Seller Guide: How to Negotiate the Best House Sale Price
Tuesday Nov 09th, 2021
Selling a home is like playing a competitive sport. The buyer is trying to get the best deal, and the seller is trying to get the best house sale price in the least amount of time. As a seller, there are times when playing hardball is the best strategy, but sometimes a give and take approach will get the best results.
Since selling your home is one of the most significant financial transactions of your lifetime, the best way to prepare for the transaction is to sharpen your negotiation skills. Remember, the price and terms of the sale will determine your profits, so anything that helps you negotiate a better deal is useful.
To help, here is a guide on the best negotiating techniques for selling your home.
How to List Your Home with the Right Asking Price
The asking price, also known as the list price, is the amount of money for which you’ll sell your house. When it comes to negotiating your house sale price, it’s critical to set a realistic asking price that appeals to the broadest range of buyers while maximizing your profits.
Many variables go into setting the right asking price including the property’s location, age, size, and condition, and market conditions in your neighbourhood. Setting your home’s asking price too high or too low will make it harder to negotiate the best price. For this reason, it’s essential to understand the market and find the right agent before choosing an asking price.
Understanding the Market
It’s essential to understand the housing market in your area before setting your home’s asking price. Are you in a buyer’s market or a seller’s market? In a seller’s market, you can usually price your property higher than market value. Higher prices don’t scare buyers when their demand exceeds the local supply of homes for sale.
In a buyer’s market, homebuyers have the upper hand. You’ll need to price your home 5% to 10% below market to attract buyers. To figure out your local market conditions, you’ll need to research. You can find local trends like median listing price, median closing price, and average price per square foot on online listing sites.
If that sounds overwhelming, don’t worry, you aren’t alone in setting your home’s price. When you decide to list your house, a real estate agent will provide a complete analysis of this data.
Hire an Expert Real Estate Agent
Selling a home can be a logistical headache without an agent. A good agent will act in your best interest and help you choose the right selling price for your house. Pricing your home properly will get you a quick sale at a good price. Your real estate agent will also negotiate for you and manage the paperwork involved in a home sale.
Although real estate agents charge a high commission — usually 5% to 6% of the house sale price—trying to sell your home on your own is not a good idea if you haven’t done it before. Nevertheless, it’s tempting, especially after seeing so many “for sale by owner” signs on people’s front lawns or the internet.
How to Negotiate the Best House Sale Price: Step-by-Step
The key to getting top dollar for your home is to know the market conditions. Knowing the market will help you make smart decisions to achieve your goals. Here are some tools to help you.
Step 1: Pad the List Price to Account for Closing Costs
Remember that every party will want to give a little bit to get a little bit in a negotiation. So one negotiation strategy is to price your home based on the expected give-and-take.
For instance, if you want a certain price-point for your home, consider listing the property for just slightly more. If the buyer is reluctant to pay that price, then offer to pay their closing costs. While this will ultimately reduce the amount of money left in your pocket, it could help soften the buyer and convince them to accept a higher price. Using this tactic will land you the best selling price while making the buyer feel like they got a good deal.
Step 2: Organize an Open House
A common strategy in a seller’s market is to list your home for slightly more money than nearby comparable properties. Alternatively, you can also under-price your home. Underpricing sets up a situation that invites multiple buyers to bid on your home competitively.
If you choose the second pricing strategy, then you should also hold an open house. By hosting an open house, you’ll give as many buyers as possible the opportunity to view your home. In addition, potential buyers may anticipate competition and submit higher bids. If you receive more than one offer, consult your real estate agent to choose the best one.
Step 3: Choose the Best of Multiple Offers
If you receive many offers, don’t automatically choose the highest one. Instead, work with your real estate agent to assess the offer amounts and contingencies. Some offers may be high but have a long closing period. Others may be low but have no contingencies. Your real estate agent can help you weigh the pros and cons of all offers.
Once you know which offer you want to pursue, you don’t need to accept it as is. Instead, consider counter-offering.
