Negotiation is an art and a science rolled into one. Negotiation when conducted with a cool head and logical reason may lead to a win-win situation where both parties can avail the benefit. Real estate transactions consist of numerous prices, wants, demands and compromises. There is a market value, asking price, offer price, appraised value and the final sale value. The objective of negotiation is to successfully close the deal with the other party to gain an advantage and avoid conflicts.
Negotiation happens on a day to day basis without us taking note of it. Be it national-level talks between nations or a deal-making between individuals, negotiation is an indispensable part of human activity. When it comes to real estate transactions, the home buyer and seller engage in negotiation to decide the price, method of payment and various other terms and conditions of the transaction.
When a major asset like residential property is involved, negotiation should be conducted carefully by both sides to prevent disputes in the future. This article seeks to highlight the concept of negotiation in a real estate deal and explain its importance in such a deal.
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How do you negotiate a real estate deal?
A real estate transaction is a high stake deal where there are steps like an appraisal of the value of the house, evaluation of the condition of the property, making of the offer, making of the counteroffer, negotiation process and closing of the deal.
A buyer negotiates with the seller to obtain a valuable residential property at the most feasible of prices. The seller, on the other hand, negotiates with the buyer to sell the same residential property at a considerable monetary gain to the seller. Negotiation seeks to close the deal on mutually beneficial grounds.
Here are a few things to keep in mind:
- Assess what kind of market you find yourself in. Is it a homebuyer’s market or is it a home seller’s market? Or is it neither!
- Know the other party in this transaction. S/he is not your opponent, but just another person who seeks to close the deal to derive gain from it.
- Do not lose sight of what you want! A Negotiation process can go on for long and grow increasingly complex where small concessions offered by the other may seem attractive enough to deviate you from what you want. Stay focused on what you want and you can get out of this process with your goals achieved.
Sometimes buyers find the listed price of the house and make an offer to the seller and in certain other cases, the buyer makes an offer to the seller and is met with a counteroffer in return. To arrive at a mutually agreeable price, the buyer and seller engage in negotiations.
So, here a few tips on how to negotiate:
- Conduct thorough research on the house, its estimated value, its title and ownership, the condition of the house, the neighborhood in which it is situated, comparative price analysis of the house’s value with similar houses located in the neighborhood. Getting information is a must before taking any further course of action.
- When it comes to negotiations, it is best to listen to the other party/parties put forth their demands first to understand these demands and their motivation behind their demands. You may be tempted to speak on why the house is important to you, why you want to buy it or why you want to sell a house. Also, most likely the price you have in mind will not match the other party’s price and you need to negotiate your way to a price where you both benefit to prevent dispute or conflict. So, before putting forward your demands, if you get to know what the other party wants, you can suitably assess the direction of the negotiation and adjust your tactics accordingly.
- Become friendly with the other party! Be you the buyer or a seller in a real estate transaction, making friends with the other party is a wise move for it may help you get a better deal that gets you what you want. Antagonizing the other party will only lead you to get unsatisfactory results because then the other party will not view you as a friend but as an opponent. This may unnecessarily extend the duration of negotiations and have bitter consequences for both sides.
- There is a requirement for you to be firm with your demands during a negotiation process. Also, you should state what you want from the other party directly without beating around the bush. You want to close this deal as soon as possible on mutually beneficial terms. By failing to construct your wants in clear, direct terms, you are only going to extend the process and make it more complicated.
- A contentious issue may arise when it comes to undertaking repairs of the house. Many a time, a buyer may find that the condition of the house does not meet his or her standards. S/he may want to undertake repairs but believes that the seller should be obligated to pay for such repairs. However, the seller may refuse to accept such an obligation. This may become a point of contention between the two parties. In such a case, a discussion is what you need to resolve these differences and sort out the matter. As a form of compromise, both the buyer and seller may divide between themselves the bill for repairs on a pro-rata basis.
- A seller mostly tries to gain on amenities like the car park, access to the pool, power back up and other attached facilities to the house rather than on the offer price. This is a common tactic among sellers and builders because buyers are naturally attracted to the attached facilities to improve their standard of living.
- You need to keep your cool and deal with the issue with a clear mind. Having an emotional attachment to the house or developing one is not wrong. It makes the process a bit more personal and allows the seller and buyer to share common ground. But, letting your emotions rule you while making decisions is the last thing you want. Before you know it, you are too involved, attached and stubborn to let go.
Your attitude is confrontational and you are not making any progress in the negotiations. Worse, you refuse to let go of the house! The talks are doomed to fail with the matter falling apart. Thus, you need to keep a clear head on your shoulders while negotiating. You need to know when to let go when you are not making progress with the talks. It is best to move on than waste time and effort on something that refuses to reach a reasonable conclusion.
Negotiation is used to resolve issues between two parties in a real estate transaction. This may be a lengthy process that may get increasingly complex as it progresses. However, if you keep sight of your goal and proceed with the negotiations in a tactical manner keeping a win-win situation as your priority, the process may prove fruitful for both sides.
Negotiation is meant for you to get what you want at the cost of a compromise, not a sacrifice. If you know that there is no point in proceeding further, you need to let go. A negotiation which yields no results and has struck an impasse should not be further pursued. It is only a waste of time and money.