Okay I know, I know…I pinched the title from Donald Trump. (He can bite me, or tweet me, I don’t care ;).)
Seriously though, there is an art to negotiations and I want to share some thoughts, especially with those of you who are new to the process.
One of the first things I wish buyers would understand is that market data is the same for everyone. There isn’t a housing market for buyers and another one for sellers. It’s the same MLSⓇ data accessible by everyone. The real estate board records each sale, what it is, where it is, the date it sold, as well as the price it sold for. This is valuable information and is used by REALTORSⓇ, appraisers and the public alike to determine current house prices as well as trends.
What’s fair and reasonable? A house is only worth what a buyer is willing to pay. That stands to reason. Naturally, sellers want to get the highest price possible for their home and buyers want to get the lowest price possible. They are totally opposite priorities. In this regard, being a designated agent within RE/MAXⓇ and a specialist buyer’s agent at The A-Team really helps clarify my role. Not having any allegiance or obligation to sellers gives me freedom to fully represent my buyer clients in all negotiations. No messy conflicts of interests to worry about with me!
It really helps me do my job better to figure out what kind of buyer I’m working with.
Investors versus Consumers
Broadly speaking, we fall into one of these two categories. Mr and Mrs Consumer are all about the house, the location near schools, the granite countertops, the way it makes them feel…etc. This couple might even pay a little more than the target price in order to secure the property.
In contrast, Mr and Mrs Investor are all about the money. What kind of deal can they squeeze out of the seller and what kind of return on investment can they expect? Is there a rental suite in the basement? This buyer is less interested in what it is, as much as they want a good return on investment.
What are the steps? After we have settled on the property(s) you are interested in, here’s what we do next:
- Step One. I do a pricing analysis using mostly comparable sold data on the home in question to see where the value parameters are. I spend quite a bit of time on this because it really helps give confidence to the buyer before we begin.
- Step Two. Begin negotiations below the pricing ceiling and work your way towards agreement. (More on this later).
Hey, we’re all different! Some people like negotiating and others hate it. Some ethnic groups come from parts of the world where negotiations draw blood, and in fact, if they don’t get a screaming deal (i.e. the seller is screaming), then they’ve lost face in their family. I’m only half kidding. But here in Canada, we like to be fair-minded when dealing with each other.
One thing we need to realize is that a low-ball offer can be regarded as a slap in the kisser to the seller, especially if they’ve looked after the property and it is not priced ridiculously high. I often say to my clients: “You don’t want to pay too much, but neither do you want to start so low that you alienate the seller.” When a seller responds with either full price or $900 bucks off the asking price, it’s a sure sign that they are not impressed with your initial offer. It’s a bad start and avoidable. You want to get things going, offer/counter-offer until agreement is reached. So ‘fair and reasonable’ is a key phrase to bear in mind when negotiating.
In summary, how would I define a good, successful negotiation? At a minimum one where my buying clients are satisfied that they are not paying too much for the house, but equally, a successful negotiation is when everyone can leave the table with some self-respect. There’s something cool and Canadian about that. Happy Birthday Canada!