically amounting to 2 percent to 5 percent of the loan principal. There are various closing cost components and they vary from state to state. Closing costs include an appraisal, credit check and title search. But did you know that who pays the closing costs is negotiable? That means the buyer, the seller, or a combination of the two pays closing costs.
In negotiating closing costs, it is important as the seller to think about the motivation of the buyer. Many home buyers will have scrimped and saved for their down payment and are well qualified for their loan, but do not have the additional funds to pay up front for the closing costs.
How can we make this situation a win-win? You, as the seller can agree to pay all or a portion of the closing costs if the buyer increases the amount of their bid to match that amount.
If the only thing preventing you from selling your home is the out-of-pocket cost for closing fees, and you are able to pay it, it would be beneficial for you to do so especially if you are recouping those expenses by raising the sales price. Bottom line, it is all about what you take home at the end of the transaction.
Let’s look at an example:
· Your asking price is $300,000.
· Closing costs would be approximately $7500.
· The buyer offers $290,000 and asks for you, the seller, to pay $7500 in closing costs.
· This would mean you would be getting $17500 less than your asking price. Not awesome!
· You counter with a reasonable request. You agree to pay the $7500 in closing costs if they pay the full asking price of $300,000.
· You have reduced your loss to a more reasonable amount of $7500.
· The buyer is able to make the deal because he/she does not have to come up with $7500 more out of pocket. The buyer is getting a good deal.
· You are getting a fair price.
One thing to keep in mind is that the home will have to appraise for the higher sales amount in order for the loan to be approved.
While this is not a comprehensive list of all the negotiation techniques that can be used in your transaction, these are proven ways to get your house sold in the least amount of time for the most amount of money. As a bonus, when you have clear goals and expectations about what will happen during the transaction, your stress level goes way down! That’s a win!