What are some negotiation tactics you can use to sell your home?

What are some negotiation tactics you can use to sell your home?

Justo Team | September 24, 2019

Do you want or need to sell your house but struggle with negotiating? Does the idea of negotiating to sell your home scare you? Well, this guide is for you and for anyone looking for tips and tactics for negotiating when selling your home.

As you already probably know, negotiating is an essential part of the process of selling your home. An excellent negotiation strategy can help you to sell your home and ensure that you get the best deal possible.

Having a great real estate agent or broker can support and guide you through the negotiation process to sell your home. That should make the process to sell your home this infinitely more manageable and less stressful. But also aim to educate yourself on the art of negotiating. 

With this, you will feel more confident when negotiating with buyers and selling your home. Using the strategies described in this article should help you to feel more confident in negotiating with buyers.

It is important to remember that selling your home is a process. The first step is putting your home for sale. The second step is receiving an offer from a potential buyer. 

Receiving an offer from a potential buyer is an exciting time. However, do not break out the champagne because you still have lots to do in selling your house.

No, receiving an offer is only the first step in the process of selling your home. The chances are that this offer will be somewhere in between horrible and unbelievable. Negotiating with a buyer is usually one of the most challenging parts of the process of selling your home.

You might have read that last sentence and thought, wait for a second, negotiating the sale of your home might be one of the hardest parts of selling your home? Yes, you read that correctly. That is where things might get messy and complicated.

Negotiations in real estate, whether you are buying or selling property usually take the form of counteroffers. That gets done when you cannot accept their offer at this point, but you are willing to negotiate.

Now you (the seller) and the buyer can come to a mutually agreeable sale. In this situation, you need to know what you want and are looking for in an offer. However, if your counteroffer is not accepted, you need to have a Plan B, a minimum that you are willing and able to take.

The proper way to receive an offer on your home and things you should be considering when you receive an offer on your home

There are specific questions you should be asking when you are accepting an offer on your home. These questions are meant to help you figure out whether or not you are receiving a good suggestion. 

1) Deposit: The deposit, how much is it? In other words, does the buyer’s deposit in earnest money constitute a severe offer? A significant deposit, in places like Toronto, this would be an earnest money deposit of 5% of the property’s sale price. This deposit allows the buyer to demonstrate to the seller that they are making a good-faith gesture for their intention to buy the seller’s home. 

The information included with a deposit will provide information about how the money for this deposit will get paid. Is this deposit being paid via check, cash, or promissory note (a written document where you promise to pay a lender)?

What happens to the earnest money if you reject the offer? Will the earnest money be returned to the buyer if you decline their offer? Will you be able to keep a buyer’s deposit as damages if they back out of this agreement without good cause?

2) Price: How much are the potential buyers offering? How does this compare to your listing price for your home?

3) Down payment: Are the buyers offering a liquid down payment, i.e. a Cashier’s Check? Are they paying a down payment in cash or some other means?

4) Terms of the sale: Is your buyer making an all-cash offer or is your buyer’s contingent on them receiving financing from a bank?

5) Paying property taxes, utilities, etc.: An offer might also include a method through which the buyer and the seller will be working together. That is to ensure that property taxes, utilities, rents, etc. will be adjusted and prorated between the buyer and the seller.

6) Provisions for who pays closing costs and other costs: These provisions deal with who is paying for title insurance. It also determines the prices to survey the property if applicable, home inspection, home appraisal, and other closing costs.

7) The target date for closing: The date that your buyer is looking to close by, this is when the actual sale of your home will be happening.

8) Occupancy date: How soon is your potential buyer looking to move into your home? How soon will you need to move out if you have not already run out?

9) Contingencies: Is there anything that could serve as an obstacle for this deal going forward?

It is normal to receive an offer that is not perfect. You might have a situation where potential buyers might be willing to compromise on some things.

That is for the items you want in exchange for things you do not wish to have compromises. You should be making a pro-con list so you can see the pros and cons of accepting a buyer’s offer will be.

