Despite cooling off nationwide, the Texas real estate market is hot right now. Odessa and Wichita Falls, for example, rank first in the nation for price growth. These two locations saw year-over-year price growth of a stunning 34 percent.
The number of homes for sale plummeted by 44 percent over this period. The shrinking supply is responsible for pushing home prices upwards.
While not at the same rapid pace, home prices in the Dallas-Fort Worth region are also on the rise. Rising property values and diminished supply make negotiations in real estate more challenging.
Nonetheless, there are still effective negotiation strategies to get the best deal. If you’re ready to make an offer on a home, read on to learn negotiating strategies.
Explore these tips for negotiations in real estate that will make your buying experience smoother.
1. Negotiate in Person
Today, people rely on mobile devices and the Internet to communicate. This trend is also true in the real estate market. Many buyers are making offers through e-mail or phone calls.
A better strategy is to negotiate in person. Ask the seller’s real estate agent to attend a meeting to discuss your offer.
It doesn’t have to be a formal or intimidating atmosphere. You can discuss negotiations over a cup of coffee. Negotiating in person shows the seller that you are serious.
Also, sometimes things are misinterpreted over text or e-mail. Written communication can lack emotion or context, leading to issues during negotiations in real estate. Discussing in person leaves room for clarifications and adding proper context where necessary.
2. Skip the Lowball Offers
In a seller’s market, lowball offers do not achieve anything productive. Instead, an offer that’s substantially lower than the asking price may prove detrimental. The seller may be offended and choose to negotiate with another buyer instead.
There is this false notion that a lowball offer sets the floor in negotiations. Negotiations in real estate don’t work this way.
The seller’s asking price is the fulcrum for negotiations. Supply versus demand and comparative sales drive the contract price.
There are other variables that your broker will research, such as neighborhood and schools. Skip this step and offer a competitive offer if you’re serious about buying.
3. Seller’s Concession
How do you plan to pay closing costs? Do you have the capital on hand to pay for the various lender fees and services required?
Closing costs are partially dependent on the value of a mortgage. There are mortgage origination fees that are calculated as a percentage of the mortgage amount.
That being said, closing costs on a $150,000 mortgage could be as high as $7,500. Some buyers don’t have that type of cash lying around.
Instead of solely focusing on the asking price, you can get relief on closing costs by asking for a seller’s concession. If the seller agrees, they are committing to contributing funds towards your closing costs.
This money isn’t coming out of the seller’s pocket. It’s actually an agreement from the seller to roll your closing costs into the sales price.
4. Negotiating Home Repairs
Home repairs are also considered a potential seller’s concession. There are two specific periods in which home repairs can be negotiated.
Before making an initial offer, you will likely take a walkthrough of the property. Pay careful attention to any significant upgrades that are necessary in case you decide to purchase the home. Perhaps the wood floor is damaged and needs to be replaced.
These replacement costs should be specified when making the initial offer. By denoting these costs, you’re presenting valid reasons to make an offer that’s lower than the asking price.
The second chance to negotiate repairs is after the home inspection. If any serious issues are uncovered during an inspection, you may adjust the sales price accordingly.
Perhaps mold is discovered in the attic, and remediation services will cost $3,000. The contract price can be negotiated down to address the mold treatment.
5. Demeanor Plays a Big Role
Real estate agents and professional negotiators smell fear and reactionary behavior. Negotiations in real estate should be done with confidence and a positive attitude.
Having a likable and friendly personality makes the process smoother. Nobody enjoys working with a difficult person. Any turnoffs in the working relationship could drive the seller to another buyer.
Your body language is also very telling to professional negotiators. It sets a negative aura if you’re constantly frowning or failing to make eye contact.
6. Meet the Sellers in Person
Negotiations in real estate are typically conducted by agents. However, you should still make an orchestrated effort to meet the sellers.
Despite the fact they are moving on, many sellers have an emotional connection with their home. Perhaps it was the seller’s first home and they simply grew out of it.
The sellers likely have great memories of their children’s birthdays or an engagement party. This means they’re not only motivated by money.
They also want to sell it to a person that will love the home as much as they did. Take time to meet the sellers, make a good impression, and show them they’re leaving the home in good hands.
7. Consider an Escalation Clause
In a seller’s market, there is potential for a bidding war. An escalation clause gives you the upper hand over the competition.
This clause automatically increases your offer when a competitive bid is made. For example, you could insert a clause that automatically makes your offer $5,000 higher than the next highest bid.
8. Stop Viewing Negotiations as a Battle
The seller and his or her real estate agent is not your enemy. There is enormous potential for a win-win contract.
The fact that you’re discussing in detail means a deal is close. The asking price fits in your budget. You will find that developing a working relationship with the other side is the best strategy.
Negotiations in Real Estate – A Recap
Negotiations don’t have to be hard fought or bitter. Instead, make proactive attempts to foster a strong working relationship.
Simple things like meeting the sellers in person or maintaining a positive attitude go a long way. If you are interested in learning more about negotiations in real estate, contact us for assistance.