Negotiating the Contract
You need to evaluate your own situation honestly and realistically before you begin negotiating the contract.
The Offer
It is difficult to describe the negotiation process in detail because they can vary so greatly. The general structure of the exchange, however, is fairly simple and routine. Occasionally, buyer and seller will sit down and talk through the terms of the contract together. More often, it begins with the buyer submitting a written
offer to the seller. Typically, the offer will give the seller a limited time frame (12-72 hours) to accept — if they wish to accept the offer as written.
Even if the buyer tries to make an offer the seller “can’t refuse,” there are usually aspects the seller can’t or won’t accept. The seller may be unable to accept an offer with a closing date of March 30th if she is buying a property that is contracted to close on March 28th. This could be because she needs the money from the sale to complete the purchase. Even if everything is acceptable, there are always the bedroom curtains Aunt Mabel made or the shelf Uncle Jack installed. The seller may suddenly remember they want to exclude those from the sale. Consequently, a counteroffer from the seller will almost always follow the buyer’s offer.
Negotiating the Counteroffer
Typically, the counteroffer will say that the seller accepts the buyer’s proposed offer with a list of changes. These may include price, dates or the exclusion of Uncle Jack’s shelf. The buyer is then in a position to accept this offer or to counter again. They can incorporate some of the seller’s changes, reject others, and add additional terms. Usually, buyer and seller will either find common ground after two or three such exchanges or the negotiations will break down. Once an offer or counterproposal is accepted as written and within the time frame specified, both parties have entered into a contractual agreement. The sale and purchase of the property will now adhere to the terms specified by the contract and counter proposals(s) .
Negotiate Honestly
You need to evaluate your own situation honestly and realistically before you begin negotiating the contract. If you’re a parent who needs to get their child settled into school next month, negotiate conservatively. Don’t negotiate like an investor who can buy any decent 3-bedroom home, and who is willing to lose out if the seller won’t compromise. Or if your lease is up next month and you have nowhere to go, you may not want to negotiate as hard.
If you’ve found a house you need or want badly, don’t let the desire to win the negotiation cause you to lose it over $1000 — or $100. We’ve seen this happen, along with the emotional devastation that follows, too many times. Keep the big picture in mind. The important question is not whether you or the seller wins the negotiation, but whether
you are likely to win over the long term if you buy this home at this price and under these terms.
Don’t let the dynamics of the negotiation make you overextend yourself financially or buy the wrong house. Keep your goals and limitations in mind and take them seriously.
Negotiate Wisely
If you have a psychological need to buy 5% under market, don’t bother to make an offer on a newly listed property. The seller generally won’t be interested. Keep in mind that if it takes you a year to find a seller who will negotiate on these terms, you may still lose money if the market has gone up 10% in the interim.
If you do a lot of negotiating and take pride in your skills, consider a bit of restraint in your home negotiations. It is important to remember most of the sellers you’ll be dealing with don’t sell homes professionally and aren’t professional negotiators. More importantly, they often don’t really see the sale of their home as a business transaction. Selling the home is a very personal — and highly emotional — process. This is where they’ve raised their kids, spent their weekends finishing the basement, weeding the garden and planting trees . Don’t lose the house by irritating the seller for no good reason.
Don't Burn Bridges
Always keep in mind that you may need to call the current owner after you’ve bought the house. You might have to ask about the sprinkler system or to find out what some pipe in the basement was put in for. Or you may need the seller’s approval to extend the date set for loan approval or closing. Good relations not only make the process more pleasant for everyone, they may be worth real money to you down the road. Don’t risk them over trivial issues or the desire to “win” the negotiation.
And, please, when negotiating the contract, don’t tell the seller you are making a lower offer because you don’t like something. Whether it's their landscaping, their paint colors, or their wallpaper, they will be offended. They will wonder why you are offering to buy their house if you don’t like it. They'll want to find another buyer who likes their wallpaper. People want to pass their treasures on to people who appreciate them. For many sellers, their home means more to them than anything else they’ve ever owned.