When looking to get the best possible deal, the way you negotiate is key. In real estate, negotiations are everything. It’s what makes the difference between getting a good deal and a bad one. Professionals know this, but do you? If you’re looking to buy or sell on the market, it’s important to familiarize yourself with these 3 real estate negotiations strategies.
Always Include An Escalation Clause
In a hot market, being competitive is the only way to win. According to CNN Business, Americans are overpaying a lot in the current hot market. In hot markets, multiple buyers will be interested in a property. So what happens if someone offers a higher price on a house? Likelihood dictates that their offer will be accepted, leaving you with nothing. That’s not something you want to happen if you’re highly interested in a particular property.
So one way to stay competitive even without knowing about all the offers a seller receives is to include an escalation clause. An escalation clause is a certified way to win. An escalation clause states that you are willing to offer a higher amount than what the highest bidder is offering. However, this clause must include a limit. It’s no point bidding more than what you can afford or what the realistic value of the property is.
So an escalation clause can mean something like being willing to pay $8,000 more than the highest offer but not exceeding $300,000 of the total value. That way, you are staying competitive but making sure you’re not overpaying.
Offer Cheap Value
When negotiating for a property, one way to win is to identify cheap value. What this means is to identify something that is cheap but can offer great value to the other party. This move works for both buyers and sellers. But the tricky part is identifying what that cheap value is.
Let’s look at how cheap value works when buying a house. Let’s assume that you’ve identified a house that costs $350,000. Looking at the local prices over the past few months, your real estate agent says that the property is worth $250,000. This means that the buyer is grossly overpricing their property. If you offer what the property is worth, chances are you’ll be way off and the seller won’t even counter you.
So what you can do is offer the seller cheap value. One example of that is to offer what you think a fair price is, and give the seller a 90-day period to look for a property. That way, they have all the time they need to find another place to live. What you’re getting in return is saving a ton of money.
Another example is to include a breakup fee. A breakup fee essentially means the seller has to pay a fee back to you. This clause can come in handy when also looking to score on the cheap. You offer the seller a certain, fair amount and give them the option to accept other offers. But if they do, then they have to pay you the fee.
This form of negotiating is essential for getting a better deal. More so, it’s the kind of tips and tricks for beginners that no one is talking about.
Show A Strong Hand
Lowballing in real estate will always be a thing. Buyers and sellers will hassle over the tiniest details constantly. And while many consider this to be a good thing, it doesn’t reveal anything about the seller. Lowballing does have its place in real estate. But you know how to do it.
If you’re naively thinking that offering well below the asking price is going to tell you anything about the seller, then you’re wrong. All you’ll get is a NO and even perhaps a shut of the door. To make things interesting and figure out what the seller is thinking, you need to show a strong hand.
Confidence is the best way to secure a deal when buying a house. So instead of lowballing, make a smaller bid that goes a little below what the seller is asking. By doing this, the seller has two options. They will either counter as they see a potential buyer in you, or they’ll accept your offer.
If they do accept, it’s a win-win situation. They get somewhat less than what they expected, but they’ve done the job. You get what you wanted, albeit for a smaller price. It’s doing stuff like this that makes you a better negotiator. The last thing you want when negotiating for a deal is to be left out of the conversation entirely by lowballing aggressively.