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Submitted By: Supriya M.N.-251099 Adwait Mahajan-251100 Siddhartha Kamat-251075 (Batch 06)
Content
1. Introduction
6. Reference
1. Introduction
The value of trust in a negotiation cannot be overstated. Most people are fair minded and reasonable. They respond well to respectful treatment and to having their concerns heard. If the seller feels that the buyer and agent are acting with integrity, their attitude will be much more cooperative. Contract negotiation is a sensitive area, and anxiety can be high. The buyers may have had an unpleasant past experience with buying a home. The seller may be under pressure, with future plans at stake. Acting with integrity does not mean that all "cards have to be put on the table." It is not proper to discuss personal issues that affect the buyer, such as your financial ability or urgency to move in. It is valuable to develop rapport because trust increases your leverage. Finding common ground with the seller can be a very powerful tool in the event of multiple offers. Understanding your Leverage: The more we find out about the seller's needs, better is the chance we have to find solutions to negotiation hurdles. We will be able to offer information or concessions that appeal to the seller's deepest concerns. Obviously, if the house has been on the market for a long time, you have a lot more leverage than you would with a brand new listing. If their time frame is immediate, and you can meet it, you have some leverage. If they have multiple offers, you have very little leverage. How much under list price should you offer? Buyers usually offer less than list price, unless it is a strong sellers market. There is no standard percentage "under list price" that can be used. A market analysis will show recent sales for the neighbourhood, which is the best way to establish the offer price. It is usually counter-productive to offer so low that the seller will automatically reject the offer. This will set a negative tone, and may result in an emotional response from the seller. What if we have a multiple offer situation? Occasionally the seller receives more than one offer on their property. By simply disclosing that there are multiple offers, the seller is not "shopping" your contract. Shopping occurs when the seller discloses the terms of an offer to induce a buyer to submit a better offer. This can result in major distrust of the process by the parties, and the likelihood of loss of the buyers. Usually the procedure is to notify each party that multiple offers have been received. Each party is then given the opportunity to raise or adjust his offer by a certain time. After that time, the seller is free to review all offers and choose one to work with. They are not obligated to choose the "first" offer that came in. The selected offer may be countered, or accepted as is.
Professional negotiators usually try to preserve the relationship between the parties, and work together to resolve problems. The goal is not to reach an impasse in which neither the seller's nor the buyer's needs are met. What makes a successful deal? Negotiation is all about trying to get a great deal for oneself while at the same time making the other person feel like they got a great deal too, and while one may think that the skills required to negotiate small purchases are much different than the skills required to negotiate the purchase of big ones (like cars, real estate and companies), in reality, the basics are the same. While pursuing real estate deals, there are some things which are to be kept in mind to make the deal a successful one. 1. Always let the other party speak first: When the other party states their position first, you have the ability to define the mid-point of the negotiation Second, its quite possible that the other partys first offer will be better than the first offer you would make. 2. To Listen: One of the strongest manoeuvres while negotiating is to talk less and listen. It is the most basic and the most useful negotiating tactic.
3. Well informed: It becomes very important to be well informed in any real estate negotiations, because, negotiations are not just about money but its also about solving the problem first 4. Always get the last concession: Here the emphasis is on training the other party to do what you want, without them even realizing it. 5. To implement a penalty for asking concession When the penalty for asking more is made more cumbersome than what the party has asked for, its quite possible theyll decide its not quite worth the effort 6. Friction: Sometimes there may not be enough friction in the negotiation and deals are easily made and agreed upon which might make the parties feel like they have not earned a great deal So, if one wants to ensure that the other side doesnt back out after the negotiation is finished, make them work hard to get to a common agreement; this hard work will often translate into feelings of successful outcome for the other side. 7. To keep a check on ego: For a lot of people who pride themselves on their negotiating skills are more interested in having their ego stroked than they are in any real tangible outcome. Always be polite, considerate, and good mannered. This shows confidence and will get you further towards your goal. 8. Get it in writing: Once the property has been view and analysed and you are ready to make an offer, it must be in writing to have any binding legal status 9. To have a realistic approach: When you go out to buy, negotiate for what you estimate is a realistic price.
Mistakes the buyer is susceptible to: Often, in the complex process of buying a home, negotiations can be tricky, and people considering doing so should make sure they understand what they are getting into. Here are some mistakes one can make in negotiating to buy a house. 1. Not understanding the seller: Any information you can obtain about the local real-estate market or the seller will strengthen your negotiating position. 2. Showing your cards: While looking for information about the seller, its important to divulge as little about oneself as possible. Any knowledge that is provide can be used against you by the seller as leverage
3. Not having options: When you begin negotiating about a certain property, you must make sure, you have identified several other homes you would be happy with as well. You should never negotiate without having any other options. It is also advantageous to let know the agent either directly or indirectly, that theirs is not the only property you are considering. 4. Not to skip the face time: It is very important that the negotiations are not done on phone or emails, but are to be done face to face. It is the best and the most effective way to persuade or influence people in negotiation. 5. Offering a specific number: When making an initial offer, it is always good to extend a range of figures rather than presenting a fixed had number. A price range always offers flexibility. 6. To get caught up in the game: The goal is to purchase the home and not beat the seller.
