Real Estate News

How to negotiate best prices, terms in real estate transaction
Use time, local market conditions to your advantage

By Robert J. Bruss
Inman News

Although all the key real estate negotiation components are important to every negotiation, it's time to focus on the other key components of any negotiation. Remember, all these components apply to every negotiation, whether you are buying or selling real estate, a car a refrigerator, or anything else.

1 – TIME DEADLINES. The time deadlines (if any) of each party to a negotiation are extremely important for a successful negotiation. However, in real estate negotiations, it pays to be aware that some buyers and sellers have no deadlines.

To illustrate, most of us have met homeowners who will sell if they can get their asking price. That's why unsolicited purchase offers at attractive prices for real estate are often successful, especially for vacant land sales. Out-of-town absentee owners are often agreeable to accepting an unsolicited purchase offer because they have been thinking about selling but never quite got around to doing so. That almost happened to me a few months ago.

EXAMPLE: A neighbor phoned me about buying my condominium in Minnesota (which she knew I use only a few days each month). She was getting married, wanted a two-bedroom unit like mine, already lived in the complex in a one-bedroom unit, had a buyer for her condo, and wanted to move before the wedding. She was motivated by several time deadlines. But I, as a potential seller, wasn't motivated at all! If she had sent me a written purchase offer for top dollar, accompanied by a substantial deposit check, she would have had my undivided attention! As it turned out, she bought a less-desirable two-bedroom unit across the hall from mine, but without the more attractive view I enjoy.

Whenever possible, try to find out the other party's time deadline, but without revealing your own deadline. This negotiation principle isn't just limited to real estate.

EXAMPLE: I'm in the market for a new refrigerator. Lately, the "warm temperature" light sometimes comes on for no explained reason. After I adjust the refrigerator control, however, the problem goes away. I'm starting to shop around at dealers recommended by friends for a new refrigerator because, after 22 years, it's probably not worth repairing my current, perfectly satisfactory model. But I'm not yet highly motivated to buy unless I can get a very good deal. However, if my refrigerator conks out completely, I will quickly become a highly motivated buyer with a very short time deadline to get a new refrigerator delivered as fast as possible. Negotiating a bargain price then won't be my key motivation. However, look at the situation from the refrigerator salesperson's viewpoint. Maybe he or she has a strong motivation, such as meeting a sales quota, or winning a dealer or manufacturer's sales contest. That's why, for example, it's usually best to buy a new car or other consumer products toward the end of the month, or at the end of the quarter, or end of the year to negotiate the best price and terms.

2 – INFORMATION KNOWLEDGE CREATES NEGOTIATION POWER. Especially in real estate negotiations, successful negotiators (and their real estate agents) understand the importance of information knowledge of all the circumstances if they are to negotiate the best possible price and terms. Knowing local real estate conditions, such as whether there is a buyer's market (with more properties listed for sale than there are qualified buyers) or a seller's market (with more qualified buyers than properties available for sale), is an example of essential profitable information.

Even specific knowledge about a specific property is critical for a successful negotiation. To illustrate, the length of time a house has been listed for sale is essential knowledge for a prospective buyer who wants to negotiate a bargain purchase price. If a house just came on the market for sale last week in a local seller's market, the seller is probably anticipating a top-dollar sales price. For this reason, I've found it's usually best not to make a purchase offer immediately after a home is listed for sale (unless the local real estate market is very slow).

But when a house is listed during the first week of December that probably indicates a highly motivated seller who will listen to any reasonable purchase offer during the slowest sales season of the year. Of course, if you are a home buyer, you can probably negotiate your best price and terms if you purchase during the home-sale slow season after Thanksgiving until New Year's Day (or even until Super Bowl Sunday) in most communities.

Other important knowledge information, depending on circumstances, might include local development proposals, rezoning, city council actions, school district quality (good or bad), possible property tax increases, and special assessments for civic improvements.

Working with an experienced real estate agent who lives and works in the vicinity of the property can greatly improve odds of negotiation success. For this reason, I recommend buying and selling with longtime real estate agents who are among the top-producer realty agents in their brokerage firms and in the local real estate association. The more awards and earned designations a real estate agent has on his/her business card, the better! Also, if a sales agent has been selling or leasing real estate more than five years but hasn't yet earned a real estate broker's license, that not a good sign. The educational classes required to become a broker, and pass the examination, in most states will help benefit an agent and his/her clients.