What are contingency clauses and why are they important when you are selling your home?

Contingency clauses are additional conditions (this is in addition to the standard legalese that is part of standard Agreement of Purchase and Sale documents). Contingency clauses allow buyers and sometimes sellers to back out of a real estate transaction.

You ideally want to have a few buyer’s contingency clauses as possible in the final agreement and purchase of sale documents. You want to limit how long contingency clauses are valid for and how long that contingency clauses can perform. You want to exercise a lot of caution with contingency clauses. The following are some common contingencies.

Contingent Sale: This clause specifies that your potential buyer(s) will be purchasing your home. It will be contingent on them selling their current home. That is a feeble offer because the sale of your home will be dependent on a whole other set of buyers and sellers and a situation you have no control over.

Financing: Your potential buyer(s) purchasing of your home will be contingent upon them receiving new funding. If this buyer has been pre-approved, this might lead to little cause for concern.

Timing: This clause means that this real estate transaction proceeding is contingent upon buyers being able to move into your home in a certain period.

Disclosures/Inspections: This disclosure means that buyers will only agree to purchase your home only if they approve your disclosures and the report from a professional home inspector.

In other words, this contingency could take the form of buyers wanting to have a contingency plan. It applies when they want to see a home inspector’s report proving your home is safe and in good condition. 

Another contingency might happen if a buyer is securing financing from a bank or financial institution and needs to have your home professionally appraised. This contingency would focus on your home’s fair market value is equal to or higher than your home’s agreed-upon sale price. In these cases, buyers will ask for a specific period.

Typically this is a few weeks. When you put a time limit on contingencies, you are forcing buyers to act more quickly to remove any emergencies that could potentially prevent a sale from happening. You probably will not be able to sell without this contingency. [Inspection Checklist when buying a home in Toronto]

Questions to ask yourself when receiving offers with contingencies:

  • Is the contingency plan being requested reasonable?
  • Does the contingency negate the value of the offer at hand?
  • Will I be able to live with this contingency or should I do my best to limit this contingency, insisting that it gets completed during a set time? 

Your options when being presented with an offer to purchase your home and how to approach this negotiation process

When an offer to buy your home comes to you, as the seller, you have three possible options.

  1. You can accept the offer to purchase as written with no changes, modifications, etc.
  2. You can wholly reject the offer. You might consider rejecting the offer and asking the buyer to submit a completely new offer.
  3. You can always reject this offer and create a new counteroffer of your own for your potential buyer.

You must know as a seller that you cannot both accept an offer from a buyer and then make changes to the proposal. That applies if you have received from a buyer to suit your needs better.

As soon as you make any changes, modifications, etc. to the buyer’s offer, it gets presented to the buyer as a whole new offer. Buyers have every right to walk away from this transaction.

It is recommendable that when having an offer presented to you that you never wholly reject a potential buyer’s offer. Do not do it without offering a buyer an opening to provide you with a counteroffer. Ask for something closer to what you (the seller) and the buyer wants out of this transaction.

You can use all of the negotiation tactics or strategies you want when trying to sell your home. But you need to be willing to be open to negotiating with potential buyers. However, if you respond with a flat out no or rejection to a buyer’s initial offer, you are not providing them with the space to return with a counteroffer.

If you are unable to do such, you probably will not receive your dream offer on the first go-round of negotiating. Expect that you will be negotiating with the buyer. You might only negotiate over big things or a million little things with a potential buyer.

Be prepared to go back and forth with a potential buyer until you both reach a point of agreement. That is when you enter a position that is mutually agreeable for everyone involved or someone walks away.

Here is something to consider when you are selling your house. Consider the following situation since it is analogous to selling your home.

Are you a person who has ever been in a situation in a market or marketplace where you are negotiating over the price to buy something? That could be anywhere; a flea market, craft fair, food market, spice market, etc. You might go in with a goal that you want to buy X. 

