Showing and Negotiations

SHOWING

Once the phone starts ringing, you should be fully prepared.  As a side note, make sure that your phone is always answered when you’re trying to sell your home.  Answering services and machines are inexpensive and are necessary. The message on a machine should go something like this “ You have reached 555-5555.  I’m sorry we’re not available to take your call.  If you are calling about the house for sale, please leave your name and number and we will call you back. Thank you”.  Do not have children on the answering machine; this is only cute to parents and grandparents.

When buyers ask to see the home, make sure you get their name and phone number.  If some emergency should arise that would prohibit you from keeping the appointment, be courteous and call them.  This also allows you to keep a list of people who have toured the home and a way to contact them should you need or want to later.  While you have them on the phone, find out how they knew your house is available and ask them a few questions.  Find out if they’re local or from out of town; do they have a home to sell before they can buy a new one; have they pre-qualified with a lender.  There are ways to ask these questions and not be intrusive and you should practice how you’re going to do it.  Finally, be prepared for the ultimate question from a buyer “Why are you moving?”  Chances are you’re moving for the same reasons they’re moving.  You’ve outgrown the house, the house is too big since the children grew up, the drive to work is too far, etc.  Your response to the question should not be negative.  It should be simply that the house is great but for whatever reason, your needs have changed.

Assuming your home is in a “state of readiness”, you can begin to set appointments and show your home.  Make sure you set the right atmosphere for the showing, calm and relaxed.  Some home sellers will bake bread or cookies while buyers are viewing the home because the aroma is warm and comforting.  Fresh flowers, if possible, are a nice touch.  The house should be well-lit, no dark halls or rooms.  Children, when possible should go to a friends house, or visit a neighbor.  If the children are in their room watching television, then your buyer may feel intrusive and that’s not what you want.  Also if your prospect has children with them, they will feel that they’re invading on another child’s territory.  Pets should be confined and for the most part, out of sight because they can be distracting.

Many sellers will let buyers simply roam the house, but most prefer a guided tour.  This provides the seller an opportunity to point out the many qualities of the home.  Try to remember what first attracted you and convey that to your prospects.  Talk about what has been updated or recently replaced, emphasize how well you’ve maintained the home.  Discuss the advantages of the location, the neighborhood, close proximity to schools, churches, parks and shopping, etc.  You want your prospect to envision living in the home and whatever you can say or do to make this happen, you should.

Hopefully, you’ll hear back from buyers who have toured your home but don’t always count on it and don’t be discouraged when you don’t hear from them.  If you haven’t heard from them, you may want to wait a couple of days and give them a call.  Simply ask if they’ve decided on a home yet and if not, is yours one they’re considering.  This gives the buyer the opportunity to tell you why your home will or will not work for them, i.e. too big, too small, etc.

NEGOTIATION

A deal is successful when both you and the buyer are happy with the terms.  The negotiation process should be friendly and non-confrontational.  After all, you’re both winners... they're getting a new home and you're able to move on. 

Presentation of an offer

The presentation of an offer/contract can be handled several ways.  It’s preferable that you contact a real estate attorney to help you review, prepare and negotiate the offer.  Many real estate attorneys will assist you with this task at no additional cost if they are the attorney used for the closing. Y ou and the buyer can meet and discuss the offer face-to-face before it’s in writing.  Simply discuss each of your needs and come to an understanding.  Then contact a real estate attorney to prepare the contract based on what you and the buyer have discussed.  If an offer has been prepared and presented to you, then you can either review it alone and make the decision, or contact a real estate attorney to assist.  If your prospective buyer is working with a real estate agent and you have agreed in advance to pay a commission, the agent will present the offer to you and you negotiate with the buyer’s agent.  If your prospective purchaser is working a buyer’s agent or an attorney, keep in mind they are working for the purchaser and not you.  Best advice - hire a real estate contract attorney to handle the negotiations on your behalf.

