<drum roll please>
Begin with a goal in mind!
Far too often when representing buyers, it becomes apparent that people are inclined to let their emotions get the best of them during negotiations; and as a result of these emotions, they are often ready to make quick or irrational moves that can prove quite costly in at the end of the day. One would like to think that buying a home is a process based on logic (i.e – it’s priced right, has the 3 bedrooms we need, etc.) when in reality, most decisions to buy or sell are a result of emotional reactions, usually the “feeling” that the individual gets from the home.
Since things like wonderful landscaping, a great basement rec room, backyard pool, etc can subconsciously cause an excited buyer to think “What’s $15,000 more, I love it!” (and can cloud our judgement, preventing us from thinking logically about what $15,000 really means), I say that you should always begin with your negotiations with this three step plan that if followed, should allow you to make more informed decisions.
1) Have your REALTOR present to you the final sale price of similar properties in the area for a period of the last 6 months to a year (depending on volatility in your market), as well as any active listings that are close comparisons. It is important that your agent does detailed research into things like square footage, upgrades, property taxes, age mechanical of systems, etc., so that you can compare apples to apples – you don’t want to make a large financial decision based on a sweeping search such as ” sold south end bungalows in the last year”, the more specific your search is, the better off you are.
2) From the data your agent has compiled, you should be able to come up with an anticipated selling range for homes similar to the one you are considering, this will usually be presented to you in a range such as $270,000-$285,0000. In conjunction with any other information you might know about the sellers motivation, previous offers, market activity, etc – you should come up with a maximum purchase price for the home. That way, before you have the opportunity to let the negotiations get heated, you know that you will not pay more than “$X”. Oddly enough, you will find that a lot of the stress and anxiety is taken out of the process when you have decided your limit ahead of time.
3) Although “price” is arguably one of the most important terms when purchasing a home, it is certainly not the only important term – other things like closing dates, inclusions etc., can also have an immense impact on the transaction and how it plays out for you as the purchaser. You should also do your best to assign a value to the rest of the list of things you are aiming for in the transaction, for example: If you are renting a property where you need to give notice to the landlord that you are leaving, perhaps a closing at the beginning of a month would be best for you so you avoid paying further rent. If the seller insists that he/she wants a closing in the middle of the month, and as a result you incur additional rent costs, then logically, perhaps you are only willing to offer a purchase price that is less whatever half a month’s rent is.
I can’t stress the importance of laying out a blueprint of all of your goals, wants and needs ranked in priority before you start negotiations. This is merely a guideline and like any good theory, does not fit every scenario (i.e – multiple offer situation) but I hope it will assist you in finding the balance between emotions and logic when negotiating the best possible terms of your purchase.
