Negotiating a successful real estate sale requires creating an environment that sustains the buyer's interest and trust during the process. The goal is to reach a good agreement - one in which the underlying interests of both buyer and seller are met. The results of a poor agreement often return to haunt the parties after closing. Many of our real estate clients have been experienced negotiators in other industries, and we have learned from their skill and experience. Here are some thoughts to consider as you prepare for the sale of your home.

What do you want to achieve in the negotiation?

Letting the buyer know what you need, in a clear and reasoned way, is the first step toward getting it. For most people, price is the highest priority, and is given the most attention. The buyer's offer must be evaluated in light of a market analysis, marketing time and buyer responses. This will give you an indication of what a reasonable offer should be. In addition to price, there are other needs to think through. Distinguish between must-haves and would-likes. Your interests might include:

1) Selling at the highest price possible.

2) Coordinating your move to your new home.

3) Setting the closing to meet your travel, school or work time frame.

4) Resolving any repair issues fairly.

5) Protecting yourself by having complete property disclosures.

6) Locking in a mortgage loan rate for your new home.

7) Having no title or survey issues, or solving any that do arise.

8) Completing your relocation process and getting settled into a new home.

9) Forging a good relationship with a buyer who appreciates your home.

10) Having no future problems or unexpected issues after closing.

How much leverage do you have?

A big factor in your leverage is the underlying market condition. If you are in a seller's market you should receive offers at the top of the range. This is especially true if your home is in a hot area and has great appeal. If you have multiple offers, you have very strong leverage! Buyers must make their best offer up front.

If you are in a buyer's market, and your home has been for sale for many months, you have a lot less leverage to work with. Knowing the buyers' underlying interests will help you improve your leverage. If you see that they love your house, you have some leverage. If their time frame is immediate, and you can meet it, you have some leverage. If you can meet some of their secondary needs, you have some leverage for a better price. If the buyer is a dispassionate investor you have very little leverage.

Be careful that you do not accept an offer that contains a high risk contingency to sell the buyer's home, or a long option period, or a buyer without approved financing. These offers have a down side that may be difficult to live with. Buyers should submit a letter from a lender giving their qualification status.

Understand the Option Period

In Texas, our contracts contain a short option period during which the buyer can terminate. We all breath a sigh of relief when the option period is over. In the long run the option period protects you, the seller. It allows time for the buyer to do inspections and answer any open questions. Keep in mind that, for many buyers, taking the first step in a big decision is hard. Once the ball is rolling it is easier for them to stay on track. Action creates commitment. There are subtle pressures to keep the buyer in the deal, such as face saving, and time and money investment.

Is an adversarial or cooperative approach more effective?

There is nothing more destructive to the negotiation process than the adversarial style. Professional negotiators try to preserve the relationship between the parties. We do not want to reach an impasse in which neither the seller's nor buyer's needs are met. Occasionally, buyers include a note with their offer explaining why the house is not worth the price, pointing out deficiencies, etc. This starts the negotiation off with a defensive or angry seller. In the same vein, your attitude toward the buyer can be effective in building their interest in your home. The negotiation process usually begins with some degree of distrust between buyer and seller. The goal is to move in the direction of trust as quickly as possible.

How do you work with a combative strategy?

Sometimes you must work with an adversarial buyer or agent. Their strategy might include: snide remarks, defensive arguments, emotional statements, threats to terminate, ego involvement, and stated positioning. Creative solutions are not likely to be found in this environment. Good control of your own emotions is critical when working with a combative negotiator. Here are some pointers:

1) Do not respond emotionally. An angry or defensive response will escalate the negotiation into a no-win battle.

2) Do not argue. Arguing usually positions them more strongly and drags the negotiation process off course.

3) Do not ignore their arguments. Listen carefully, but do not accept or reject.

4) Accept the fact that strong emotions are present. They may be a negotiation tactic - to cause fear or submission.

5) Avoid an "us-against-them" strategy. Attach cover memos to your responses in order to communicate with the buyer and break down barriers.

6) Firmly anchor pricing and other points to outside data. Show that your proposals were not chosen unreasonably.

7) Do not allow hazy proposals to stand. Put everything in writing. An emotional negotiator will usually produce an unclear agreement.

8) Offer some wins on some of the terms. Face saving is important.

9) Make your counteroffer as attractive to them as possible. Look for ways to meet their underlying needs.

10) Keep your overall interests in mind. They may be qualified buyers who can satisfy your goals.

Is every point in the contact negotiable?

Yes. However, one of the most effective means of coming to an agreement is to rely on consistent standards. For example, it is common in our area for the seller to buy the title policy and buyer to pay survey cost. Using accepted standards prevents buyer and seller from haggling over every point. On the other hand, all points in an offer can be used to help structure the deal.

How do you move in the direction of trust?

Most people are fair minded and reasonable. They respond well to respectful treatment and to having their concerns heard. If the seller feels that the buyer and agent are acting with integrity, they will be much more cooperative. Contract negotiation is a sensitive area, and anxiety can be high. Both buyer and seller are under pressure, with future plans at stake. Acting with integrity does not mean that all cards have to be put on the table. It is not necessary to reveal your cost basis in the house or personal situation. It is valuable to develop trust because trust raises the level of cooperation and forwards the negotiation. Here are ways:

1) Listen and understand what the buyer has to say. Answer questions quickly.

2) Express appreciation for the buyer's interest in your home.

3) Respond within a reasonable time to offers or proposals.

4) Disclose the property condition thoroughly. This usually has the effect of improving the buyer's interest.

5) Reveal some personal information about your use and enjoyment of the home.

6) Leave out bottles of water for your prospective buyer.

7) Offer a small gift, such as a neighborhood directory, list of service people, babysitters, etc.

8) Give the buyer first choice on any items your are planning to sell or give away.

9) Give an orientation to your home to show how to operate your pool, sprinkler, security, etc.

10) Accommodate the buyer's requests to drop by and measure the house or show it to relatives. (Yes, this can be annoying.)

Finding common ground with the buyer can be a powerful reinforcement of the buyers choice of your home. If you meet the buyer during a visit to your home, make the buyer feel very welcome, and look for some common interests: children's needs, neighborhood events, shopping, gardening, etc.

Responding to a Low Ball Offer

There is a point at which an offer is so low and poorly considered that it should not be given a response. However, most of the time it is best to respond to offers, for these reasons:

1) The buyer may be unfamiliar with your market. In his market, greater price reductions may be commonplace.

2) The buyer may be unfamiliar with the comparable sales for your home. Good sales data might build his confidence in the property.

3) The buyer may be starting low, but be willing move up. This often happens.

4) It may be in the buyer's background or culture to negotiate aggressively. Once terms are settled, he may be very relationship oriented.

5) By refusing to counter, you are adding a subtle slap to the buyer's ego. He may not submit another offer, and you will not see how high he will go.

Responding to a Reasonable Offer

Buyers expect sellers to take an evening to discuss the offer. If an offer is accepted within 15 minutes, the buyer may feel uneasy. Multiple offers must be presented fairly. You should either disclose to all parties, or disclose to none, that multiple offers have been received. We prefer disclosure to all parties. This will maximize your ability to obtain the best price.

By disclosing that there are multiple offers, you are not shopping your contract. Shopping occurs when you disclose the terms of an offer to induce a buyer to submit a better offer. This will likely result in distrust of the process, and possible loss of the buyers. There may be a lot of emotion on the table. Future problems will be avoided by a formal and fair procedure for handling multiple offers.