Once an offer is presented, you can (preferably with the assistance of your real estate attorney):

lAccept the offer as is, sign it and it becomes a binding contract.

lCounter-offer back to the buyer by making changes in the offer and initialing the changes.  The buyer has the option of walking away if the changes are unacceptable but negotiations have been re-opened.

lDecline the offer – this should not be an option.  You should at least make a counter-offer.

Many issues can arise during the negotiation but it’s worthy to discuss a few that you should understand and be prepared to handle.  If you’re wise you will have the consult of a real estate attorney but ultimately the decision is yours.

 Buyer offers a low price

If the offer is low or not within the range at all, counter offer a little below your asking price.  Be prepared to go through several counter offers.  You may ask the buyer how they arrived at their offer.  It’s possible that the buyer may have done more research than you and have good evidence that your price is high.  If this happens then you’ll eventually have to drop your price - no matter who buys the property.  If the buyer tells you this is all they can afford, then very likely they are not really qualified to buy your home so don’t spend a lot of time negotiating.

 Buyer has a house to sell before they can buy yours

 Accepting this contingency has many pitfalls and if possible you should try to avoid accepting an offer with this contingency.  Your first response should be to suggest to the buyers that they get a bridge loan or swing loan.  They will need to qualify to carry both houses at the same time.  If they can qualify, you can extend the closing date on your house to give them the time to sell their house.  That way, they have the time they need and you have a guarantee that they will close on your house regardless if they sell their current home.  If they can’t qualify but it seems reasonable to you that their house will sell and these buyers seem like good prospects, you might consider taking the offer, but including a "kick-out clause".  A “kick-out clause” means that you continue to market your house, and if you get another offer, the first buyers will have 24-48 hours to prove that they can perform on their contract without selling their current home, or they get "kicked out".  They will get a return of their earnest money deposit.  You are then free to negotiate with the new purchasers. Anytime you accept a contract with a contingency, it should include a time frame for the satisfaction of the contingency, even if you have a “kick-out clause”.  In other words you could allow the buyers 45 days to get a firm contract on their house and 45 more day to close.  We strongly recommend that you hire a real estate attorney when you are dealing with complicated situations such as this because if you exercise the kick-out clause, you must make an agreement with the newest purchasers that their contract is contingent on the first buyers being released.

Buyer wants to do a lease-purchase, also known as a lease-option

This means the buyer wants to rent the property for a period of time and then purchase it during or at the end of the rental period, which is when you get your money.  A lease purchase is often used to sell less desirable properties or to sell properties in a slow market.  It is also used in lieu of other contingencies.  If a buyer has a house to sell and can’t qualify for a bridge or swing loan, a lease-purchase can be a good solution.  Do not attempt this transaction on your own, hire a real estate contract attorney to prepare the forms and manage the closing.

 The offer is contingent upon the buyer obtaining financing

This is very standard, most people do not pay for a house with cash.  But there are certain elements that sellers should avoid.  Generally, you should not enter into a contract that is contingent on the buyer receiving a certain interest rate and points.  Let the buyer know that it is fine for them to shop around to get the best mortgage terms, but that the contract must say that that they will take "market" terms.  This means that the buyer can’t get out of your contract just because interest rates go up - unless they no longer qualify for the loan.

 Buyer has too many personal property items in the contract

 If it’s not nailed, fastened or attached to the house, it is not included in the sale unless the buyer has made special provisions for it in the contract.  Buyers and sellers must be careful because if there are too many valuable personal items in the contract, the mortgage lender may deduct the value of these items for the purpose of the mortgage.

Sale is contingent on the house passing inspection

A home inspection is not an appraisal and it is becoming common practice to see this contingency in contracts.  The purpose of the home inspection is to disclose the condition of the property to the buyer.  In many states, disclosure by the seller is required by law.  Sellers may opt to have an inspection before the home goes on the market.  This conveys to the buyer that you are selling a structurally and mechanically sound house.  Regardless, a prudent buyer will require an inspection and you should expect it.