Three Things All Hub Sellers Should Negotiate, Even if They Have Multiple Offers
David Bates / August 23, 2017-12:57 pm
My buyer put in a full price offer on a Hub condominium, and something unusual happened: the seller countered at an amount that was even higher than his asking price.
“Incredible!” I thought.
That informal welcome to a seller’s market five years ago did not end with the seller’s suggestion of an amicable sales price. Instead, the seller, a lawyer by trade, basically re-wrote all the aspects of the buyer’s offer.
The buyer was left with a choice: move like The Flash and deposit like Bill Gates or do neither and hope that other buyers, who were sure to be on the seller’s doorstep the next day, would not be willing to pay even more than the seller was asking for right now.
My buyer took the deal, and I took to heart the seller’s approach to the negotiation.
Far too many times after hearing an acceptable price, I had seen sellers check out of the negotiation as if they had just crossed the finish line of the Boston Marathon. That was just too bad.
Considering the amount of real estate deals that fall apart, sometimes the price is not the most important facet of the deal to negotiate. After all, a seller does not need a great price only; they also need a sale that closes.
So, to assure themselves that they are taking the best possible offer, after negotiating a purchase price, all sellers should negotiate two other important aspects of the offer: anything with a date and anything with a number. They should do this even when—especially when—they have multiple offers, a common happening in this ongoing sellers’ market.
Negotiating these areas improves the chances that an offer will stick, limits the amount of risk a seller takes on when accepting an offer, and allows the seller to gain additional leverage between the day they accept the offer and the day they go to closing.
For the seller, the sooner things happen, the better. Why wait ten days for a buyer to do a home inspection when the buyer could do it in three or five days? Sometimes, the home inspector is even available the day after an offer is submitted. How great is that? If the home inspection uncovers a deal-killing item, the seller can quickly go back to runner-up offers. If, on the other hand, the inspection results were not available until ten days later, many of the other potential buyers who made offers will have moved on, either emotionally or literally, to other properties.
The same goes for adding speed to the purchase and sale agreement date. When buyers move that date up, sellers get a final contract and an additional deposit sooner.
Sellers should also emphasize a need for speed in the buyer’s mortgage commitment date. Once the buyer gets a loan commitment, the closing becomes home free. Why wait five weeks when some lenders can do it in four or even faster?
Additionally, if a property is vacant, the seller reaps many benefits by getting the buyer to speed up the closing date. After all, for each day the seller carries a vacant property there are prorated costs associated with mortgages, real estate taxes, condo fees, and utilities. Why should the seller absorb those costs—which can amount to thousands of dollars—when closing sooner assures that the buyer pays them instead?
Note that time is not a seller’s friend, it is his or her enemy. Anything can happen in the future: interest rates could jump, a pipe could burst in the property, a crime could happen on the street, or the buyer could get laid off. All these issues, as well as many other happenings, could have a devastating impact on the prospective sale. However, sellers can minimize the future risk by having the buyer move as fast as possible.
Another benefit of having the buyer move fast is that it tends to minimize the anxiety buyers might have surrounding the purchase. In other words, the buyers are so busy trying to meet the compressed timeline that they do not have time to get nervous. Additionally, if the buyers do give into fears and terminate the transaction, at least the seller knows as soon as possible.
In addition to negotiating all the dates, sellers should negotiate all the areas in the offer where there are numbers.
Why should the seller take a $500 or $1,000 deposit with the offer, when it might be possible to get the buyers to provide a $2,000, $5,000, or $10,000 deposit with their offer?
Why should the seller ask for a 5% deposit at purchase and sale when it might be possible to get 10%?
Deposits are leverage. It is the possible loss of a deposit that gives a buyer pause in backing out a deal. Therefore, it makes sense that the bigger the deposit a seller gets, the less likely a buyer will be to back out. For that reason alone, sellers should try to negotiate bigger deposits. Additionally, if a buyer does back out for reasons outside their contingencies—and it does happen—by taking a larger deposit, the seller may be able to collect more in damages from the buyer.
A final number that sellers should negotiate concerns the home inspection. In some offers, buyers communicate that they will not invoke their inspection contingency to terminate a transaction unless the inspector reveals that repairs will exceed a certain dollar amount. Negotiating that number up has several benefits. Of course, it can save the deal altogether, but it can also limit the amount of negotiation the seller has to do to satisfy the home inspection. Additionally, a high number saves the seller the time, hassle, and costs of either making nominal repairs or compensating the buyer for not making them.
In summary, the three things to negotiate in every home sale are the following:
The final sales price.
Any date in the offer (move it up).
Any other number in the offer (make it higher).
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