What Are The Common Mistakes Made When Negotiating An Offer?
Success in real estate is often determined by two things: determination and a willingness to negotiate. After all, the ideal home rarely pops up during your first search and the right deal rarely presents itself without you asking for what you want.
If you already have the determination to buy in the immediate future, then you may need to brush up on your negotiating skills. Fortunately by doing so, you’ll learn key strategies for working with sellers and can then determine how far you can push back without taking things too far.
Where should you begin? One of the most important things you can do is learn about the market conditions and understand what’s involved when buying a house. This will give you an edge when it comes to negotiating, especially if you are in a buyer’s market (where there are more homes for sale than buyers).
You can use the facts about the area to determine what a fair price truly is and get an idea of whether your counter-offer is reasonable. However, if you’re buying a seller’s market (where there are more buyers than homes for sale), there will be less room for negotiation and you’ll therefore have to change your strategy.
With so many variables in play in each buying/selling scenario, it’s impossible to determine how any negotiation will go beforehand. This is why it’s so important to learn key negotiation strategies ahead of time to prepare yourself. By doing so, you’ll put yourself in a position to more smoothly navigate any real estate transaction in the future, no matter what type of buyer or seller you’re up against. To further prepare you, take a look at the biggest mistakes to avoid listed below.
Threatening With an Ultimatum
Although it can be tempting to give someone an ultimatum in a real estate transaction, it’s important to realize that there’s always a third option: to stop the negotiation. Being so aggressive certainly can result in an accepted contract, although it could come with the caveat of the other party becoming defensive and it could be a reason why the deal may fall through.
As a result, they could make closing difficult or even threaten with legal actions in the future. For these reasons, it is best to avoid this tactic all together.
Being Too Greedy
Nobody wants to leave a deal knowing they left something on the table, but in real estate, this can become a major downfall. If you’re always trying to get more without a willingness to give, then you’re likely to push people away. Ultimately this can lead to missing out on some great deals just because your pride took over.
Being Afraid to Lose
While nobody likes to lose, it’s important that you don’t let your determination to win take over the negotiation. If you always have the need to “win” over the other party, then you’re only going to end up disappointed and missing out.
Keep in mind that both you and the other person are working towards the same goal, so ultimately both of you are going to “win” in the end. If you lead with this mindset, then you’re more likely to have positive experiences and more opportunities in the future.
Making Your Needs a Priority
It’s certainly important to get a few things you want in a negotiation, but this shouldn’t be your main focus. If you want to have a smoother transaction, then it’s recommended to get to know the other party.
What do they care about? What do they want? By learning more about their needs, you’ll be more likely to find common ground that can lead to a deal that’s satisfying for both of you.
Only Focusing on Price
It’s no secret that both parties in a real estate transaction are interested in money as their main objective. However, making this your only focus can mean missing out on other ways to get a good deal.
Have you thought about services or products you could trade to make up for a less than ideal price?
For example, if you were purchasing a home that the seller wouldn’t budge on price for, perhaps you could ask for furnishings such as a washer, dryer or fridge to make up for it. You could also ask for better terms, as there are many options for things you can negotiate with.
Controlling the Situation
Taking control of the situation is sure to make you feel stronger, but have you considered how this will affect the other party? It’s likely that they’ll feel weak and therefore may back out of the deal.
By allowing yourself to look humble while they appear to be in control, you will be giving them confidence that they’re making the best decision possible. As a result, you’re more likely to get a fair deal.
Letting Your Emotions Get in the Way
When the other party in the negotiation sees that you’re emotionally attached and need a deal to go through, you’ll be putting yourself at a major disadvantage. They may use this as a way to gain an edge over you in the transaction.
To avoid this, make sure to check your emotions from the start. You should care, although this shouldn’t be what controls the situation. An excellent way to put things in perspective is to write down alternatives in case the deal doesn’t work out. With that you’ll be able to fall back on other options and won’t allow emotions to be your deciding force.
Thinking You’re Prepared
Confidence is great, but too much confidence can hinder your ability to effectively negotiate. Don’t assume that you’ll be able to counter an offer without first doing some research to back up your reasoning for the price.
To better prepare yourself, you’ll need to write down points, practice what you’ll say, and even bring notes with you. By taking the time to do this, you’ll have better reasoning and will be able to minimize errors.
Overreacting to Offers
When you first receive an offer, it’s important to read through it and deeply consider all of the pros and cons. Even if you don’t particularly care for it, don’t overreact as your first response.
Clear your mind, let your emotions subside, and then move on to determining a counter that makes sense for you.
Being Self-Conscious About Your Image
It’s beneficial to think about the other party in a real estate transaction, but you shouldn’t let worry about offending them get in the way of you making your offer. No matter what you are prepared to give them, bring your confidence and the research to back yourself up.
Even if you plan on submitting a low ball offer, let them know that you have done your homework and based on the facts at hand, your offer represents a fair market value. With that, the other person may be more likely to work with you and might even accept your offer quickly.
Closing a real estate transaction, whether it’s a purchase or a sale, is never cut and dry for both the buyer and seller. There are many details that can get in the way, especially with both buyer and seller having expectations they’d like to have met.
By being realistic with yourself and realizing that negotiations could potentially be tough, you’ll find that the process goes much more smoothly. Even difficulties can be overcome by those who are willing to stick with it and use their determination and negotiating skills to follow through.
Other Helpful Real Estate Negotiation Resources
- Common Real Estate Contract Contingencies
- 8 Great Negotiating Tips For Real Estate via Paul Sian
- What Are Some Unrealistic Home Inspection Requests via Bill Gassett
- Tips For Making An Offer On An Overpriced Home
This article, “Top 10 Negotiation Mistakes To Avoid In Real Estate” was provided by Joe Samson, a Calgary AB real estate professional with CIR Realty. Joe actively blogs on his website, JoeSamson.com. He is also active on many social media websites including Twitter, Google+, LinkedIN, and Facebook.
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