Real estate negotiation is truly an art, with some science behind it. We talked — here — about the three most important things in a real estate transaction. In any transaction, really. Recall that location is only part of the deal.
The product, the price, and the packaging are the Big Three we’re talking about.
Think about a real estate transaction. When you, as the buyer, submit your offer, you are not buying real estate and all the warm fuzzies that go with that. No, indeed, you don’t buy anything until the seller agrees to sell it to you.
When you submit an offer on a property, you are sending a message to the seller that you’d like to buy a particular property, and here — in writing — are the terms and conditions under which you’d like that transaction to happen. You are asking the seller to pick your offer over any other offers that might have been received.
You are asking the seller to pick you.
Really, you are the product.
You, more crudely defined as “your financial ability and apparent willingness to complete the transaction.” That’s what the seller really wants to know when you submit an offer: can you and will you actually close the deal?
Of course, with a product comes a price. At first glance, it seems that price is a pretty simple concept to understand. In real estate negotiation, however, you need to consider the price as merely a part of the total cost of accepting your offer. Other parts of the cost component include the mortgage payoffs the seller needs to make, closing costs and prorations the seller needs to pay, and anything else in the contract that affects the seller’s checking account. I’m not necessarily saying you need to change the price you are offering, but you do need to be aware of the seller’s perspective as much as you can. Adjusting your offering price or financial terms can help tip negotiations in your favor, if you’re in need of such tipping.
When we talk about packaging, please understand we are not talking about your clothes or your car. No. That has nothing to do with real estate negotiation. We are talking about all the other terms of the offer that don’t seem to have a financial component (but really do, since everything has a value). These are things like date of possession, inclusions and exclusions asked or given, and all those other ticky-tackies in the contract. Don’t forget the general market conditions. Like location of the property, that’s a part of the package. Does the market generally favor the buyer or the seller? That has an impact on the real estate negotiation.
So when you write an offer, how do you present yourself as the product? Remember from that other post, that if one the Big Three (Product, Price, and Packaging, remember?) is weak, the other two need to be proportionately stronger to make up for it. If two are weak, the third must be very strong. If all three are weak, the likelihood of getting your offer accepted is probably somewhere south of Slimtown, and slightly north of Nowhereville.
When you’re ready to jump into the real estate market, let’s take a look at the strength of your Big Three, and see where you stand. Just please remember, this needs to happen before you start looking at houses.
Let’s just say we’ve gone through the initial steps, and we have a buying plan in place. What do you have to do to make the real estate negotiation phase go smoothly once we’ve found the house you want to make your home, and increase the chances that your offer will get selected?
First, we’ll need to see where you stand in each of the three parts. It’s hard to say that any one of the three is more important than the others. In real estate negotiation, you just never know what the seller will find to be the deciding factor. The price, however, is so dependent on the actual house that we can ignore that for a the time being. A lot of the packaging, also, is dependent on which house you will choose, or simply outside of your ability to change. Let’s focus for now on you, the buyer, as the product in this real estate negotiation.
What can you do to improve your odds of getting your offer selected as we enter into the real estate negotiation phase of the home-buying process? Actually, there are several things, and most of them have to do with getting your financial house in order. We’ll need to address them in future posts. You won’t want to miss that.
So what’s next? Take your pick.
Yeah. You should probably do at least one of those things right now.