In southern Wisconsin, as in much of the country, we are experiencing a buyer’s market. We simply have far more homes for sale than we have buyers buying.
We’ve seen housing prices fall, inventories remain high, interest rates drop to historic lows, and incentives offered to first-time home buyers to encourage them to buy.
Naturally, buyers are feeling confident when they enter into negotiations on a property. They’ve all heard stories from friends or family members that they can get properties for a steal. Play hardball, and the seller will break under the pressure. What else is he to do if he needs to sell his home?
Many buyers believe they can and should submit a lowball offer in order to secure the best deal from a seller. Here are some reasons why that’s not the best strategy:
1. Current home prices already reflect the drop in housing values. Buyers should ask their agents for a brief market analysis, showing sales and active listings for comparable properties in the area. They should also seek the sales history on the property they wish to purchase. This preparation will help them determine the appropriate price to offer for the property.
2. When presented with a lowball offer, sellers will often counter back higher than they would have if the offer was more reasonable. In a proper negotiation, both parties benefit. Anger is never good for a negotiation, so buyers are wise to remember that they are actually dealing with human beings on the other end of the transaction.
3. Price is not the only factor to consider when writing an offer. What else is the buyer asking for? Closing costs? Appliances? A home warranty? An allowance for new paint or carpeting? Is the buyer hoping to ask the seller to leave behind some of the personal property, such as the pool table, riding lawn mower, or outdoor furniture? Buyers are more likely to succeed in securing a lower price if they are not asking for more than that from the seller, AND if they bring something of value to the table: a quick closing date, pre-approved financing with a reputable lender, an amount of earnest money appropriate for the value of the property, and so forth.
4. REALLY IMPORTANT: Negotiations do not simply end with an accepted offer. Suppose the property inspections reveal that some major repairs are needed. Going back to the seller who was lowballed, to ask that he foot the bill for the repairs, may result in a lost deal. Yes, the seller will need to disclose any “defects” to future buyers that were found during the initial inspection. But that may not deter a seller from walking away from a deal that left him unhappy from the start. He may opt to make the necessary repairs and hold out for a better offer from a more reasonable buyer.
5. It often pays to be nice. Sellers are usually kind enough to provide buyers with information about the community, neighborhood, and unique workings of the property. This can be very valuable information to have – and is easy to obtain if the seller feels favorably toward the buyer. Another challenge that occurs more often than one might think: the closing gets postponed at the last minute, and now the buyers are homeless, with a truck full of belongings, and new appliances to be delivered that are already enroute. There are remedies to such situations, for which the seller may play a significant role. Power can shift in a transaction at any time.
It’s important to keep in mind that home sellers are neighbors. They are members of a community to which buyers hope to belong. Great deals can and should be negotiated where both parties walk away winners.
We’ve seen housing prices fall, inventories remain high, interest rates drop to historic lows, and incentives offered to first-time home buyers to encourage them to buy.
Naturally, buyers are feeling confident when they enter into negotiations on a property. They’ve all heard stories from friends or family members that they can get properties for a steal. Play hardball, and the seller will break under the pressure. What else is he to do if he needs to sell his home?
Many buyers believe they can and should submit a lowball offer in order to secure the best deal from a seller. Here are some reasons why that’s not the best strategy:
1. Current home prices already reflect the drop in housing values. Buyers should ask their agents for a brief market analysis, showing sales and active listings for comparable properties in the area. They should also seek the sales history on the property they wish to purchase. This preparation will help them determine the appropriate price to offer for the property.
2. When presented with a lowball offer, sellers will often counter back higher than they would have if the offer was more reasonable. In a proper negotiation, both parties benefit. Anger is never good for a negotiation, so buyers are wise to remember that they are actually dealing with human beings on the other end of the transaction.
3. Price is not the only factor to consider when writing an offer. What else is the buyer asking for? Closing costs? Appliances? A home warranty? An allowance for new paint or carpeting? Is the buyer hoping to ask the seller to leave behind some of the personal property, such as the pool table, riding lawn mower, or outdoor furniture? Buyers are more likely to succeed in securing a lower price if they are not asking for more than that from the seller, AND if they bring something of value to the table: a quick closing date, pre-approved financing with a reputable lender, an amount of earnest money appropriate for the value of the property, and so forth.
4. REALLY IMPORTANT: Negotiations do not simply end with an accepted offer. Suppose the property inspections reveal that some major repairs are needed. Going back to the seller who was lowballed, to ask that he foot the bill for the repairs, may result in a lost deal. Yes, the seller will need to disclose any “defects” to future buyers that were found during the initial inspection. But that may not deter a seller from walking away from a deal that left him unhappy from the start. He may opt to make the necessary repairs and hold out for a better offer from a more reasonable buyer.
5. It often pays to be nice. Sellers are usually kind enough to provide buyers with information about the community, neighborhood, and unique workings of the property. This can be very valuable information to have – and is easy to obtain if the seller feels favorably toward the buyer. Another challenge that occurs more often than one might think: the closing gets postponed at the last minute, and now the buyers are homeless, with a truck full of belongings, and new appliances to be delivered that are already enroute. There are remedies to such situations, for which the seller may play a significant role. Power can shift in a transaction at any time.
It’s important to keep in mind that home sellers are neighbors. They are members of a community to which buyers hope to belong. Great deals can and should be negotiated where both parties walk away winners.
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