How to Negotiate and Close Real Estate Deals

Welcome back to the CA Realty Training blog, sharing some “REal knowledge” one installment at a time! This week we’re covering negotiations… the tricky, fun part of navigating (and closing) a real estate deal.

Now remember, in this profession, you’re only paid when the deal is completely done with, closed -- you’re not paid hourly, you’re paid on commission. The smoother everything goes, the better off you are. The quicker you can progress through an escrow, the higher your return on time invested.

Since your payday is based on when you close, you want to hear the words “over and out!” before you start celebrating.

To open escrow, you must come to an agreement between the two parties. Any negotiation is just an agreement reached between the competing interests of those two parties -- in our case, a buyer and a seller.

Negotiations usually begin with the selling price, because the buyers want the house for the lowest price possible, but at the same time, the sellers want the highest price (obviously). The price they agree upon is the market value of the house, and it’s influenced by external factors such as comparable sales and the condition of the house.

Most negotiations have to be balanced, reasonable, and equitable for them to work out -- otherwise one or both of the parties would walk away.

You’ll negotiate on behalf of your clients, keeping their best interests in mind, especially in terms of getting them the house. For example, if the house is worth $1 million, an offer of $800,000 is not going to be a reasonable starting point for a conversation. The seller could even put their foot down and declare they won’t accept any more offers from your buyer -- and that would be a bad thing if your buyers really want the house. You must negotiate with the buyers to put in a reasonable offer so that they are not denied the house of their dreams!

However, there are some times when your hard-line negotiating skills will really come into play. A routine part of any escrow process is the home inspection. If there are any issues, you do have the right to cancel escrow and get a return of the earnest money deposit. In this case, though, a skillful negotiator will sometimes use the issues with the house as leverage to get a discount from the listing price -- especially if the market is hot, like it is right now! If the buyers really want the house, they may be willing to overlook some repairs like minor roof repairs or cosmetic issues, especially if it gives them a discount on the house.

Of course, the easy way to do this would be on the exact dollar amount of the repair, but this is where an agent’s negotiation skills come into play. The buyer’s agent will try to get a bigger discount, out of the annoyance factor of doing the repairs after buying the house. The seller’s agent will try to get a smaller discount, being that the home is likely to sell as-is in today’s hot market. Who wins? The stronger negotiator becomes the stronger agent in this case, and the settlement they reach should please both parties or they should cancel the escrow.

A good tip in negotiations is to try to help the other party, as they are more likely to come to a favorable settlement, especially if they have the upper hand. A seller is currently more likely to find a second buyer, than a buyer is likely to find a backup property that suits their needs as well. If you’re the buyer and your inspector has found issues, help the sellers out by offering them an easy sale -- just at a lower price. They probably don’t want to do repairs on a home they are about to sell, and you can control the repairs better after you’ve bought the house.

Another great tip -- and this applies across all walks of life -- is to do your homework and know as much information as possible about the sellers (or the other party in the negotiation). If the seller’s highly motivated, you’ll have a better chance of getting a good deal on the house and getting a quick, easy deal.

Remember, getting an offer accepted is just the beginning of the process. There are many, many more negotiations that will take place during your escrow period and it’s key to know all the information and come to the best results for your clients.

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