So you have decided to sell your home. You’ve selected a Realtor®, decided on a listing price, and now you have it listed on the market for sale. After a few showings it becomes apparent that, sooner or later, you are going to get an offer from an interested buyer so you begin to prepare yourself for a successful negotiation and getting your home sold.
Then it happens, your real estate agent calls you with an offer. Unfortunately, it’s not quite what you were expecting, perhaps the price is too low, or the offer has so many contingencies attached, either way, it seems like it will never reach the closing table. The probability of getting this worked out seems almost impossible.
The reality is, most of the time, this is the beginning of a successful transaction. Negotiating with the buyer is a normal part of the home selling process. Home buyers know, if they don’t ask for what they want, they will never get it. With a little effort and good communication, you can normally reach an agreement that you are happy with.
Here are the steps to a successful negotiation
The real estate negotiation is typically initiated by the buyer presenting an offer to purchase the home to the seller. If that buyer is being represented by a Realtor®, which is always in the buyers best interest, they will submit an offer using a pre-printed GAR (Georgia Association of Realtors) form called a Purchase and Sale Agreement. This is the buyer’s initial offer on your home.
This agreement is not legally binding until both parties agree to the terms and sign the contract and complete binding agreement.
This is where the buyer will indicate all of the terms they would like to include in the purchase of your home. These conditions could include things such as:
- Purchase Price
- Due Diligence Period
- Seller closing cost contributions
- Earnest money deposit
- Closing date
- Any contingencies, such as a finance contingency if the buyer is getting a mortgage to buy this home or a contingency that the buyer sells or leases their current home before they purchase this new one.
The Purchase Agreement should also have a time limit for the buyer to respond. In today’s market, with the lack of inventory available, most buyers are allowing the seller twenty fours hours or less to respond.
If you agree to the buyer’s initial offer, you can accept it by signing that agreement. Once notice is received by the other agent/buyer of the accepted agreement, then you will have a binding agreement date. This is the date all negotiated items that involve a time specific time limit in the contract begin.
If the buyer’s original offer is not acceptable, which is normally the case, you have two choices:
- Reject the offer
- Make a counteroffer to the buyer.
The seller’s counteroffer is also made on a pre-printed GAR form called ‘Counteroffer to or Modification of the Unaccepted Original Offer’.
This is your chance to make changes to any of the terms requested by the buyer.
For example, you might:
- Raise the purchase price
- Reduce the amount of closing costs
- Request a higher earnest money deposit
- Reject or modify any contingencies requested from the buyer
Once you submit the counter offer and deliver it to the buyer or the buyers agent, you have rejected the buyer’s original offer. Always consider the initial offer carefully before making a counteroffer as it cancels the buyer’s original offer. Since your counteroffer is a new offer, the ball is now back in the buyers court.
Just like the original offer, your counteroffer to the buyer should always contain a time limit for acceptance. You can set the counteroffer time limit to whatever time frame you wish, although it is recommended to give the buyer a reasonable amount of time to respond. If the buyer does not respond within the time limit outlined in the counteroffer, the counteroffer expires, and the negotiations are over.
When the buyer receives a counteroffer, the buyer has three choices:
- Accept the offer as it is written. The buyer does this by signing the counteroffer before the time limit expires and delivers the signed offer to you or your real estate agent.
- Reject the offer. The buyer can reject your counteroffer and end all negotiations.
- Submit a counter offer of their own. There is no limit to how many counteroffers can be made by the buyer, or seller, before a deal is reached. Well informed buyers, and sellers, frequently reach an agreement relatively quick, so, fortunately, multiple counteroffers don’t happen often.
There are many roles played by real estate agents in the home selling process, but none may be as valuable as the role they play during the negotiation stage. Realtors® deal with offers and counteroffers every day, so they should have a good handle on whether it is a good, or not so good offer.
Obviously, you have a price that you would like to get for your home, and your real estate agent will do their best to meet that expectation. Your real estate agent should advise you if it is in your best interest to accept the original offer, or if you should submit a counteroffer.
Your negotiating strategy will typically vary depending on the type of housing market you’re in when you sell your home. In a buyers market, the buyer will have many more homes to choose from that are suitable for their needs. Rejecting a good offer and making a counter offer, even one that seems reasonable, may drive the buyer to pursue the second home on their list.
However, in a sellers market, with a shortage of homes for sale, the buyer may be more inclined to accept your counteroffer or continue to negotiate, so they don’t lose their dream home. In this market, you negotiate from a point of strength.
Another factor to consider is the buyer’s motivation. We want to know what type of counteroffer is most likely to be accepted by the purchaser. A counteroffer that raises the price and increases the closing costs paid by the seller, or one that keeps the price lower and reducing the closing costs paid by the seller? The net dollar price of the two counteroffers may be the same, but the buyer may find one counteroffer more suitable than the other.
The key is to hire a good Realtor® and listen to their advice. Sometimes the first offer is the best offer. Waiting for the perfect offer can be costly in terms of time and money. Be realistic and consider all options and circumstances before making a decision to accept, counter, or reject a buyer’s offer.
Thinking of selling your home? Use our 15 second Home Value Estimator to find out what your home may sell for in today’s market, or all us at (678) 985-1234 for a free consultation on your home’s value.