You might see various vendors selling different variations of a particular product, with different price points. You might go around and survey the market, seeing what is available, and noting that you liked what certain vendors had to offer more than what other vendors had to offer.

You might consult a few vendors, inquire about prices and get a feel for who they are. You will know if they are willing to negotiate. And see if you like the quality of whatever they are offering, etc.

After this initial survey of your options, now consider offers. You might then revisit a few vendors. At this point, you might be getting closer to deciding on what you are going to buy and whom you will be getting into the business. 

Now comes the time when you pick your vendor. At this point, this is where you begin the back and forth negotiations over the price and other things.

Consider this when you are in a marketplace negotiating the price of things. In this situation, you would be the vendor selling their goods and your potential buyer is making an offer. If then you are not willing to negotiate, your potential customer might walk away. The chances are that they will go to buy something from another vendor. 

On the other hand, take this if you are the buyer. While speaking with the vendor, discover if they are willing to negotiate with you on price. The chances are that you will be more willing to stick around and eventually buy whatever you were planning on buying from them.

If you build up a rapport with a vendor, you might even buy more from them, spending more than you had initially planned. That tends to hold if you make it clear to the seller that you are particularly interested in what they are offering.

In these situations, the sellers who are willing to negotiate and work with buyers tend to be pretty successful. They might not sell whatever they are offering at the price they had initially planned. But it goes otherwise if they are skilled negotiators and can build a rapport with buyers.

They might even convince buyers to buy whatever buyers were planning on buying as well as additional items. You might be wondering, so what does this mean for me?

Take note of this if you are flexible (within reason, of course, you do not have to capitulate to a buyer’s every single demand). Create the space for negotiating; you might be more successful and could be able to sell your home more quickly.

You might be wondering ok, so how do I make space for buyers to negotiate and provide me with a counteroffer that is closer to what I want? 

The four major areas where you can expect to negotiate with buyers when selling your home

First, as mentioned earlier, whenever you can, you should provide a potential buyer with the opportunity to go back to the drawing board, and present you with a better offer. There are four major areas where you can expect to negotiate with buyers when making counteroffers.

  1. Price
  2. Terms of the offer
  3. Occupancy (The date when you need to vacate your home and the buyer moves in)
  4. Contingencies

It is important to remember that if you a counteroffer in even one of these four areas or another area, you will have technically rejected the buyer’s offer. Making a counteroffer in one area means that you have rejected theirs.

That means that buyers might decide they want to change something else or they might even walk away from this real estate transaction. You need to prepare for the possibility that a buyer might walk away from this transaction during the negotiation process. 

The four most common ways that you can counter an offer when negotiating with potential buyers

Counter the price; the buyer is offering to pay

The price might be one of the biggest concerns a potential buyer might have, and you will have as the seller. Remember that you might find the buyer to pay one price and the buyer might want to spend another cost, be prepared to negotiate over the final price. Yes, you as the seller are allowed to want to have a buyer to pay a specific amount but do not be greedy when pricing your home to sell. 

If the buyer is presenting an offer that is not in line with the value of your house, then you can reject their offer. You can also give the buyer a counteroffer that is more in-line with what you are hoping or expecting for them to pay. 

Countering the terms of the offer

That might surprise you, but like the seller, you might have the most excellent flexibility when negotiating with a potential buyer over the terms of their offer to purchase your home. In many cases, buyers will be receiving a new loan and are probably planning to make a down payment in cash.

However, there might be situations when the buyer will ask you if you are willing to participate in owner/seller financing. In this, you keep the title of your home and sell it to them and act as their lender. 

In this scenario, you might carry some part of the financing. A lender might give your potential buyer 70% of the final sale price to buy your home, but you are covering the other 10-30% of the purchase price of the house. 

With owner/seller financing, the seller/owner of a property provides a potential buyer with sufficient credit to cover the home’s purchase price less any down payment. Then the buyer would make a regular payment to the seller. With seller/owner financing, the buyer would sign a promissory note with the seller.

