By Eric Bjork
Sentinel Contributor
In two previous articles, we discussed the recent paradigm shift in real estate away from “location, location, location” and toward “price, condition, location.” Negotiation involves all three. For many homebuyers and sellers, negotiating can be described as stressful, frustrating, tedious, and painful. Yet the acquisition or disposition of residential real estate need not be an adversarial process.
Buyers and sellers approach a property with different perspectives. Homeowners tend to think of their home’s value as being whatever it was at the top of the most recent cycle. Homebuyers are understandably reluctant to pay top dollar, given the unprecedented declines in values over the last eight years, particularly in markets that had been considered rock-solid. That said, the residential market in Greenwich looks stable and balanced and the outlook continues to be positive.
Sale or purchase price is the obvious place to begin. Buyers and sellers should start by taking out the guesswork with research. Abundant sources of data and many real estate professionals are available to determine an appropriate range of asking prices if you are selling, and a reasonable entry point if you are bidding. Realistic values supported by comparable sales data should form the basis of the discussion. Sellers must separate sentimental value from asset value and buyers must keep their emotions in check. Solid quantitative research helps eliminate “low balling” or staking out “have to get” positions that tend to be counterproductive for both parties.
Numerous other elements have value in real estate transactions, including closing dates, financing and appraisal contingencies, inspection results, inclusions, exclusions, and lease back provisions. For a seller purchasing another home, the most important consideration may be knowing that their buyer can actually close as the complexities of new mortgage regulations have placed financing contingencies under increased scrutiny. For a seller whose destination has not been determined, the best offer may be one that provides them with maximum flexibility around closing dates.
Timing and momentum are two critical aspects of every successful negotiation. Indeed, the best time for a seller to formulate a strategy is before an offer is presented. Running through the “what ifs” with a broker or advisor ahead of time can be advantageous. As buyers tend to bid only on homes that they can imagine themselves living in, responding quickly can benefit the seller by establishing positive momentum. For a buyer awaiting a response, hours are like days and days can seem like weeks. A timely response during negotiations can build good will and convey courtesy and respect.
Property condition frequently becomes a source of renegotiation following inspections, and a pre-listing inspection is often recommended. Repairs tend to be less expensive than replacements. Buried oil tanks, wet basements, and safety problems should be addressed before bringing a property to market. Current purchasers clearly prefer homes that are in move-in condition. Time invested in cleaning, fixing, de-cluttering, and staging reduce the number of items that are subject to renegotiation. These activities provide the added benefit of making room for the buyer’s imagination.
While price and condition are variable; location is fixed. The first two can be adjusted to compensate for the third, but in the end, location will play a major role in determining value. In a competitive negotiation, it is frequently location that will provide the seller with added leverage.
In residential real estate sales, several negotiating maxims still seem to apply. Just as the first offer is often the best offer, a seller’s first counter should be a good counter. Strong counters send a message that “we can do this” and create positive momentum. Even a low offer may deserve a response, as it is not about where you start, but where you end up. In Greenwich, well-priced properties often sell within 2 to 5 percent of the asking price. Both parties should be reminded that many elements have value, and trade-offs can close gaps. Splitting the difference has its place, but should not be deployed too early.
Finally, real estate acquisitions tend to be long-term propositions. Missing the right house or the right buyer for 1 or 2 percent may be missing the forest for the trees. In this business, win-win is still possible, and both sides can walk away happy.
Eric Bjork is Vice President, Director of Sales at Berkshire Hathaway HomeServices | New England Properties. He can be reached at 203-869-0500 ext. 204, at 203-561-4915 (cell), or at ebjork@bhhsNE.com.
