Even in market conditions like the U.S. is currently experiencing, with demand for homes at record highs, the art of negotiation is important. It’s always wise for home sellers to understand how to bring in the best possible price, whether it’s a seller’s or buyer’s market.
There are many tactics that can help a seller get top dollar, as well as the desired sale terms, when putting a home on the market. Here’s what to consider before you accept an offer.
Strategies for negotiating home price as a seller
Negotiations are a two-way street when it comes to real estate transactions. In addition to prospective buyers working to get the best deal for their budget and overall goals, home sellers also have a lot of negotiating power. With the help of an experienced real estate agent, sellers can employ a variety of techniques to escalate the final purchase price for their home and secure the most favorable terms. Strategies to consider include, but are not limited to:
- Bidding wars
- “Highest and best offer” bids
- Expiration dates on counter-offers
- Rejecting offers outright
Create a bidding war
The ultimate goal for nearly every home seller is a bidding war between buyers. This scenario drives up your home’s price — often well beyond what it was initially listed for. In today’s market, that goal is not very difficult to achieve, especially if your home is in good condition and listed at a fair market price, says Jade Lee-Duffy, a real estate agent with Reali San Diego, California.
“With today’s limited housing inventory, there has been a frenzy among buyers to outbid each other and drive up prices hundreds of thousands of dollars above list price,” says Lee-Duffy.
The competition of bidding wars can also inspire prospective buyers to offer more favorable sale terms, such as waiving home inspections and contingencies and offering longer or more flexible closing timelines.
As a seller, you can help trigger bidding wars by pricing your home slightly below market value. This will ideally attract more viewers to your property and result in more offers. Yet another approach is to create a deadline for all offers on your home, which may inspire buyers who have been on the fence to submit their offer.
Invite bidders to make their highest and best offer
Another tactic sellers may choose to employ during negotiations, particularly when there are multiple bidders, is asking prospective buyers to make their “highest and best” offer. This is also sometimes referred to as a “best and final” offer.
As a seller, employing this tactic means you’re not going to negotiate with every potential buyer who makes an offer. Instead, you want them to submit the highest price they’re willing to pay for your home, along with the best sale terms. This approach also typically includes a deadline by which prospective buyers must provide their highest and best offer. Making this request indicates to buyers that you’ve received multiple offers, and it generally results in more competitive bids.
In especially competitive markets, sellers can conceivably pursue multiple rounds of highest and best offer submissions. “This can be done more than once, so that you could continue asking for buyers to increase their offer at each round,” says Lee-Duffy.
Include an expiration date on counter offers
When making a counter offer as a seller, you can also include an expiration date by which the prospective buyer must respond. In a competitive situation, this can be helpful in moving negotiations along more quickly. It allows you to either get your home under contract or move on to other offers, with less waiting time.
Reject an offer outright
Though it may sound counterintuitive, as a seller you can also completely reject an offer that does not meet your needs without making any counter offer at all. While this doesn’t seem like much of a negotiation technique, the approach can actually be useful — it may entice the prospective buyer to completely revise the offer they initially submitted and develop an entirely new proposal. In the best case scenario, the new offer will be one that you feel is more competitive financially, or more in line with your goals.
How to know when to accept an offer
While bidding wars and record-breaking sale prices may seem like a dream come true to a seller, knowing when to bring negotiations to a close and finally accept an offer is crucial. Dragging negotiations out too long can cause a potential buyer to lose interest and move on.
Pursuing the highest price at all costs can backfire in other ways as well. “The danger in driving up the price sky high is that, once a seller has accepted an offer, the buyer has the power to cancel their offer and get back their deposit before contingencies are released. This can happen when a buyer feels they’ve offered more money than the property is worth,” says Lee-Duffy.
When trying to determine whether or not an offer is the right one to accept, be sure to review all of the terms carefully. “All offers are not good offers,” explains Los Angeles–based real estate agent Chantay Bridges of EXP Realty. “When they’re full of contingencies, such as ‘If I sell my house,’ ‘If I move’ or ‘If I obtain this new job’ — those may be red flags. Standard contingencies such as inspections are commonplace, but when the list gets to be way too long, it’s typically not in the best interest of the seller.”
In the end, the best course is to consult with your agent. An experienced listing agent knows when it’s time to stop negotiating, when you’ve reached the full potential of the sale and when you’ve secured an offer that’s worthy of accepting. After all, your goal is to finalize the deal, not to drag it out forever in the constant hope of something better.
Negotiating the price of a home sale is just as important for sellers as it is for buyers. Working with an experienced real estate agent or broker, there are a variety of techniques that can help you obtain the best price possible for your home, as well as the most favorable sale terms. But be sure you know when it’s time to bring the negotiations to a close, or you risk losing the interest of prospective buyers.