The 7 Negotiations Involved In Selling A Home
Most home sellers assume that the only thing they’ll have to negotiate is the price of the home. In our experience, the sale price is the negotiation that least likely to kill a deal. Here are the 7 things that will be negotiated during the sale of your home:
- The Sale Price
This is probably the most obvious negotiation involved in selling a home, but in our experience it’s actually the least contentious. If the buyer makes an offer that’s close to the asking price, we can almost always find an agreement.
- Closing Costs
Most sellers look at closing costs as an afterthought to the discussion of the sale price, and some even forget that it’s a point of discussion. In realty, closing costs are a great tool for coming to agreement on other negotiations. By taking on a few thousand dollars in closing costs, sellers can incentive buyers to pay a significantly higher sale price. Seller closing costs usually vary by area – we include our estimate for what you’ll pay in you Take Home Cash Calculator when you request a valuation.
Just because you’ve settled on a price and closing costs doesn’t mean your sale is guaranteed to close. Contingencies are the factor that probably causes most deals to fall apart. Most non-cash buyers will require an appraisal contingency, and almost all buyers will want an inspection contingency, but you can still negotiate a shorter time frame for these contingencies than what the buyer requests. Why would you want a shorter time frame? To borrow a phrase from Silicon Valley, it’s better to fail fast. If issues arise that are going to kill the deal, we’d rather see them sooner than later so we can put the property back on the market or go to a backup offer.
- Closing Date
The longer your closing drags on, the more likely it is to fall apart. The incentives of the buyer and seller are usually aligned on this front – the buyer presumably wants to move into their new house – but this isn’t always the case. The buyer may have a few months left on their current lease, or the seller may not want to move until after the school year ends. We usually recommend closing as quickly as possible, mostly because they longer you stay in the house, the more holding costs – such as maintenance, landscaping, and property taxes – you’ll be responsible for.
- Inspection Issues
We’ve written about how the inspection can derail a deal before. Unless the inspection comes back spotless, there is likely going to be another negotiation on how much the repairs will cost. We usually try to pre-negotiate these issues during the initial contract discussions: especially if the home has multiple offers, we can usually get buyers to agree that any repairs that come out of the inspection are on them. If it does come down to a negotiation after the inspection report is released, we require our clients to either negotiate a price reduction or repair stipend. We’ve seen too many cases where a seller tries to make repairs themselves not to the satisfaction of the buyer, which end up endangering the deal.
- Appraisal Issues
If an appraisal comes back below the sale price of the home, another round of negotiations ensues. Because a lender will only write a mortgage up to the appraised amount of a home, at this point the seller can either reduce the price to the appraised amount or the buyer can agree to pay the difference between the sale price and the appraised amount in cash. Neither is ideal. Again, this is why we try to negotiate this issue beforehand. When possible, we get buyers to agree to funding that difference in cash, up to a certain amount, if the appraisal comes back short of the sale price. It’s also possible to renegotiate closing costs or repair credits to make up some of the difference.
- The Closing Attorney
While it may not seem important, having a good attorney can significantly improve a seller’s piece of mind during the closing. Good closing attorneys communicate with both parties as documents are received and the closing progresses. More importantly for our clients: using a Properly partner attorney for closing means that our sellers don’t have to waste 5 hours at an attorney’s office on closing day. We’ve worked out agreements where our clients can sign a few documents ahead of time, and then have the fund wired directly to their account at closing, without having to waste an afternoon.