Tips to Successfully Negotiate a Purchase Agreement
If you’ve found the house of your dreams, then you must do one more step before it’s actually yours. This is negotiating the purchase agreement. It can be one of the most stressful steps in the house buying process. You may think that it’ll be accepted, but it could also be rejected.
What is a purchase agreement for a house?
A real estate purchase agreement is a binding contract used to outline the terms of a residential property deal between a buyer and a seller.
Negotiating a purchase agreement for a home is important since there’s potentially a lot of cash at stake.
While sellers want the highest price and buyers want the best deal, they have to meet somewhere in between to seal the deal.
Here is how to negotiate the purchase agreement in easy 12 steps
House price research is the first step in buying a property. Buyers don’t want to overpay, while sellers want to make sure the deal makes sense for their financial plan.
Asking your real estate agent for comparative market analysis is to your benefit. You can assess whether the seller is pricing at, above, or below market value. The buyer will then strategize how much to offer accordingly.
Take the Time
Being patient is trying for many people. Whoever is flexible about time has the advantage. Your patience can be challenging to the other party as it reflects that you are not under pressure to conclude the transaction.
So what do they do?
They offer concessions as a means of providing you with an incentive to say yes.
Learn the other party’s motivation
Closely related to time in the negotiation game is the importance of the other party’s motivation.
For example, if you learn the seller is selling because they just purchased a larger home, you know they are motivated both by a time deadline and a need to sell their old home to provide the down payment cash.
However, if you learn the seller wants to buy a larger home but has not yet done so, that seller is not yet highly motivated to sell and might not accept your low purchase offer.
The biggest obstacle to learning the seller’s motivation is often a listing agent who refuses to tell why the seller is selling.
You or your agent should courteously reply, “Well, we would like to know so we can make a purchase offer which meets the seller’s needs.” That is usually enough to melt even the toughest, meanest listing agent you will ever encounter.
Buyers competing with all-cash offers need to figure out if they can drop the financing contingency, which will shorten their closing timeline.
Buyers can do this by having their mortgage fully approved prior to making an offer. That preapproval shows that their finances are in order and they can afford the property.
Negotiate The Conditions
Agents operate on the principle that “yes is less.”
That means the fewer conditions and the fewer matters that are dealt with in your offer, the greater the chance they have of getting a yes from the seller, and an acceptance of your offer.
But you shouldn’t work on the same principle.
From your perspective as a buyer, a simple offer to buy a property on a 10 percent deposit, settlement in 45 days, cash unconditional, will work against you, as the only thing you can negotiate over is the price.
In this example, experienced negotiators might make their offer subject to finance, pest and building inspections with say, a 120-day settlement, and much smaller deposit with as many inclusions as possible in the sale.
This will allow them the opportunity to negotiate away some of these matters, ultimately arriving at a settlement with a 10 percent deposit, 45-day settlement, but at a reduced price.
Understand And Respect Each Other’s Priorities
If during the negotiations you can find out more about the buyer’s priorities you’ll not only improve your position, but you’ll also be able to resolve any obstacles more creatively and sensitively.
For instance, if a buyer is adamant about the sale price – perhaps because they’re at the limits of their available financing – they might be more flexible about the closing date or other terms. There are no “one size fits all” approaches to negotiating. Still, the more you know about the buyer’s priorities, the more you’ll be able to work with them to achieve your own priorities.
Don’t be afraid to ask for what you want
Successful negotiators are assertive and challenge everything – they know that everything is negotiable. Being assertive means asking for what you want and refusing to take NO for an answer.
Aggression is often used to achieve a result. However, practicing being assertive will take care of your interests while maintaining respect for the interests of others. When you manage your own interests ahead of the others and with a lack of respect then you are negotiating aggressively.
Learn What the Other Party Needs From the Deal
Learn what the other party needs—not really why they are selling or buying, but what will satisfy them that they have a win-win sale.
Ask questions of the agent and praise the good points of the property or the nice character of the buyers if you’ve met them.
Put together the best deal so that the closing is smooth and successful.
Wait For A Response
Patience is a virtue in negotiation.
Once you’ve made an offer it’s important to wait for the seller’s response.
If they won’t respond to your offer, then walk away.
Don’t be tempted to make a further offer without hearing from the vendor.
To make another offer is to send a strong message to the seller that you’re keen and they will probably take advantage of you.
Always be willing to walk away
Never negotiate without options. If you rely too much on the positive outcome of a negotiation, you lose your ability to say no.
When you say to yourself, “I will walk if I’m unable to secure a negotiation that is satisfactory,” the other side perceives that you mean business.
Your resolve will force them to make concessions. If you don’t consider the option of walking away, you may be inclined to cave into the other side’s demands simply to make a deal.
Don’t take the issues or the other person’s behavior personally
Never get personal with the negotiations.
For example, you wouldn’t describe the property as a “dog box”, a “demolition job” or a “haven for drug dealers.”
None of these comments are likely to achieve a reduction in the price.
You’re better served if you advise the seller that the property has potential, but it’s obviously in need of work to bring it up to its best condition.
Get Something In Return
Whenever you give something away, receive something in return. It’s the give and takes principle or I’ll do this if you do that.”
When you give something away without requiring the other party to reciprocate, they will feel entitled to your concession.
If they have to earn your concession, they will derive a greater sense of satisfaction than if they received it for nothing.
Every day most of us need to negotiate, and most of us wish we would have paid less. It’s a natural feeling and we all feel it at some time.
At Falaya, our team focuses on a result that allows both parties to walk away with a feeling of success. We aim to obtain the most feasible solution on behalf of our clients as this is what we are expected to deliver.