A promissory note is a legal document that specifies the terms of the loan. It states things such as the interest rate, repayment schedule of the loan, and what consequences a buyer might face if they defaulted on the loan. In some cases, with seller financing, the owner might be able to keep the title of the home until the buyer pays off the loan.

Seller financing is risky and usually meant for buyers who are unable to qualify for a traditional mortgage from a bank or financial institution. Ideally, you should consider offering seller financing if you own your home outright, do not have a mortgage or any liens on your home.

The shorter the term for the loan that you offer the seller and the higher interest rate means that you could stand to make money. You should consult a real estate broker and attorney before you even consider offering seller financing to a potential buyer.

Countering the buyer’s desired occupancy date

If you are serious about selling your home, be prepared to be flexible with timing. In other words, be ready to move out sooner than you might have anticipated if this is what you need to do to sell your house. Flexibility is a vital negotiation tactic you can use when selling your home. Being flexible when negotiating with buyers over the occupancy date or other things.

Countering the buyer’s contingencies

When negotiating with buyers and dealing with counteroffers, there are two approaches you can use when handling unwanted contingency clauses. 

You can be straightforward and direct, crossing out the contingency in the buyer’s offer because you will not accept this contingency clause. The honest approach demonstrates your position, but this approach might upset a buyer and lead a potential buyer to walk from the deal altogether.

The alternative approach you could take for contingency clauses is more diplomatic. You might consider a contingency in two ways. You could find limiting an emergency time-wise, specifying the work to remove a contingency, needs to be completed during a specified period.

You also might consider limiting a contingency by cost. Agree in your counteroffer that you are willing to pay. That is for the expense related to certain things but up to a certain amount. You will only pay up to a certain amount.

Negotiation tactics you can use to help you sell your home.

First, bring in a real estate or broker to represent you as the seller

That should seem like a no-brainer. Having an experienced real estate agent or broker represent you as the seller will make the process of selling your home and negotiating with buyers much more comfortable. An experienced agent or broker will be able to tell you how much you should list your home. The agent shall know how much you can realistically expect to get for your home. 

A great agent will be there to advise and support you during the whole process to sell your home and can guide as you negotiate with potential buyers.

Second, price your home appropriately

You should be consulting a savvy and experienced real estate agent or broker who has experience in your area about how much to list your home. It is essential to list your home at a reasonable price. The listing should be following your home’s fair market value.

Also consider what people are willing to pay and what other comparable sale prices are, etc. You should be pricing your home based on what your home is worth or how much you might be able to get for your home realistically. 

You should not be greedy in pricing your home. Do not price your home to ensure that you get however much money you need. If you are unsure about how much your home might be worth, you can consult a real estate agent. You can also look at recent sales of comparable homes in your area. Using this information can help you determine a fair asking price for your home.

Consider getting a home inspection done before putting your home on the market

That might sound like an odd concept, paying for a home inspection before you put your home on the market. You might be wondering why you should consider doing this? Getting a home inspection before you put your home on the market will put you one step ahead of potential buyers. 

A home inspection can help you learn about potential issues that your home has that you might not have otherwise known. A home inspection can help you uncover problems related to your home’s structural integrity. It can expose issues with your plumbing or electrical systems, or other potential safety or security hazards.

 Armed with the information from a home inspection will allow you to fix some of the issues with your property that a home inspection uncovered. Getting a home inspection will allow you to gain insight into the condition of your home.

That makes sure that you are not surprised when a buyer informs you of the existence of defects in your home. Investing in fixing some of the problems uncovered by a home inspection can help you in a lot of ways. You can avoid having to capitulate to buyers’ demands that you repair or replace expensive defects in your home.

Consider countering a buyer’s initial offer and putting an expiration date on your counteroffer.

It is usual for buyers to expect some back and forth to negotiate over the sale price. That usually happens if their initial offer is lower than the listed price for the home and if they are low balling the seller.