Step 4: Use Contingency Clauses as Leverage
A contingency clause is a condition that is added to a standard offer document. Contingency clauses let buyers and sellers walk away from a contract with no repercussions if certain conditions are not met.
Here are some common contingencies:
- Sale of existing home: The purchasers will only buy if they can sell their current property first. This clause makes the sale of your home contingent on another house with a different group of buyers and sellers. This extra unpredictability means you should deprioritize offers with a home sale contingency.
- Financing: The buyers will only buy if they are approved for financing. During the closing period, the buyer can cancel the contract if they can’t secure a mortgage. This contingency clause isn’t a deal-breaker if the buyers are already pre-approved, because they will probably be approved for financing.
- Appraisal: The home appraisal must calculate the home’s fair market value at or over the contract house sale price. This clause is often required to secure financing. If the home appraises for less than the contract price, organize a second appraisal or the buyer could select another lender.
- Inspection contingencies: The buyers will only buy if your property disclosure and home inspection are satisfactory. This contingency is often non-negotiable for single-family homes as it reveals essential information about the home’s condition. You’ll need to perform repairs or issue a credit if the inspection reveals problems. The buyers can walk away from the deal if you refuse.
If you receive a contingency offer, analyze it by asking the two questions below:
- Does this contingency diminish the value of the offer?
- Is it possible for me to work with the contingency, or should I negotiate it?
Sellers can protect themselves by being well-informed and familiar with the contract’s provisions. If you decide not to work with a contingency, you can remove it from your counteroffer. That said, be prepared for the buyers to add it back or walk away.
Finally, if you receive an offer with a strange contingency, hire a real estate attorney to evaluate the contract. Your real estate attorney can recommend protective stipulations and suggest avenues for retribution if the buyer backs out.
Step 5: Work for Counteroffer
A buyer interested in purchasing your home will submit an offer outlining the price they will pay and their conditions. As the seller, you don’t have to accept their offer right away. Instead, can let the buyer know their offer is unacceptable by submitting a counteroffer. A counteroffer signals that you’re willing to negotiate.
Buyers expect a back-and-forth negotiation, so their initial offer will almost always be less than what they’re willing to spend. If you believe the offers you’ve received are too low, you can submit a counteroffer through your real estate agent. Keep in mind that the buyers can walk away if they don’t like your counteroffer, so make it reasonable. Your real estate agent will be able to guide your counteroffer.
If the buyer is serious, they will counter your counteroffer. You may have the opportunity to counter again, but some buyers will not negotiate further. If you aren’t happy with their best offer, you have the option to move on to any other offers. If you didn’t receive any other offers, you can continue marketing your home and wait for another offer.
Step 6: Place a Deadline on Your Counteroffer
If you want to sell your house quickly, consider putting an expiration date on your counteroffer. This strategy forces the buyer to make a quick decision or lose the opportunity to buy the home. In addition to concluding the deal quickly, there’s another reason to press sellers to make a quick decision.
Many purchasers will not submit an offer if another negotiation is in progress. This can be detrimental because homes with a longer time on the market are less appealing to buyers. If the default expiration time is three days, you may want to reduce it to one or two days.
Step 7: Reject the Offer
If you feel confident in your negotiation skills, you can use a more extreme approach: reject the buyer’s offer outright and ask them to submit a new offer. This method conveys a strong message that you are confident in the value of your home. If the buyer decides to resubmit, they’ll feel the pressure of competition with other buyers. This non-exclusivity puts pressure on the buyer to submit a more competitive offer as soon as possible.
This method is effective if the home is newly listed or if you have an upcoming open house. If you don’t counter, you aren’t ethically bound to negotiate with that buyer. You can accept a higher offer if one comes along.
Bottom Line to Negotiating the Best House Sale Price
The key to successfully using these negotiation methods is to make sure that your house appeals to buyers. If you want to have the upper hand in negotiations, the home should have something that rival properties don’t. If purchasers aren’t enthused about the property you’re offering, no amount of pressure can persuade them to change their minds.
However, if your property is appealing and you employ these negotiation strategies, you will attract the right buyer and maximize your house sale price.