Why Can’t We Negotiate More?

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Posted on April 26, 2012 by Karen Crowson in Buyers,Sellers,Short Sales

Negotiation has always been a component of real estate.  But it’s not mandatory. One party can try and the other can say no.  So much of that has to do with how the market is, and whether it’s a buyer’s market, a seller’s market or a balanced one. Negotiating is very common in a balanced market.

WHAT KIND OF MARKET IS IT?

Buyer’s Market – price tends to be first and foremost. The longer a property has been listed, the more likely a below-asking offer will be submitted – especially if it is the only offer. Once two parties come to agreement, there is usually another round of negotiation regarding repairs. When listed properties are plentiful, the buyer has other choices and may play hardball where offers are concerned.

Seller’s Market – appreciating prices and/or low inventory put sellers in the driver’s seat. They push back on price, and know the buyers don’t have a lot of other properties to choose from.  They may also be competing with other buyers for the home. If the seller encounters a buyer with strong financing though, it’s less likely they’ll take too many chances where repairs are concerned.

Balanced Market
When the playing field is level, there is much greater likelihood of back and forth negotiations. In those cases, price isn’t the only topic on the table. Length of escrow, closing costs, and strength of financing may be strong considerations.

WHO ARE THE PLAYERS?
Taking all of the above into consideration, it’s still important to look at the situation from the eyes of the other party.

Short sellers don’t have anything to gain from the sale of the home, and may favor a buyer they identify with over an investor. And the sellers won’t be doing any of the negotiating themselves – that will be done by the bank’s representative or a third party negotiator.

Banks (approving short sales or selling foreclosed properties) weigh a few important factors – can it close? How quickly and for how much? The property is treated as an asset or liability with little or no emotional entanglement.

Owner Occupied Sellers
They have complete say over negotiating. However, emotions may play an important role in whether or not they engage.

Investor Sellers
If it makes financial sense, investors will play the game. But, it does depend upon market conditions. They are there to get in, get out and reinvest their money.

Homeowner Buyers
First time buyers don’t always understand the concept of buying a re-sale home. It’s not a brand new house and sellers don’t usually intend to make it brand new for you, or reduce the price if it’s not. Often they hear about ‘deals’ others have gotten, and need to be grounded in what reality looks like for the current market.

Investor Buyers
Many of them operate with all cash, and that carries a tremendous amount of weight. However, it too is market dependent. Short sellers don’t necessarily want to sell to an investor who will profit from their hardship. And for others, price rather than terms will be the most important factor.

Here’s an actual buyer scenario.

So yes, real estate transactions do involve negotiating, but it depends upon the market and who has the advantage. A year ago, many buyers were saying no to negotiating.  Now, it’s the seller’s turn. And those sellers are traditional homeowners, banks and investors. After they say NO, they just say NEXT!!