Tag Archives: real estate negotiations

A Failed Strategy

AgentLogo by James Stefanile, ABR, GRI, SRES, QSC, gCertified, REALTOR/salesperson, Prudential New Jersey Properties, Montclair Office

I am obliged to carry out my clients’ wishes, whatever they are, and I do so willingly.  However, it is worth noting a buyer strategy which is quite common and equally unsuccessful.

The market naturally see-saws from buyer advantage to seller advantage and back again with the ebb and flow of market and economic conditions.  Right now we are in a transitional period, in my view, where sellers are re-claiming the upper hand after the recession when buyers had all the advantage.  Currently, I consider the advantage between buyer and seller in real estate to be about equal.

Whenever the advantage shifts there’s always a lag before everyone sees the trend,  During that lag time buyers and sellers often exhibit behavior out of step with the new reality. I think that’s what’s driving some buyer behavior recently.  Purchasers, in some cases, are holding back money, low-balling the initial offer and are very stingy with their counter offers, even in the face of comps that don’t support their position.  I know, I know – no one wants to throw too much money at a property and pay too much.  On the other hand, the object of the exercise is to successfully purchase a property and I can tell you through bitter experience that being too circumspect has never worked.

Sellers are not immune from bad negotiating strategies.  Miniscule counter offers and other obstacles occur among sellers and those ploys are equally failure-prone.

For buyers, to put it bluntly, if you want to buy the property then buy it.  Acknowledge the reality of the situation you’re in: If there are multiple offers, be aggressive.  Buyers who submit weak offers in the face of competition always fail – let me repeat that – they always fail.  If you are the only offer on the table it’s ok to offer less than the asking price but use common sense.  Expecting a seller to either part with a property for a ridiculously low price or negotiate in good faith in the face of such an offer is unrealistic.  The seller will reflect your strategy back at you.  If you offer a low ball price the seller will probably counter with a tiny reduction, if the seller counters at all.  Once negotiations proceed, tortuously, in baby steps you can be pretty sure the rest of the transaction will be just as difficult, if it proceeds at all.

Most properties with multiple offers sell for at or above the asking price.  Most negotiations, whatever the situation, if they proceed slowly, will guarantee failure as the seller gets a better offer while we’re dithering around or will give up on the overly conservative buyer.  When a buyer is playing it safe and negotiating by doling out money in tiny handfuls the seller knows very well there’s more money under your pillow without anyone having to tell him or her.  That leads to resentment which does not lead to success.

Even when there is no competition, that can change in the blink of an eye.  The object is to nail down this deal before another buyer shows up and dazzles the seller.  The way to do that is to start with a realistic offer and negotiate strongly in terms of money, keep the seller engaged and optimistic and make the seller feel good about you and prompt the seller to respond in kind.  You won’t necessarily spend more than you should with this strategy but you will stand a greater chance of success.  The longer the negotiations linger, the more incentive the seller has to continue to show the property hoping he or she finds someone more likeable than you.  Also, if it has taken forever to get to a meeting of the minds on price, it can still all go away during attorney review if the seller gets another offer from a buyer he thinks is less difficult.

It’s easy and all too common to lose sight of the goal (purchasing the property) while we practice our alpha male or alpha female negotiating skills.  I often see buyers trying to flatten a seller into submission.  Again – never works and it shouldn’t.  The objective is not to see the other party beaten and bloody.  The objective is to arrive at a meeting of the (hopefully mature) minds where everyone is as satisfied as possible and is willingly proceeding with the transaction. Be assured, I am counseling my sellers in the same way to avoid immature behavior and to deal realistically and fairly.

Please ignore what your parents taught you about haggling and bartering.  Their well-meaning advice is rooted in another time.  The stories they tell you are probably only half-true anyway and, as the world matures, we have to mature with it and deal with each other like fair-minded adults.

In June of this year Prudential New Jersey Properties will become Berkshire Hathaway Home Services New Jersey Properties, part of the amalgam of companies owned by Warren Buffet.  The Montclair office where I work will also move to a brand new office space in Montclair at the same time.  I’ll have more to share on this transition as we approach the event.  The one thing that won’t change is me.  Whatever letterhead I’m using, you can expect the same level of service – and the same opinionated rants you enjoy in this blog.

