In this busy spring season, real estate negotiations are the most important aspect of securing a deal for your new home. Even a small mistake can cost you a lot of money or dismantle the deal entirely. You need to have a seasoned pro by your side who is strategic, understands the psychology of both buyers and sellers and has a deep knowledge of the ever-shifting market to secure the best price.
Ever wonder how your real estate agent does it and what goes into it? Here’s my guide on how a real estate agent effectively negotiates a deal for their buyers — and what they need to bring to the table to ensure a successful deal.
[Read: Is It Better to Rent or Buy a House?]
Research on Other Properties
Aside from your real estate agent helping you find the right home, it’s imperative that they are ultimately able to secure you the deal. That takes an extraordinary amount of market knowledge and a lot of research and analysis on comparable properties. Your agent will then take this information into the negotiation with the seller.
For a house in the suburbs, that means knowing the final price for all recent home sales in your neighborhood (for similarly-sized homes and acreage), as well as those currently on the market.
For an apartment, that means knowing the final pricing on all other apartments in the building and similar buildings in the neighborhood, as well as the asking price for other properties currently on the market.
In both cases, this also means understanding the specifics of the potential comparable home, such as its condition, square footage, the street it is on, light, exposures and so much more. No two homes are the same, so having a trusted agent who understands all those nuances is critical in advising you on the bid price.
A good agent should speak to other agents who have sold similar homes recently about the level of traffic, the number of offers the home had and the number of days the home was on the market.
Putting all that research together and communicating that to the seller in the negotiation can be very powerful. For example, “We are offering you x price based on this comparable y property down the street. The other property had a smaller yard, but it was in better condition because the kitchen and two bathrooms were renovated last year.”
Understanding Seller Motivation
A good agent will try to understand why the seller is selling and use that information in the negotiations. For example, if the seller has children in school and wants to wait out the rest of the school year, offering to lease back the home to the seller for a few months after the closing can be a good negotiation tool. They might be more willing to accept your offer versus another higher offer where they are expected to move out immediately.
On the other hand, if the sellers have already bought a new home and are eager for a quick sale because they don’t want to carry both properties for a long time or are selling due to a divorce where both parties will split the proceeds of the sale, then an all-cash deal might be an incentive to accept your offer to expedite the closing.
In cases like these, the terms of the offer might be more important to the seller than the actual sale price. They might accept a lower price to have a quick sale or an opportunity to stay in the house longer, or for another reason that fits their situation. Understanding the other side’s motivation is critical in the negotiation process.
[READ: Behind the Scenes: The Unglamorous Side of Being a Real Estate Agent]
Making a Personal Connection With Sellers
Your broker should try to build a connection between you and the seller. While it’s often the case that the parties do not meet, any chance to forge a relationship can help in the negotiation process.
For example, writing a “love letter” to the seller explaining who you are as a buyer and why you want to buy their home can go a long way. Pointing out specific things you love about the house can engender a feeling of connection and encourage the owner to choose you over other bidders. For example, you could mention that one of your children really loved the decor in one of their children’s bedrooms and dreamed of it becoming their room. Or the fact that you have three sons when the seller also has three sons. Personal details like this can help you connect on a level that might make a difference.
Remember, selling a home can be very emotional and creating a feeling that the new buyers will love the home as much as the sellers have loved it can impact and motivate a seller, especially when there are multiple offers.
[Read: The Buyer and Seller Guide to a Real Estate Bidding War.]
A Note on Contingencies
In a competitive market, contingencies such as inspections and appraisals or needing to sell another home first when bidding on a home can hurt your negotiations. Offering to lock in the price, no matter the results of the appraisal or inspection, can be an important leveraging tool.
Also, having your financing lined up, such as getting preapproved with a bank and disclosing a proof of funds statement that shows you have the funds for the down payment, strengthens your position. With multiple offers on the table, sellers will likely select the deal that they feel most confident will get through the finish line most seamlessly.
Broker Experience and Reputation
Negotiations can get contentious, and the brokers’ professionalism can make a big difference. If your broker gets angry or rude, the seller’s broker might be less willing to engage. Selecting a calm and professional broker will help avoid broker interactions that could potentially blow up a deal.
In most markets, real estate agents know each other after years of working together. If your broker knows the other broker you’re negotiating with and has a good relationship with them, it will help the process go more smoothly. In addition, your broker will likely know something about the other broker: whether they’re a straight-shooter, confrontational or even dishonest. Having a real estate agent who understands who you are dealing with on the other side of the table can help you avoid a bad-faith negotiation. The relationship between the agents can enhance the experience when they know and respect each other and work together to make a deal with which both parties are happy.
Leave It to the Professionals
Remember, your real estate broker is your advocate. Their experience can help you get the best price by having a pulse on the day-to-day market. They also handle the negotiations with the other side, which helps take the emotion out of the process. Buying a home can create anxiety, anger, desperation, frustration and more (on the part of both parties). In negotiations, having a third party take the emotions out of the process results in the most effective outcome. The most crucial factor in negotiating a home purchase is leaving it to the professionals — and ensuring you are working with one!
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An Insider?s Guide to Real Estate Negotiations For Buyers originally appeared on usnews.com
