The offer

B - Negotiation Situations: What are typical offers and situations?

Less than full price offer:

If the opening offer is close to list and acceptable in all other aspects, it’s best to give pause, not to immediately accept this good offer, but to consider negotiation situations, requests, issues, deadlines, etc.

Why not? When an opening offer is immediately accepted (excluding a full price offer with all the terms you want) buyers often feel that they started too high. This can lead to second thoughts. Panic could cause them to look for ways to get out of the deal. Or they may feel compelled to hammer you with the home inspection. Avoid this potential interpretation by simply delaying your acceptance by an hour or so. This gives the appearance of serious thought and consideration on your part. 

Countering the excellent offer:

This runs the risk that the buyers may walk from your offer since their emotional spring may be wound extremely tight. They could think you’re incredibly greedy for not accepting their really great offer. All buyers want to pay less than full price.

If you feel you have a good reason to come back at or near full price, then consider it. These include things like: it just went on the market, the price was set low to make it attractive, you know that they are highly motivated and that your property really meets their needs, etc.

Shooting for your bottom line, target price: 

Some buyers try to estimate what they think you expect as the final price and negotiate to come in just under this. They hope that you will become anxious and decide to accept the offer–perhaps foregoing a few thousand dollars just to “get it over with.” 

This is a good time to counter with a drop that’s just above your bottom line while letting the buyers know that this is where you'd like to end up, which could get you more than your target price. 

However, don't give a counteroffer that is conveyed like an absolute bottom line, such as, "This is as low as we're going to go." Instead, “This is where we really wanted to be” is much more acceptable and says the same thing. It isn’t a "take it or leave it." 

Reasonable or unreasonable offer:

For the most part, buyers’ offers are what works best for them. Outside of your asking price, they have very little idea as to what terms will be acceptable to you. The buyers may be able to agree to all of the desired changes you provide in your counter offer. So don't blow off their initial offer.

There could be a time limit to respond:

In the offer, the buyers may specify a time limit for your response, often 24 hours. If none is provided, don’t assume you can sit on it and wait for other offers to come. Yes, you may procrastinate, but the buyers have the right to withdraw their offer at any time before you respond, including withdrawing it before the time limit has expired.

Once you have replied with a counter offer that contains any change to the buyers’ most recent offer, this is considered a rejection of their latest offer. Conversely, if the buyers come back with any changes to the counter offer you submit, this is considered a rejection of your offer.    

Only the offer that has not yet been accepted, outright rejected, or countered is considered to the current outstanding offer. To avoid confusion, this is the reason why the offer and counteroffers should be done in writing, with any changes made in writing on the same document.  

If you are asked to pay buyer closing costs:

In some markets it’s very traditional for the seller to pay a portion of the buyers' closing costs. Customary or not, the buyers could be asking for this because they are short of cash. They need everything they have for the down payment.

Instead of countering to eliminate their request, leave it in. But counter their offer with a higher price that covers these closing costs. Always look at the net you’ll receive, not the bid price.

Cash-strapped buyers will almost always pay a higher price if you’re willing to help with closing costs. They’ll even pay more than the asking price (assuming it’s realistic). However, you need to be confident that your house will appraise to the sale price.

In a buyer’s market, the buyers could simply be trying to get everything they can. If you’ve got a great house, remember: they may want a deal, but primarily, they want your house. 

Unreasonable request for an allowance:

Some buyers will ask for a credit–such as a new furnace - and inflate the requested amount in order to cover the “hassle” they’ll have to go through to correct the problem.

Not only should this extra amount not be given, neither should the full replacement allowance. Counter their dollar request with a lower amount. Even if this is a legitimate request from the buyer (like the inspection revealed the furnace is on its last leg), point out that you could have replaced it with a cheap furnace and it wouldn’t be an issue.

If they want to buy the most expensive high efficiency furnace out there, then in all fairness they should pay the difference since they will be getting the full use out of it. It will be exactly of their choosing and it will be brand new. That’s worth a lot. 

Commission rebate for the buyer:

Whether you are listed or a by-owner and are entertaining an offer from an agent, find out about the company the agent represents. Some new realty offices promote a concept where the agents split the commission with their buyer clients. On the west coast some agencies will rebate up to 75% of their commission to their buyers.

As an example, assume that you’re giving a 3% commission to the buyers’ agent as compensation for producing the buyers. On a $500,000 house, $15,000 will go to the buyer’s agency. If there is a 75% rebate, then the buyers will be receiving a windfall of $11,250 at closing.

It makes little difference to you if the agent splits the commission since your goal is to sell your home. However, if you know that the buyers will be receiving a large bonus for buying your home, you should be able to hold to a higher price during the negotiations. The reason is that the rebate provides a psychological lift to the buyers.

The offer on your home already says that the buyers want it. The rebate makes them more likely to pay a higher price since they know they’ll be getting a chunk of it back in cash (which they would no matter what house they were buying).

If you’re not familiar with the buyer’s real estate company, call their office and ask if they offer a rebate program. In most areas, a commission rebate back to an agent’s client must be revealed on the contract offer, which you would obviously notice when reviewing the offer. 

Use a middleman to facilitate the sale:

A benefit for using real estate agents is that in the negotiating stage of a sale, the agent is the person delivering the counter offers and shouldering the sticking points. In some situations, having a “middleman” is helpful.

You can have this third-party advantage by lining-up an attorney ahead of time. At any point in your negotiation, advise the buyers that you need to run the offer by your attorney, explaining that he or she handles all of your financial dealings.

During or following the negotiating, ask the buyers what lender they’ll use. Advise them that your attorney (the middleman) specified the need for this along with a copy of the purchase contract.  

Resurrecting a dead offer:

Negotiations have been known to die, only to be revived and come together at a later date. This can occur when the offer originally fell apart due to either price or some issue prevented agreement.

After a couple of weeks, contact the buyers, verify that they're still looking and say something to the effect of, “Look, we weren’t able to get together last month, but we just wanted to check back with you to see if we can make this thing work?”

Obviously two things have to happen: the other party still has an interest in the deal working out and you must be willing to start the proceedings with some concession such as price or some change to the previous sticking point. 

Most people never think about this as a viable possibility. If bridges were burned, or if both parties suffer from over enlarged egos, it won’t happen. But if the buyers haven't made a buying decision that will prevent it from happening, this really is a good option. Time can add pressure to the original motivations for moving–for both parties. 

Have a purchase contract ready:

If you have obtained a blank contract (purchase offer form) from an agent, attorney, or another source, make several copies and fill in the blanks such as your name(s) and the property address, lot size, etc. However, do NOT sign these contracts.

Place several of these on a table next to the sales brochures of your home. This could help to get the ball rolling for individuals unsure of their next step. People will buy if you make it easy for them to do it.

The financial ability of the buyers:

During the first meeting with buyers, an agent will inquire about their current relationship with a lender. It feels like a personal subject, but it’s as easy as asking about the availability of ingredients to bake a cake.

Sometime before you have reached an agreement, ask the buyers about current rates and which lender they’ve chosen to get their loan. This doesn’t sound abrasive like, “Have you been approved for a loan yet?”  Be sure to obtain the lender’s contact person for your attorney. 

Avoid unlawful discrimination:

In case you aren’t aware of Federal laws, they prohibit home sellers from discriminating on the basis of arbitrary reasons. Included in unlawful discrimination are race, color, religion, gender, marital status, national origin, ancestry, familial status (families with children), disability, political affiliation, life-style or sexual orientation.

Some states and local governmental institutions have extended their definition of discrimination even further to protect buyers. You are advised to check with your attorney if you have any concerns here.