What knowledge the buyer can acquire from a realtor? Since the basis for negotiation is knowledge. Dont make guess or assumptions. The realtor can provide basic information at hand, like,
MLS printout: if the property is listed, read and understand all of the data Listing brochure: may add details about the property Listing history: has the property been previously listed, How long on the market, has
the price been reduced, When and how much. Neighbourhood sales & listings: study the recent listings and sales in the neighbourhood to see how similar they are to yours Statistical market data: what is the Big Picture of the current market. In a stagnant or falling market, time is on your side if you are buying but will work against you if you are a seller. Understand the leading statistics such as months of inventory remaining and absorption rate. Public Records Information: this includes the basic property details used by the city property tax assessors office. Ownership Data: is the Seller a foreign corporation, mainland investor, or owneroccupant, a bank, private trust or charitable organization. Conveyance History when was the property last sold and for how much. Mortgages and liens: do they exceed the value of the property and if so how will they get paid off. One must know these and have the basic information before starting the negotiation process.
without some sort of professional advising and guiding the process, like an attorney Sellers who discourage buyers from being represented by their own Realtor Dont Do The Following! Avoid these costly negotiating errors:
Dont be overly critical of the property to try lower the price Dont give up you wont get what you dont ask for Dont express a firm position keep it to yourself until you get a response Dont make a low offer or counter offer expecting that the other side will simply
split the difference Dont decide on an offer price based on a particular discount you expect off the list price. Your discount is irrelevant - its the final price that matters whether it is above or below asking price Dont make accusations or contradict the other party Dont expect a one-sided deal even if the market is in your favor! Dont make emotional pleas or accusations Dont use intimidation - it will backfire on you Dont get personal. Its not about you, its about the house. Dont be discouraged. Do not argue. Arguing usually positions the other party more strongly and drags the negotiation process off course. Do not ignore the other sides arguments or statements. Listen carefully, but do not accept or reject. Reduce misunderstanding by following up with written summaries of discussions. Do not allow hazy or unclear proposals to stand. Offer some "wins" on some of the terms. Face saving is very important. Look for ways to meet their underlying interests.
6. Keep private things private. Buyers may have some issues that should be kept private. They may have just sold their house, and need to act fast. They may need to start kids in school. They may be in the middle of a divorce. They may have an interest rate that is about to expire. Not one of these pieces of information will get them a better deal on a house. In fact, they all indicate that they are under pressure. Your buyers should be perceived as folks who are well qualified, who truly appreciate this home, and who can be trusted to close. 7. Get good information. Here are some questions to ask before you and your clients compose an offer: How is the market in general? How are other actives and recent sales priced? How long has the home been on the market? Have there been price changes? Did the house sell recently? What was the price? Is there a time deadline that must be met? Would a pre or post lease be desirable? What is the appraisal district value? The taxes? Is a disclosure available? A property inspection? A survey? Are there any offers expected, or on the table now? Price is just one consideration in the negotiation for a home. Other terms, such as financing, close date, repairs, or possession date may be just as important. Negotiating for a house requires skill in giving and taking information, and in communicating to the seller that your clients are the best buyers for their property. Real Estate Negotiation Tactics 1. Iceberg Theory Do your homework. Like an iceberg in the water, where the majority of the mass is submerged with just its tip showing above the surface of the water, you want to be able to see what's really going on beneath the surface. This theory tries to explain the concept of the facts and figurines which are usually ignored even when they are of major importance and the buyer rather tries getting the brief overview only. 2. Salami Method This method explains how to cut the deal into very thin slices (like salami) and dealing with each piece in a specific order. Prepare all your negotiating points. Find out which ones the other party forgot about and use them to your advantage. 3. Orphan Properties Look for real estate the big market players (like Banks and other Investors) don't want anymore. So in a way, one should try to get the best deal out of the properties which are unwanted to the seller.
4. What about financing? Financing is definitely the most important aspect while buying the house. There are several factors that involve the money issues. The buyer should be pre-qualified and pre-approved by a lender as pre-qualified buyers represent less risk to owners than a purchaser who has never met with a lender. Such buyers usually have some idea of their ability to finance a home and know that they are likely to qualify for certain loan programs. The lower the interest rate, the larger the pool of potential buyers. More buyers equal more potential demand, good news for sellers. Alternatively, high rates or even rising rates may drive buyers from the marketplace and that's not good for anyone. 5. Who has expertise? Imagine you're in a fight. The other guy has black belts in 12 martial arts and you don't. Who's going to win? Brokers have long represented sellers, and now buyer brokerage is entirely common. In a transaction where one side has representation and the other does not, who has the advantage at the bargaining table?
6. Reference
1. http://www.biggerpockets.com/renewsblog/2010/03/24/7-tips-for-better-real-estatenegotiation/ 2. http://money.usnews.com/money/personal-finance/real-estate/articles/2008/06/05/the7-biggest-home-price-negotiation-blunders 3. http://www.aroundhawaii.com/business/real_estate/2009-10-real-estate-negotiatingThe-10-rules-of-engagement.html 4. http://businesstoday.intoday.in/story/property-negotiation/1/21150.html 5. http://homebuying.about.com/od/offersnegotiations/qt/CounterOffers.htm 6. http://www.biggerpockets.com/articles/basic_negotiating_principles_real_estate_rd.h tml 7. http://realestate.aol.com/blog/2010/03/16/how-to-negotiate-your-home-purchase/ 8. http://www.realestategrowth.com/blog/archives/category/real-estate-negotiation 9. http://www.inman.com/buyers-sellers/columnists/dianhymer/real-estate-negotiationtips-pay 10. http://www.rental-property-investing.com/real-estate-negotiation.html