Buying a house is a long process that can last for more than a month. But there are times when the transaction can be prolonged due to the actions or errors on part of the homebuyer and/or home seller. Elements of the transaction like preparing and maintenance of documentation, availing of home loan to finance the purchase, negotiations with the seller over price and payment, the registration process etc. may take time. But if these processes are conducted inefficiently, they have a negative effect of drawing out the transaction that can lead to a loss of time and money.
The buyer and seller may have different estimates when it comes to the real value of the house. Where the seller wants to sell the house for a gain that suitably meets his/her expectations, the buyer is out to save money and buy the house at a bargain. Both get the house appraised on their respective ends and negotiations between the two parties are about reaching a favourable settlement for the two parties. This article seeks to explain what negotiation is for the buyer and what steps and strategies can be adopted on the buyer’s side to get a favourable deal from the seller.
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What steps need to be taken before entering negotiations with the home seller?
A home buyer and home seller are two parties in a transaction in which the subject matter is the house on sale and the interests that lie therein. In this case, a buyer needs to have clarity on his position and needs to be well aware of the seller’s position before entering negotiations.
- Preparations are required to get things in order before negotiations can commence.
- First and foremost, know the seller. Conduct a background check, ask around in the neighborhood, etc. You could even ask for the personal details of the seller because s/he will definitely ask for these details from you. You may get valuable information about the seller online.
- Get to know the seller’s position and demands in clear terms.
- Get the house on sale appraised to estimate its value. Also, get a comparative price analysis done with similar placed properties in the neighborhood. Also, check through public records online sites for when the house came on the market and for how long the house has been on sale.
- You also need to thoroughly inspect or get the house inspected to assess the condition of the house and determine the cost of repairs because that can be a point of contention.
- Get a title search done to find any defects in the title of the property. When the property is transferred from one person to another, along with ownership, the defects in title are also passed. To avoid or prevent disputes arising on account of the title of the property, get a title search done to be safe rather than sorry.
- Ensure that your credit status and score are sound because sellers are bound to hesitate when dealing with a person whose financial credentials stand on shaky ground.
What are the strategies to be adopted while negotiating with the home seller?
Now that you have the material and you have done all the required preparations for the negotiations, it is time to negotiate!
- First and foremost, approach the negotiation process ready to make compromises. Do not approach negotiations with a confrontational attitude. You want a favorable deal that is beneficial to you, not a breakdown of talks.
- Always make an offer that is lower than the listed property value of the house on an online property site by the seller or lower than the appraised value of the house. It gives you more room to bargain and adjust your offer price accordingly.
- Put forth your demands clearly and prioritize what you seek to achieve from the deal instead of seeking small concessionary gains from the seller.
- Making friends with the seller is a good idea. You could reveal your motives for buying the house but not in overly excited tones. Staying on the good side of the seller can prove beneficial when it comes to persuading the seller to see your point.
- Try to understand the seller’s motivation for selling the house. We usually have our emotional reasons tied with our financial motives in a transaction. Try appealing to that motivation of the seller keeping your motivation in mind and strive for a win-win situation
- Get into negotiations only if you are confident of your strengths. Otherwise, this is the job of a realtor or estate agent. You would rather pay commission to the realtor to get a favourable deal for you than stand to make a substantial loss on your real estate investment due to lack of negotiations with the seller.
What should a buyer aim to gain from negotiations with the seller?
As a homebuyer, you have a motive behind purchasing a house and have certain goals in mind when buying such a house from a seller.
- Apart from these overall goals, a buyer enters negotiations with a home seller, with secondary objectives in mind like saving on price, ensuring a certain way or method of paying the consideration money, getting the seller to bear the cost of repairs of the house or share these expenses on a fair pro-rata basis, etc.
- With these objectives in mind, the buyer needs to work towards these objectives keeping the overall goal or vision in mind.
- For instance, the buyer seeks to buy his or her dream house at a specified price. The seller has demands that do not match with the buyer’s objectives. The buyer needs to steer the course of the negotiations towards closing the deal at a price which if not the buyer’s offer price then approximately close to the offer price and on payment terms favorable to the buyer.
- The buyer should be friendly with the seller to ensure mutual gain for the parties, but should not get too personal to sacrifice his or her objectives.
- If the buyer cannot achieve his or her objectives then maybe instead of calling off the deal, the buyer may seek dispute resolution by asking for alternative concessions.
- If the buyer is unable to persuade the seller to see his or her point and a neutral third party has been employed to resolve the differences, the buyer should clearly present his or her case clearly before such a mediator or arbitrator. However, if despite all this the buyer is threatened with a situation of purchasing the house at a considerable loss, it is best that the buyer withdraws and does not pursue the deal any further, thus ending the agreement between home buyer and seller.
Is a mediator necessary?
The mediator is necessary in order to:
- conduct the mediation and negotiation process in a fair, just, and unbiased manner
- avoid conflict of interest or an appearance of a conflict during the mediation process.
- make necessary inquiries and determine all the possible conflicts between the parties, etc.
Thus a mediator becomes necessary for carrying out the mediation process in the most fruitful manner.
Negotiation is a process of discussion among parties involved to reach an agreement or enforceable decision. However, this is subject to both the parties presenting their respective cases and demands to each other and discuss in order to reach a mutually beneficial resolution. A buyer should keep his or her overall goal in mind and try to steer the negotiation towards achieving objectives that are beneficial for him/her.
There are tactics and strategies that can be employed that may yield the desired results. Adequate preparation and research need to be undertaken before getting into negotiations. Understanding the mindset of the seller allows you to appeal to the motivation of the seller and close the deal on mutually favorable terms.