5 Negotiating Strategies When Selling Your Home
Selling your home is likely one of the biggest financial transactions you’ll undertake in your lifetime, and the price you agree on with a buyer, along with the real estate commissions you pay, will determine how much money you walk away with. These negotiating strategies could put you in the driver’s seat and help you get top dollar in any market.
- One hardball tactic is sticking to your list price in your first counteroffer or even rejecting an offer without making a counteroffer.
- To foster a sense of competition, you should only accept offers after an open house.
- When making a counteroffer, put an expiration date on it to force a speedy response.
- If you agree to pay closing costs, then increase the purchase price.
Try These Negotiating Strategies When Selling Your Home
1. Counter at Your List Price
As a seller, you probably won’t want to accept a potential buyer’s initial bid on your home if it’s below your asking price. Buyers usually expect a back-and-forth negotiation, so their initial offer will often be lower than your list price—but it may also be lower than what they’re actually willing to pay.
At this point most sellers will make a counteroffer with a price that’s higher but still below their list price, because they’re afraid of losing the potential sale. They want to seem flexible and willing to negotiate to close the deal. This strategy does indeed work in terms of getting the property sold, as thousands of sellers can attest, but it’s not necessarily the best way to get top dollar.
Instead of dropping your price, counter by sticking to your listed purchase price. Someone who really wants to buy will remain engaged and come back to you with a higher offer. Assuming that you’ve priced your property fairly to begin with, countering at your list price says that you know what your property is worth and you intend to get the money you deserve.
Buyers may be surprised, and some will be turned off by your unwillingness to negotiate. You do risk having a buyer walk away when you use this strategy. However, you’ll also avoid wasting time on buyers who make lowball offers and won’t close any deal unless they can get a bargain.
A variation on countering at your list price is to counter just slightly below it, conceding by perhaps $1,000. Use this approach when you want to be tough but are afraid that appearing too inflexible will drive away buyers.
2. Reject the Offer
If you’re gutsy enough, you can try a negotiation tactic that’s more extreme than countering at your list price: Reject the buyer’s offer—but don’t counter at all. To keep them in the game, you then ask them to submit a new offer. If they’re really interested, and you haven’t turned them off, they will.
This strategy sends a stronger signal that you know your property is worth what you’re asking for it. If the buyer resubmits, they’ll have to make a higher offer—unless they decide to play hardball back and submit the same or even a lower offer.
When you don’t counter, you’re not ethically locked into a negotiation with a particular buyer, and you can accept a higher offer if it comes along. For the buyer, knowing that someone may make a better offer at any moment creates pressure to submit a more competitive offer quickly if they really want the property. This strategy can be particularly useful if the property has only been on the market for a short time or if you have an open house coming up.
3. Try to Create a Bidding War
Speaking of open houses: Make them an integral part of your process. After listing the home on the market and making it available to be shown, schedule an open house for a few days later. Refuse to entertain any offers until after the open house.
Potential buyers will expect to be in competition and may place higher offers as a result. If you get multiple offers, you can go back to the top bidders and ask for their highest and best offers. Of course, the open house may yield only one offer, but the party offering it won’t know that, so you’ll have a psychological edge going forward with counteroffers, etc.
While it is possible to field multiple offers on a home from several buyers simultaneously, it is considered unethical to accept a better offer from a new buyer while in negotiations with any other buyer.
4. Put an Expiration Date on Your Counteroffer
Say a buyer submits an offer that you don’t want to accept, and you counter their offer. You’re then involved in a negotiation with that party, and generally it is considered unethical to accept a better offer from another buyer if one comes along, though it is not illegal.
It is possible, as noted above, to be involved in multiple negotiations with several buyers at the same time. It is the seller’s prerogative to disclose or not disclose this information to the prospective buyers. Disclosure can result in higher offers, but it can also frighten off a buyer. The seller is legally allowed to counter more than one offer at the same time, but they must include appropriate language letting all the parties know of the situation.
In the interest of selling your home quickly, consider putting an expiration date on your counteroffers. This strategy compels the buyer to make a decision, so you can either get your home under contract or move on. Don’t make the deadline so short that the buyer is turned off, but consider making it shorter than the default time frame in your state’s standard real estate contract. If the default expiration is three days, you might shorten it to one or two days.
In addition to closing the deal quickly, there’s another reason to push sellers to make a fast decision. While the counteroffer is outstanding, your home is effectively off the market. Many buyers won’t submit an offer when another negotiation is underway. And if the deal falls through, you’ve added time to the official number of days your home has been on the market. The more days your home is on the market, the less desirable it appears, and the more likely you are to have to lower your asking price to get a buyer.
5. Agree to Pay Closing Costs
It seems like it’s become standard practice for buyers to ask the seller to pay their closing costs. These costs can amount to about 3% of the purchase price and cover what seem to be a lot of frivolous fees. Buyers are often feeling cash-strapped from the down payment, moving expenses, the prospect of redecorating costs—and maybe even from paying the closing costs on the home they sold. Some buyers can’t afford to close the deal at all without assistance for closing costs.
While many buyers don’t have or don’t want to spend extra cash up front to get into the home, they can often afford to borrow a little bit more. If you give them the cash they want for closing costs, the transaction may be more likely to proceed.
When a buyer submits an offer and asks you to pay the closing costs, counter with your willingness to pay but at an increased purchase price, even if it means going above your list price. Buyers sometimes don’t realize that when they ask the seller to pay their closing costs, they’re effectively lowering the home’s sale price. As the seller, of course, you’ll see the bottom line very clearly.
You can increase your asking price by enough to still get as high as your list price after paying the buyer’s closing costs. If your list price is $200,000, and the buyer offers $190,000 with $6,000 toward closing, you would counter with something between $196,000 and $206,000, with $6,000 for closing costs. A catch is that the price plus closing costs must be supported when the home is appraised; otherwise, you’ll have to lower it later to close the deal, because the buyer’s lender won’t approve an overpriced sale.
The Bottom Line
The key to executing these negotiating strategies successfully is that you have to be offering a superior product. The home needs to show well, be in excellent condition, and have something that competing properties do not if you want to have the upper hand in negotiations. If buyers aren’t excited about the property you’re offering, your hardball tactics won’t cause them to up their game. They’ll just walk away.