14 Real Estate Negotiation Mistakes That Are Costing You Thousands
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Negotiating real estate is a lot like playing high stakes poker, you put your chips on the table and hope for the best. As in poker, one slip up and you’re screwed. Whether you’re buying your dream home, or selling a property you’ve outgrown, negotiation skills are vitally important. In the case of small mistakes or even well meaning decisions, thousands of dollars can quietly be drained from your final deal.
The market is unpredictable and you have to make a good decision as fast as you can. Here’s a run down on the key pitfalls to avoid if you want to save a bundle and walk away happy.
Failing to Do Proper Research
Failure to dive into local market data is one of the biggest mistakes buyers and sellers make. Having a good idea of the recent selling prices of similar homes in the neighborhood is a great start to negotiating. Homes priced according to recent comparable sell faster and for more than those priced on hunches. Before you even set a price or make an offer, delve deep into the local market trend.
Unreasonable Starting Offer
Although it may seem like a clever ploy to start with an offer that’s way off the mark, it will more often than not backfire. A seller may interpret a lowball offer as an insult or think you aren’t serious, and in some cases, will reject your offer altogether. However, if you’re the seller and start with an outlandish price, buyers may not even see the point of making a counteroffer. The point is to try and make a fair offer so everyone is ready to negotiate at the table.
Driving the Process With Emotions
When you feel personal about buying or selling a home, it’s easy to let emotions take the wheel, but you can pay for it. The problem with becoming too attached to a property is that you might overpay, but a knee jerk reaction to an offer you don’t like might result in you missing out on a great deal. Take a step backwards and remember that this is a business transaction. Check your emotions at the door and try to make the decision that is best for your financial future.
Skipping the Inspection
When you’re buying a house, there is a temptation to skip the inspection for a quicker closing, but it’s a risky gamble and a rookie mistake. It may be that “too-good-to-be-true” deal has hidden nasties, like old plumbing, wiring problems or even structural damage. A professional assessment is what an inspection provides and it will give you the leverage to negotiate the price if anything comes up. Never mind the little extra waiting time, always factor in an inspection.
Not Knowing Your ‘Walk Away’ Point
If you don’t have a firm ‘walk away’ point going into negotiations, you can end up compromising and regretting it. If you’re dead set on a certain price or condition, decide that threshold in advance. Having the control to know when you’re willing to walk away from a deal, instead of walking away with buyer’s or seller’s remorse after the deal is done.
Contract Details Overlooked
It’s the fine print that is often hidden in the real estate contracts, which contain the details of the overall deal. While you may want to skip over contingencies or ignore specifics like closing dates or repair costs, doing so can often lead to last minute headaches. Read the contract closely (and have an attorney read it too) before you sign anything, so as not to fall into any hidden traps. Those “small details” are really amazing how much they can end up costing you later.
Being Overly Focused on the Purchase Price
The price is important, but don’t get so focused on it that you miss what else could be important such as closing costs, loan terms, and seller concessions. In some cases, paying a little more for a house, with a better loan, can actually end up saving you money. Be sure you’re looking at the whole picture and not fixating on one part of the deal and losing money.
Ignoring the Value of Timing
Real estate is all about timing. The right time of year can add thousands to your final sale price if you’re selling. Homes listed in May sell for an average of 5.9% more than the average listing price for the year, Zillow says. It might be worth it for buyers, though, to wait until the offseason to get a better deal. Timing can be a game changer in negotiations, don’t ignore it.
Being Too Rigid on Closing Terms
Sometimes, if you stick too strictly to your closing terms, you can drive a potential deal into the ground. Closing dates or minor repairs that the other party could have flexibility on will make the deal more attractive to them, without costing you much. If the seller or the buyer has some urgency, a flexible solution can make them more agreeable on other points and help you get a better deal in the end.
Falling for “As Is Deals” Without Question
If things are going well, sellers might offer properties ‘as-is’ to avoid repairs; it sounds like a deal—until you’re the one paying for all the fixes. If you’re going to be making the purchase ‘as is,’ plan for repairs and include that in the price you offer. And don’t be afraid to push back, or ask questions. You don’t have to take a deal that lands you with the bag of repairs.
Skipping Professional Help
Saving money by avoiding a real estate agent or lawyer may cost you more. There are many legal and financial nuances that go into negotiating real estate deals and a professional can help. They know the ropes and can spot red flags you may not. What you think you’re saving by doing it yourself could actually end up costing you way more in the long run.
Not Taking Advantage of Seller Concessions
Help with closing costs and repairs is an example of seller concessions, which are valuable bargaining chips if you are buying in a buyer’s market. If it means closing the deal, many sellers are open to these. If they’re warranted, don’t be afraid to ask for concessions. Believe me, sellers almost always will negotiate these extras just to keep the deal going.
Overlooking the Power of a Good Counteroffer
If you don’t like the initial offer, don’t necessarily shoot it down right away. Counteroffers are a common part of negotiating real estate and a powerful tool. Countering can provide a middle way for both. Sometimes, all it takes is a bit back and forth and the deal is just where you want it.
Failing to Communicate Clearly
Communication during negotiations that’s clear and frequent will help avoid misunderstanding which can spoil a deal. If you have any concerns or questions please, speak up! Delays, frustrations or, worst case, a failed deal can result from miscommunication. When possible, be upfront with your expectations and communication should be open to assure it is as smooth as possible.
Disclaimer: This list is solely the author’s opinion based on research and publicly available information.
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