Negotiating From The Ground Up

Effective negotiators, on the other hand, employ their skills regardless of the situation. The trick is to maximize every advantage that comes your way.

Here, you’ll learn how to be impactful in a disadvantaged situation so that you can achieve a win-win outcome.

Understanding Buyer’s and Seller’s Markets

There are episodes in the housing market when sales are high or low. For instance, in the early 2000s, most property buyers complained about an aggressive seller’s market. Despite many willing buyers, property agents still capped high rates on behalf of homeowners.

Five years later, the ball shifted to the buyer’s market. A demand-supply imbalance invoked complaints from property owners that sellers took advantage of them.

Here we look at two scenarios of home markets:

Buyer’s Market

It happens when there are more available homes than are buyers to purchase them.

Housing costs fall, and apartments may have no buyers for long. As a result, sellers must outshine one another to boost sales.

Sellers may lower their listing rates and are more willing to bargain offers to gain competitiveness.

Seller’s Market

Buyers exceed available homes in this scenario.

As a result, the sellers have the advantage, and buyers must compete for the best real estate deals. Furthermore, competition may cause prices to rise, resulting in a quick turnaround time.

Negotiating From a Weak Position

New homes on the property listings often generate multiple offers from different buyers. Such a situation is likely to hike the property’s price above the fair market value.

If you are bidding for a property with multiple offers, here’s what you should do:

Determine the Price Beforehand

You can use comparative sales data to establish an estimate of what you’ll pay on the other end. This way, you can set a bid amount relating to the fair market value.

Understand the Seller’s Motivation

Sellers may not know how long you’ve been searching for a home or how cash-starved you could be. They have an overriding motivation that propels them to sell the house.

They’ll have several offers and only select what benefits their terms, price, or contingencies. Therefore, you should understand the seller’s needs before placing your offer.

Captivate the Seller’s Attention

Putting down a higher bid than your competitors isn’t the only way to entice sellers. There are other alternatives you can employ to increase your success.

For instance, you can put down 30% instead of the usual 20% deposit during your mortgage application. Sellers will therefore have the assurance that your mortgage will obtain approval.

You can also allow the seller to rent back the property at a subsidized cost a few months after the sale. You could also reward your seller by giving a longer close of escrow so that they have enough time to find an alternative residence.

Another option is to buy the property in its current condition. If there are any corrective works, you’ll take responsibility at no extra cost to the seller. However, be sure to include an inspection contingency so that you get off the deal if the property requires costly repairs.

Make an Offer Ahead of Others

Buyers who emerge victorious in bidding wars always place their bids ahead of their competitors. So, in a multiple offer situation, you’re likely to win if the seller receives your offer before others.

Get a Loan Preapproval

A mortgage preapproval puts you ahead of other buyers whose financial status is doubtful. Moreover, sellers will not waste time reviewing offers from buyers who can’t qualify for a loan. So, if you have it, you won’t waste time bargaining a house you can’t afford.

Avoid Risky Contingencies

A contingency can work to your downfall if not carefully thought.

For instance, if you must sell your current house to obtain a deposit for the new purchase, you could be in trouble. You’ll be competing against buyers who don’t have a similar contingency. In a multiple offer situation, sellers would instead go for an offer not subject to a sale contingency.

Have a Ratified Offer on Old Property

If you have an old house to sell before buying a new one, be sure to have a ratified offer. Therefore, you’ll place the old property in the market beforehand, accept offers from buyers, and sign a deal. That way, you’ll have a stronger negotiating position, despite a subject-to-sale contingency.

In addition, you should have a longer close of escrow and a right to rent it back for a few months after the sale agreement. Thus, you’ll have ample time to find another house and resettle.

Negotiating From a Low Position - Way Forward

Throughout your negotiations, you don’t have to be a property expert to ascertain whether it’s a buyer’s or seller’s market. All you have to do is pay attention to the latest property listings.

Additionally, you should understand the seller’s motivation, have loan preapproval, and avoid risky contingencies in a multi-offer market.

These insights will assist you in developing a strategy to obtain the best possible price for the property.

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