Getting Good Deals in a Tough Market: 7 Negotiating Techniques

The two most dreaded words in real estate today must be “low” and “baller.”

So publishing a how-to guide for lowballers is a little like hanging a kick-me sign around our neck. We’re the ones who have to make deals happen, even when our client is convinced a house in Palo Alto is overpriced by 15%. 

Yes, we know that especially in outlying areas the market stinks. But so does the seller, who priced his house in the first place. And the likelihood that he’ll lop another 5% or 10% off his asking price isn’t just determined by the house’s “intrinsic value” or its “fundamentals.”

It’s also a matter of the seller’s state of mind, which can drive him to stick to a high price, or to drop an already-fair price. So as brokers, we don’t just look at the cards on the table but also at the people playing them, searching for “tells” that the seller is ready to cut a deal.

Now as part of our Agent-Off-the-Record series, where our agents get together to assemble a greatest-hits list of insider advice on a topic, we’re outlining what we think are the six major signals and eleven minor signs that a seller is motivated to negotiate.

To get a significant discount, of say more than five percent from list price, we would typically expect to see at least two major signals or one major signal and two minor signs.

For example, just because a seller is going through a divorce doesn’t mean he’ll sell his house at a 10% discount. But if the place has also been on the market for a few months, or it’s in a neighborhood with a big inventory pileup, he might consider it.

So these signals say nothing about whether a property is fairly priced, only about what the seller is willing to accept now.

The Seven Major Signals

  1. The seller must move: the seller’s agent occasionally posts a message in the MLS that the seller is motivated. Bingo!
  2. The home’s previous sale price was much lower: the seller may accept a discount if he can still come out ahead. On the other hand, few sellers will accept less than what they owe on the mortgage, unless they’re already in default.San Francisco Real Estate Days on Market
  3. The home has been on the market 90 days without a price change: Redfin displays days on market for each listing.
  4. The neighborhood has many homes languishing on the market: use the listing statistics below Redfin’s map to see if the neighborhood’s listings average 90+ days on market.
  5. The property is vacant: the seller’s probably paying two mortgages.
  6. The owners are getting a divorce: look in the property tax records for recent title transfers.
  7. The property is the first or last home in a development: new-home prices are difficult to negotiate, but extras and closing costs aren’t. Builders are anxious to sell the first home for marketing buzz and the last so they can move on.

The Ten Minor Signs

  1. The home is staged: staging can costs hundreds every week. It increases the listing’s appeal but also increases the seller’s motivation to sell. (We argued about this one, as some Redfin agents see it as a sign of strength)
  2. The property has been re-listed: when a property is relisted, Redfin.com resets days on market. But your agent can query the MLS directly for the listing’s entire history.
  3. The seller is offering special incentives to buyer’s agents: tell a seller to keep the incentives in lieu of a lower price.
  4. The listing is a short sale: to avert foreclosure, the seller will take almost any price, but the trick is getting bank approval prior to foreclosure.
  5. A bank is selling a foreclosed property: banks don’t like owning homes, and are often eager to sell.
  6. The property is an estate sale: relatives may not want to hold out for top dollar.
  7. There are many foreclosures in the area: even if the listing isn’t a foreclosure, it competes for buyers with nearby foreclosures.
  8. The property is the most expensive in the neighborhood: an expensive home built on inexpensive land can easily be overpriced. Sellers value the wine cellar more than you will.Richard Parsons
  9. The property is unique: sellers become emotionally attached to unique properties, which are difficult to price, and difficult to sell. But if the home is one of many in the same development, the seller’s agent is usually more confident about the asking price. And if the home is part of a new development, the builder will hesitate to set a low precedent for future sales.
  10. A contingent sale fails, or stalls for more than 45 days: after a competing buyer has rejected or delayed a deal because of financing or inspection contingencies, the seller may eagerly accept cash on the barrel, even at a lower price. Use listing alerts to track contingent property sales.

Our parting advice is to remember what Time-Warner’s CEO, Richard Parsons, says about any successful negotiation: that both parties have to feel like they won something. But who wants to hear such sage advice when the market’s going nuts? Tell us what’s worked for you. Once we’ve incorporated your suggestions, we’ll publish a final version to our main site, and link back to here.

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