When you get an offer to buy your house, take a deep breath and set aside your emotions. It’s time to negotiate using solid numbers based on the real estate market’s current conditions in your area.
Crunch the numbers. Ideally, you and your agent did a Comparative Market Analysis or CMA before listing your home, which means your listing price is solid. (Remember, the market analysis compares your home to the listing and selling prices of comparable homes in your area.) When buyers start to make offers, the analysis serves as an objective guide to negotiations.
If you get a low offer. What constitutes a low offer can be subjective, depending on market conditions in your area. Although initially upsetting, it’s important to handle the situation without shutting down negotiations. Ask your agent to respond with a simple “No, thanks.” As an alternative, the agent could politely inquire why the buyer is offering a price below market value. This way, the seller puts the ball back in the buyer’s court, in essence saying “Let’s start over.” You might end up with a more reasonable offer, maybe even an eventual deal. If not, you haven’t lost anything. In some states, a “Response to Buyer’s Offer” form may be used to reject the buyer’s original offer.
Sellers may also choose to make a counter offer by submitting a reasonable offer below the list price, with back-and-forth negotiations continuing from there. Revisions to the sales contract are initialed and dated by both parties.
The sales price doesn’t have to be the sole focus of negotiations. Consider offering incentives such as covering some of the buyer’s closing costs, offering credits for some repairs, or including certain appliances in the deal. This strategy allows you to maintain price integrity while showing goodwill during negotiations.
Seller’s market. In a hot market, you may receive multiple offers and end up selling for more than asking price. But remember, the buyer’s mortgage company will require an appraisal showing what the home is worth. If the house doesn’t appraise high enough, then either the buyer must add more cash to the deal or the seller must come down on the price — or a combination of the two.
Distress sales. What if the real estate market is not as strong, or you are in a distressed situation such as a job relocation or financial crisis? Be careful not to appear desperate and make yourself vulnerable to manipulation. Be certain to work with your real estate agent to market the features of your home and the value of the surrounding neighborhood. If possible, keep negotiations going by offering incentives rather than large price concessions.
Other factors. Price isn’t the only consideration when mulling over an offer. Is the buyer offering cash with a quick closing date? How much is it worth to have your home sold in two weeks as opposed to sitting on the market and waiting for another offer? What is the buyer’s financing situation? When does the buyer want to close? If you’re facing two mortgages or a temporary move, accepting a lower price might actually be a better deal.