If you think that a potential buyer might be willing to negotiate with you, consider presenting them a counteroffer that is more in line with what you need. That is if their initial offer does not have what you want. You might even consider putting an expiration date on your counteroffer to provide potential buyers with a sense of urgency when negotiating with you.

Know your BATNA (best alternative to a negotiated agreement)

Before putting your home on the market, you should figure out what is your best option to a negotiated settlement (BATNA). That serves as your Plan B in case you are not able to come to a deal with a potential buyer. Knowing what your ideal BATNA is will put you in a position of power to negotiate as a seller.

Your best alternative to a negotiated agreement to sell your home could involve you renting your home and trying to sell your home later. You might consider renovating your home and staying as well. Reminding yourself of what your BATNA is can serve to prevent you from saying yes to a deal that is not good for you out of desperation.

Leave your emotions out of this transaction.

Staying unemotional when selling your home is a big ask, but keeping a cool head and remembering that this is a transaction will help you to negotiate more successfully. The chances are that you have invested a lot of time and money into your home. You might have become emotionally attached to your home.

You might feel insulted if a buyer comes to a negotiation with a laundry list of repairs that they want you to do before selling your house to them. You risk allowing your emotions to sabotage your consultation with a potential buyer. That is if you let this bother and trigger an emotional response. Instead, respond with action grounded in logic or reason.

We recommended that you do your best not to get emotional when buyers request repairs. A buyer’s request for repairs is not personal; this is a business transaction. You need to consider these requests logically instead of emotionally.

If you are a skilled negotiator, the chances are that you know how to identify and redirect your emotions. You can simultaneously draw out a positive emotional response from the other party/parties involved.

Offer to include a warranty

You can offer to add a warranty to help assuage potential buyers’ fears about having to spend exorbitant amounts of money on maintenance after buying a home. Providing a home warranty is one way that you can help buyers feel more secure when purchasing your home.

Warranties are not relatively expensive, considering they start at $300 or $400 a year and are not as expensive as home insurance, but they will cover major systems and appliances. It might even be more comfortable to offer a warranty than it might be to negotiate with a buyer after they have received the report with findings from the home inspection.

Consider offering to cover a buyer’s closing costs

If you want to sell your home, you could consider contributing to cover your buyer’s closing costs. That can range from anywhere from 3% to 5% of the home’s purchase price and can include many seemingly unnecessary fees. In many cases, buyers might be feeling sick with paying a large down payment, moving costs, buying furniture, appliances, etc.

In some cases, buyers might not be able to afford to close on your home unless the seller is covering their closing costs. [How much are closing costs in Toronto?]

Covering a buyer’s closing costs will help buyers who do not have the extra money. That is also helpful for those who do not want to spend additional money to move into your home.

But it might work for who those who can borrow a little more to compensate for this increased sale price. In other words, this might help your transaction go more smoothly. That is if you are willing to provide buyers with the cash, they need to cover their closing costs. 

You can present to a buyer a counteroffer that has an increased purchase price, even if this is above your list price. That is if and when you receive an offer from a buyer who asks you to cover their closing costs. If you are willing to do this, then feel free to proceed.

The buyer might not realize that in asking a seller to cover their closing costs, they are lowering a home’s sale price. But if you are the seller, you will see this reflected in the bottom line.

You could then consider increasing your asking amount by enough. That is to ensure that your sale price minus closing costs will be as high as your list price. Consider the final price after you pay the buyer for their closing costs. 

Something to consider is that the price to buy a home plus closing costs will need to be supported when your home gets appraised. That is so you can avoid lowering the price later to close the deal.

Things like this typically happen when the lender for your buyer is not going to lend your buyer money to buy an overpriced home. [Differences Between a Home Appraisal and a Current Market Assessment in Ontario]

Do not overshare with a buyer when selling

That should go without saying, but if you are desperate to sell or in some other vulnerable position, do not let buyers know this. You do not need buyers knowing your business, personal, financial, etc. If buyers know your business, this could potentially put you in a weaker position when negotiating and end in an unfavourable deal for you.