Berkshire Hathaway

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The Last Hurdle

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by James Stefanile, ABR, GRI, SRES, QSC, REALTOR/Salesperson, Prudential NJ Properties, Montclair, NJ

One of the last steps in any residential transaction is the resolution of any home inspection issues.  Here are some guidelines for both buyers and sellers that may make the process smoother and a bit saner:

For Sellers:

Don’t be stubborn:

The buyer has the right, not only to the home inspection itself, but to request repair, remediation or credit for issues of concern.  You, of course, have the right to say “no” to any request but you should evaluate whether your refusal will derail the transaction.  If you’re ready to reject this buyer’s requests (and probably the entire transaction) you need to think ahead to the next buyer who will probably bring up the same issues.

Preemptive action is best:

You should consider having  a home inspection of your own, paid by you, before the house is on the market.  It’s an expense that will pay for itself in value.  You will know of any issues before the property is exposed to the market and you can, either, have them fixed, or, quantify the dollar amount and have that information ready before any buyer brings it up.  Isn’t it better to have this information beforehand rather than scrambling in the middle of a transaction?

Quantify:

Obtain contractor evaluations and estimates of your own for any issues you discover or for those discovered by the buyer.  You  may need these to counter a buyer’s contractors’ high-priced estimate.

Consider a home warranty:

A home warranty is like an insurance policy that you, the seller, would buy.  You are insuring selected systems and appliances which protect you up to the closing and it covers the buyer for 1 year from the closing.  The cost is usually $400 or so.  It can be good leverage in negotiating home inspection issues.

Entrance at your pleasure:

Anytime the buyer wants entry to your home it’s your right to grant or refuse.  The buyer does have the right to call in contractors to evaluate issues brought up by the home inspector.  Refusing entry to your home is a good way to blow up the transaction.

Negotiate:

Seems simple enough, right?  But it’s a major temptation to stone wall the buyer’s requests.  Might work, might not.  You feelin’ lucky today?

REALTORS are not a source of discount:

I am astounded when I hear about sellers asking for a reduction in REALTOR commission because their dollar expectations were not met in the transaction.  How are the two possibly linked?  Fortunately, it has happened to me only very rarely and the answer has always been “no”.  Just because your house wasn’t worth what you expected or it has defects that you must grant relief to the buyer for, doesn’t mean I and my colleagues haven’t worked as hard as possible to market the house and manage the transaction.  We’re already taking a pay cut if you get less for your house.  No one likes to get less but it’s not my responsibility to make up the difference.

For Buyers:

Maintenance vs. Defect:

Sometimes there’s some confusion between the two.  A defect is something broken or in need of repair or replacement.  A maintainance issue is an ongoing responsibility to keep something in working order by proactive attention.  The seller does not owe you any responsibility for maintenance issues.  You are assuming that responsibility when you own the house.  The seller is responsible when something is broken and/or in need of replacement.

No upgrades included:

You can’t ask the seller for credit or remediation because there aren’t granite counters in the kitchen.  You don’t have a right to a better house than the seller is agreeing to sell you.  You saw the dated kitchen when you previewed the house and, probably, submitted an offer with a dollar figure in accordance with the upgrades needed.  There’s no good reason to re-open that discussion in the home inspection process.  Broken is one thing, old or dated is another.

Don’t withhold:

Don’t withhold your additional deposit if it’s due before the resolution of home inspection issues.  That’s a potential breach of contract and you must honor not only the terms of the contract but the schedule set forth in the contract.  If there is no resolution of home inspection issues the contract can be voided if agreed by all parties and your deposits will be returned.

Get estimates:

A good REALTOR will probably provide you with contractors who can quantify and evaluate further the issues raised by a home inspector.  Use these estimates and evaluations in your negotiations with the seller and understand the seller has the right to obtain competing estimates and evaluations.

Don’t personalize the process:

This one’s for both buyer and seller.  Don’t take a buyer request personally and don’t take a seller response personally.  This is a negotiation in a financial transaction, not a personality judgment.  It’s easy to lose track of the impersonal aspect since the negotiation deals with a home lived in and about to be lived in.  Your REALTOR should be able to be a dispassionate advisor.  Take their advice to heart.

We all approach real estate transactions with all of our past baggage on display.  Our view of the world will, sometimes, hinder our clear judgment in the process.  You can’t undo the lessons learned over a lifetime but you can step back and ask: “Am I reacting to the facts or to my perception?”  It’s a fundamental question in order to succeed and feel good about what you’ve accomplished by buying or selling a home.

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