Winning the negotiation when selling your home

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You finally have an offer! If you're like most sellers, the most difficult part of selling your home has just begun. When that agent or buyer comes over and you take a look at that offer, be prepared to be unsatisfied. It's very rare for an offer to have everything you're looking for.
Only now does the real process of selling your house begin. You have to negotiate with the buyers to get what you want and need.
In real estate, negotiations take the form of counteroffers. The way the buyers tell you they're interested in your property is the offer. The way you tell them their offer is unacceptable, but you're willing to negotiate, is the counteroffer. You must know what you want. And in the event that you cannot get it, you must also create a tentative fallback position — the minimum you will accept.

The right way to receive an offer

When you receive an offer, take charge and direct the proceedings. Here's a list of questions to ask when you receive an offer.
  1. Deposit: How much and who has it? (Is it a serious offer, as evidenced by a sufficient deposit?)
  2. Price: What exactly are the buyers offering?
  3. Down payment: Cash, and if not, why not?
  4. Terms: New first loan?
  5. Occupancy: How soon do I have to get out?
  6. Contingencies: Is there anything that could weaken the deal?
As you go through these questions, be sure you understand the answers that are given to you.
Usually, offers aren't great or terrible. They're somewhere in between. The buyers may give you some things you want in exchange for demanding others you don't want to give up. List the pros and cons of the offer so you can see what the trade-offs are.

Understanding contingency clauses

A contingency clause is an additional condition (additional to all the boilerplate that's already part of the document). Contingency clauses are ways for the buyers (and sometimes the sellers) to get out of the deal. Your goal is to let as few of the buyers' contingency clauses as possible into the agreement and to limit by time and performance those that are included. Be very careful of contingency clauses. Below is a list of some common contingencies.
  • Contingent sale. The buyers will purchase contingent on their selling their present home. This is a very weak offer, because it means the sale of your house depends on the sale of another house with another set of sellers and buyers.
  • Financing. The buyers will purchase contingent on their getting new financing — if they're already fully preapproved, there may be little to worry about.
  • Timing. The purchase is contingent on the buyers' being able to move into the house within a set period of time.
  • Disclosures/inspections. The buyers will purchase only if they approve your disclosures and their professional inspection. Typically they will ask for a set period of time for this, usually a couple of weeks. You probably can't sell without this contingency.
If you receive a contingency offer, evaluate it by answering the following three questions:
  1. Is the contingency reasonable?
  2. Does this contingency negate the value of the offer?
  3. Can I live with the contingency, or should I limit it? You can limit the contingency by insisting it be performed within a specified time.

Making a counteroffer

When an offer to purchase is presented to you, you have three choices.
  1. You can accept it exactly as it is.
  2. You can reject it.
  3. You can reject it and then counter with an offer of your own.
Remember, you cannot both accept the offer and make changes in it. As soon as you make any changes at all to the offer presented by the buyers, it's a brand new offer. When you reject the buyers' offer, they have every right to simply walk away from the potential deal.
You should almost never reject an offer flat out without a counter. Simply saying no doesn't give the buyers an opening to come back. There are usually four areas in which you may want to make a counteroffer.
  • Price
  • Terms
  • Occupancy
  • Contingencies
Remember, however, that if you make a counter in even one of these areas, you've rejected the buyers' offer, and they may decide they want to change some of the other areas or simply walk away.

Countering the Price

Price is usually the number one concern for both buyers and sellers. Yes, you want and should get your price. Just remember, however, the buyers feel the same way.

Countering the Terms

Terms may offer the greatest flexibility. Most often buyers are seeking a new loan and plan to make a cash down payment. But many times they will ask you to carry part of the financing, perhaps a second or third mortgage for a portion of the down payment.
Just remember everything is negotiable. If you're willing to carry back some of the financing, you may agree to their proposed terms, but change the length of the loan or the interest rate. (The shorter the mortgage and the higher the interest rate, the better the deal for you.) If you carry back "paper" (a second or lesser mortgage), try to see that it includes a monthly payment that is at least equal to the interest owed and that it also includes a late penalty for failure to make the payment on time.

Counter the Occupancy

If you want to sell your home, you have to be prepared to be flexible in terms of the timing. You have to be willing to give up on your schedule, if that's what it takes to make the deal.

Countering on the Contingencies

In the counteroffer, there are two ways to handle an unwanted contingency clause: the straightforward approach and the diplomatic approach. You can be straightforward and simply cross out the contingency. You won't accept it. This states your position clearly, but it may offend the buyer and cost you a deal. You may limit a contingency by time — work must be done within a specific period — or by cost — you're willing to assume an expense, but only up to a specific dollar limit.

Accepting the Offer

You haven't accepted an offer until both parties sign the exact same sales agreement. Until you sign, you can refuse to accept the offer. (However, if the offer is for the price and terms you listed the property for, you could still be liable for a commission to the agent!)
It's important to understand that the deal isn't made exactly when you sign. It's made when the agent (or you) communicates the fact that you've signed to the buyers. In practice, the agent usually calls the buyers immediately to tell them you've accepted and then takes them a signed (by you) copy of the sales agreement. Technically speaking, the buyers can withdraw the offer anytime before they learn of your acceptance (just as you can withdraw a counteroffer anytime before you learn of the buyers' acceptance of it).

Always Keep Copies

The agent (or the buyers) must give you a copy of everything you sign. Be sure you get that copy and hang on to it. You can't say you've sold your house until the title is recorded and you've gotten your check, but after the purchase agreement is signed and delivered, you can relax a bit.

Excerpted from Tips & Traps When Selling a Home by Robert Irwin. Copyright © 2004 by The McGraw-Hill Companies.

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