April 21, 2010, 4:26 am

Negotiating the Price of Your House (While Selling)

by: The Financial Blogger    Category: Properties
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That’s it! We already got an offer on our house! While this post is not written in real time (i.e. I received the offer last week), I write this article before knowing the outcome of the negotiation (so we will see if my tactics to sell the house at a higher price worked or not!).

Selling your house is probably one of the hardest things to get your head around if your goal is to get the highest price. Why? Because  normally you love your home! Therefore, establishing a “fair” market value for it is usually very difficult.

We did our due diligence by looking at comparables and bytheowner.com shows the final price of houses sold. This is how it is easier to determine your own price. However, you may doubt this information and think your house is worth more…

What do you do when you receive an offer on your house?

You should know the answer to this question before you receive an offer. While getting the highest price possible is always what we hope, you have to establish a bottom price first. This price is more likely to be the more realistic of them.

For example, I listed my house at $344,000. I established my bottom price in the range of $325,000 to $330,000. When I did my calculations for my next property, I was looking at a sale price of $325,000. Therefore, anything I can get above 325K is “gravy”. After all, my dad once told me :”it doesn’t matter how much your house worth, it only matters how much you can get for”. This means that no matter how much you like your home and feel it’s worth a lot of money, what really matters is how much someone is will willing to pay.

I got an offer at $330,000!

All right! I already received my BIN price (Buy It Now Price 😉 ). So do I get greedy and ask for more? Or should I take the offer and run since I will have sold my house within 2 weeks? Do I push the buyers to the limit to get a few thousand more because they really like it or do I take a chance and have them look for another house?

These are also questions you must answer for yourself before you get the offer you are looking for. If you don’t, you will could let emotions stand in your way.

Negotiating the price of your house while selling

I decided to prod the buyers to another level by making a counter offer at $337K. This is half way between my asking price and their offer. If you fight back, you must stay calm and mention a few good reasons:

– I told them I had other visits planned (which is true)

– I told them I wanted to move soon (they need the house by June)

– I told them I just put my house for sale so I’m sure to sell anyways.

Doing this is very hard, even if I am used to negotiating every single day of my life. When it is your own property, it’s very hard to contain your emotions. You have to transfer the motivation (pressure, if you will) to the buyer!

I am quite nervous as I should receive their “final” offer today. I am going through all kinds of emotions since I really want to sell my house quickly and I am still afraid of losing these buyers. On the other hand, I am looking at pretty big houses right now so I want to get as much as I can from this house to make sure I can buy the property I am looking for.

I’ll tell you more the very minute I know! All fingers are crossed!

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Comments

I’m right in the middle of a negotiation right now to buy an apartment building.

The guy is apparently a notoriously hard bargainer, according to the realtor who has dealt with them before. The initial listing is quite a bit above market price. I offered what I thought was a good value offer, 250K below asking.

He countered with a reduction of 50K. I did not re-counter, instead I asked the realtor to get his reasons. He said “That’s the market price.” and wanted me to recounter. But I didn’t re-counter, I just justified my initial offer by telling him some of the key assumptions from my valuation model and asked him where I went wrong in valuing his property. We’ll see where he goes. This is a great learning experience for me because, like you, I suck at negotiating when things are near and dear to my heart.

On thing I’ve found is that there is hardly ever an offer that you can’t pass up. I’ve gotten more than realtors from the other side by simply asking for more. When you get down to the end, they are so committed that you can ask for $5K more. Percentage-wise it is not much so the other side will likely say yes, but it is the easiest $5K you ever made in your life.

by: The Financial Blogger | April 21st, 2010 (10:40 am)

@ CR,
yeah… I rather negotiate for my clients than for myself. I am much better at it!

The only way I found to get my negotication done correctly was to take more time before making a counter offer (which I didn’t do while selling, but did while buying… this will be discussed in another post 😉 ).

the more time you take, the less emotive you become…

Good stuff! What’s your mortgage ?

A Home equity line of credit. I am a big fan of variable rate 😉

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