“What should we offer?” This is the question that typically opens the discussion of negotiation. Which is usually followed with, “Do we need to come in at full price (or over asking price)?” or, “How low is too low; should we be concerned about low balling?” Our response to these questions is usually a resounding, “Pause; let's back up a few steps and figure out what the property is worth.”
All too often a negotiation is predicated around achieving a price that is relative to the asking price. This stems from the misconception that if you acquire a property by paying a certain amount below the asking price, you have obtained a reasonable, fair, or good deal. The reality is, the Seller has chosen the asking price and it may be close to the property’s fair market value, or it may be considerably higher (or lower) than the actual market value (this applies to both resale and new property developments). If you were to purchase a property for $475,000 that is listed at $500,000, you might think you got a bargain because you “saved” $25,000 (5% below asking price). In actuality, if the property is only worth $450,000, you overpaid by $25,000.
All too often a negotiation is predicted around achieving a price that is relative to the asking price. This stems from the misconcesption that if you acquire a property by paying a certain amount below the asking price, you have obtained a reasonable, fair, or good deal.
It is not uncommon today to see negotiations go back and forth between a buyer and seller with no explanation for the offer or each counter offer. It plays out like this: a property is listed at $500,000 and the buyer writes an initial offer of $480,000. The seller counters the offer to $495,000. The Buyer counters that offer to $485,000 and the seller comes back with $490,000, which is accepted by the buyer. We call this a “Ping Pong” negotiation, because it’s really just about passing the offer back and forth a few times until the buyer and seller meet in the middle (or somewhere thereabouts that is mutually agreed upon). While it is valuable to know if the party you are negotiating against is employing this strategy (so you can structure your counter offer(s) accordingly), it is not a strategy that we recommend if you are looking to purchase a property for fair market value or better (unless you are negotiating on a foreclosure property, which is a topic for another day).
Contrary to the Ping Pong method of negotiation, we recommend a logic based negotiation. After we have determined the range of fair market value for a property, we will devise (with you) a strategy to obtain the property at or below this range. Most commonly, we will use the listings of comparable properties that are currently for sale, and more relevantly, the listings of comparable properties that have recently sold to support the valuation that we have established. Of course, we select the comparable listings that best support the case that we are building on your behalf; it is the opposing agent’s duty to build a case that supports his client’s position. We will also bring in an additional information that reinforces the value that we have presented, such as current market stats & trends, market forecasts, newspaper articles, neighbourhood development details, or any other relevant information.
The opposing party has a preconceived notion of the value they are willing to accept (when selling or buying), and our goal is to inform or educate them to induce a shift from the value they have in mind towards the value that we are presenting.
The art of crafting a skillful negotiation is of utmost importance, however, not far behind is the manner in which the offer is communicated. Elevation Real Estate Group strongly believes in the benefits of presenting our offers in person (whenever possible). When required, we are able to build our case in email format and send to the opposing agent with the hopes that they share the information we have provided with their clients. Although, our preference would be to present our offer across the kitchen table from the sellers and their agent. We can share countless examples (just ask us) of how our offers, when presented in person, have been accepted for lower than they would have been if we had simply emailed the offer (on occasion, even in situations with competing offers).
There are many reasons that we prefer to present our offers in person, including but not limited to:
Building rapport with the sellers and their agent
(If the seller likes us, they are more willing to accept your offer)
Personalizing the offer
(attaching it to you and your story)
The ability to communicate our supporting data
(when emailed, we can’t be sure that our case was presented)
The expression of serious intent
(this is not simply a “let’s see what they'll accept” offer)
Encouraging the seller to respond with serious consideration
(it is much easier to reject an offer that is emailed)
The ability to address questions or objections
The ability to respond to the offer in a timely manner
At Elevation Real Estate Group, our years of experience and hundreds (thousands?) of offer presentations, have honed our abilities in negotiation and offer presentation. We would be happy to share our strategies with you in person (so as not to give away trade secrets), to demonstrate how to effectively communicate your offer or counter offer, whether buying or selling, to achieve your desired outcome. Give us a call today; we’d love to sit down and chat with you!