What to Expect During the Negotiation Process
How to Handle Offers, Counteroffers, and Negotiations with Buyers
Negotiating the sale of your home might feel like trying to win a poker game—with apologies to the great Kenny Rogers, you’ve got to know when to hold, when to fold, when to raise, and when to bluff (just kidding, don’t bluff, it’s real estate).
But in all seriousness, navigating offers and counteroffers can be a little intimidating, especially if it’s your first time or your first time in the Lakes Region market. Hopefully, if you’re at the point of receiving offers, you’ve been working with a stellar agent who has already prepared you for what to expect when you’re anticipating offers.
But if not, fear not—we’re always here to educate you and walk you through the process. Not to mention, boy do we have great poker faces! Below is an overview of what it looks like when you have a single offer. We’ll write a follow up post soon that looks at the excitement that multiple offers can bring - for both buyers and sellers.
1. Receiving an Offer: It’s Like Opening a Gift…or a Mystery Box
Once your home hits the market, you’ll probably be on the edge of your seat waiting for that first offer. It’s like waiting to unwrap a gift on your birthday—but with more paperwork and potentially more stress.
What to Look For:
Price: The price is the obvious part, right? But don’t let it make or break your mood - or your decision! Sure, it may not be the number you were dreaming of, but sometimes an offer can be adjusted in the back-and-forth. So, if it's lower than you expected, don’t panic—it’s just the start of the conversation. And if it’s above the asking price, take a deep breath, and look at the rest of the offer to make sure it’s just as sweet.
Contingencies: A contingency is like a "fine print" clause. Buyers might ask for inspections, appraisals, or financing contingencies. The fewer of these, the better—but remember, some contingencies might be necessary for the buyer’s peace of mind or for securing financing. Who knows, you may want to counter with some contingencies of your own. More on this later!
Earnest Money: Think of this as the buyer’s way of showing they’re not just window shopping. A larger earnest money deposit often signals a serious buyer. It’s their “I’m really interested” stamp, so take note. Apparently, according to the more seasoned agents in our office who graciously share tips, tricks and stories from the good old days with us - back in the day, $1000 earnest money deposits were standard, but today you should expect to see a bit more. On average earnest money should be anywhere from 1%-5% of the purchase price depending on how competitive the market is at the time of selling. If you’re not seeing these percentages, think of it as a yellow flag, they’re interested, but are they ready to commit?
2. Evaluating the Offer: Don’t Just Look at the Price—Consider the Whole Package
Okay, so you’ve got your offer, but before you start doing cartwheels (or anxiety spiraling), it’s time to evaluate the full picture. Price is important, but it’s not the only factor.
What to Consider:
The Buyer’s Position: Are they pre-approved for a loan? What type of loan? We fully support the many government programs available to buyers but some of them can throw up barriers between offer and closing. Do they have their finances in order? Do they have a home to sell? The stronger the buyer’s position, the less likely things are to fall apart. If it’s a first-time buyer, they might be a little more emotional in the process, but that can also make for a more eager, committed buyer.
Contingencies (Again!): Does the offer come with a laundry list of “what-ifs”? The fewer contingencies, the better the chance of a smooth transaction. But sometimes, flexibility is key—if the buyer needs time for inspections, be open to it.
The Closing Date: If you’re hoping to move quickly, pay attention to the closing date. If it’s too far in the future, and you want to sell now, you may need to negotiate a faster timeline.
3. Making a Counteroffer: Time to Put Your Poker Face On
So, the offer doesn’t quite check all your boxes. Don’t worry; it’s perfectly normal to come back with a counteroffer. This is where you get to flex your negotiating muscles. It’s also a moment when your agent should be providing you thoughtful advice, remember, the agent controls the process, but you control the decision.
How to Craft a Smart Counteroffer:
Price Adjustments: Sure, you’d love a higher price, but be realistic about the market and your home’s value. If the offer is too low, counter with a price that makes sense based on comps in your area.
Don’t Be Afraid to Get Creative with Terms: Maybe the buyer’s price is close, but the terms could use a little tweaking. If they’re asking for a late closing and you need a quicker turnaround, suggest a compromise that benefits you both. Or, if you need to add a contingency - maybe you need to secure new housing, this is the time to add that to the counteroffer.
Know Your Bottom Line: This is the tough part—deciding what your lowest acceptable offer is. You don’t want to give it away for pennies, but you also don’t want to scare the buyer off completely. Find a middle ground - but make it one that you’re going to feel good about. Don’t get too hung up on what you thought you would get based on a Zestimate. Is the number above, at, or close to the appraised amount of the house? Are you walking away with enough money to justify the time and equity you built in the house? Can you move forward with joy to your next home or adventure? If the answer to these questions are yes, that’s a good thing.
4. The Back-and-Forth: There Can Be Multiple Antes
Negotiations aren’t usually a one-and-done deal. It’s more like a friendly (or not-so-friendly) back-and-forth until both sides can agree. Sometimes, one person folds gracefully. Other times, it’s a little more adversarial. Just remember, it's all part of the process.
What’s Likely to Happen:
More Offers & Counteroffers: Think of it like the game of “who blinks first.” If the first offer is a little low and the counteroffer still doesn’t quite hit the mark, don’t be afraid to make another move.
Concessions: Buyers love to ask for things—whether it’s covering closing costs, throwing in a repair, or giving them a home warranty. You don’t have to say yes to everything, but it can help move the process forward without budging on the price.
Set Deadlines: Keep the negotiations moving by setting a deadline. This way, no one feels like they’re stuck in negotiation purgatory.
5. Reaching an Agreement: Cue the Confetti
Once you both reach a point where you feel the terms are fair, you’ll sign off on the agreement aka the contract. Congratulations, your home is now considered “active under contract” ...now, the real fun begins - you’ll enter the inspection and appraisal phase but don't let that overwhelm you; this part is mostly just crossing the t’s and dotting the i’s. It doesn’t necessarily mean negotiations are over.
There may be additional adjustments if issues arise during the inspection or if your home doesn’t appraise out. But with a solid initial agreement, you're on your way to the finish line!
Final Thoughts: The Key to Successful Negotiations? Patience!
Remember, the negotiation process is a give-and-take. It's not about "winning"—it’s about finding the right balance and making sure both you and the buyer are happy with the contract. So, stay patient, be open to compromise, and let your real estate agent be your guide through the process. Before you know it, you’ll be popping champagne (or at least, enjoying a well-deserved cup of coffee) as you move towards the closing table.