Be creative when negotiating with buyers.

Sometimes you need to offer something else to a potential buyer. That is if you are close to finalizing the negotiations to sell your home. You might need to be creative in your negotiations. You might even consider including furniture or other extras for buyers.

The chances are that being creative in your negotiations might give you the little bit of momentum necessary to help you close the deal.

Be open to negotiating but know when to walk away

Know when to walk away too. Being always open to negotiating with potential buyers is not bad. You might want to create the conditions to receive as many reasonable offers as possible. But always be wise in making a decision.

If a potential buyer is unwilling to offer you what your home is worth or the negotiation will result in an unfavourable deal for you, be prepared to walk away.

Things to consider when negotiating with buyers and selling your home

Accepting a buyer’s offer

Ideally, you will benefit from learning about and employing some of the negotiation tactics for selling your home discussed in this article. You might think like a seller, the final part of this process happens when you accept a buyer’s offer and sign the Agreement and Purchase of Sale (APS) document. However, this is not the case. 

Technically, you the seller, have not accepted an offer until both parties, the seller(s) and the buyer(s) sign the same Agreement and Purchase of Sale (APS) agreement. Until you sign the offer presented by the buyer(s), you can technically refuse to accept an offer.

Be aware that you still might be liable for paying the real estate agent or broker a commission. It is important to note that even if the offer given to you contains the price and terms you listed your home.

The real estate transaction to sell your home still has not been finalized when you the seller, sign the offer presented to you by the buyer(s). The deal to sell your home starts to become more official when you or a real estate agent or broker communicates the fact that you have signed.

When this happens, the real estate agent or broker will usually immediately call the buyer(s) to inform them that you have accepted their offer. They then will give the buyer(s) the copy of the sale agreement which you have signed.

Technically, a buyer can withdraw an offer at any time before they learn that you (the seller) have accepted their offer. As a seller, you can technically withdraw a counteroffer at any point before you learn that a buyer has received it.

Why you need to always keep copies of the signed Agreement and Purchase of Sale documents (APS)

The real estate agent or broker you are working with or the buyers have to give you a copy of everything that you have signed. You need to be sure that you are getting a copy of the documents that you have signed and hold onto these documents.

You can relax a bit after the purchase agreement has been approved and delivered. But you technically have not sold your home until the title has been recorded. And of course, if you have received your money for selling your home.

Conclusion

Hopefully, after reading this guide, you will have gained greater insight into negotiation tactics and strategies you can employ when negotiating to sell your home. However, it should go without saying that preparing everything beforehand should help you to sell your home.

If your home is not appropriately priced or not in excellent condition, you are not going to be able to expect buyers to stay around and negotiate with you. If your home is not appropriately priced and is falling, you can expect many potential buyers seeing your home to walk away. They might never put in an offer.

That might sound harsh. But if a prospective buyer is not excited about your home, these negotiating tactics won’t mean anything. It won’t help you if a buyer has not fallen in love with your home. 

What this means for you is you should take some time to get your home ready to sell and stage it a little bit. Home staging and getting your home prepared to market should not be expensive. But making a small investment in staging your home will go a long way.

That will make it easier for you to sell your home. [How to stage your Toronto home to boost price?]

If your home shows well, you are in a position of power when negotiating with potential buyers. If buyers can easily in love with your home, they will be more likely to consult with you. You can now capitulate your desires, which will help ensure that the negotiation tactics described in this article will work for you.

Finally, it is essential to remember that selling your home is a process. So, you should be prepared for the negotiation process to possibly take longer than you might have otherwise planned for or expected. It might take you some to negotiate with a buyer for everything to be sorted out and settled.

That is true if you are working with a buyer who will be receiving financing from a bank or other financial institution or who is making an all-cash offer. Patience and flexibility will help make this process more comfortable and less stressful for you.

Justo
By Justo Team

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