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2011-10-21 12:43:27
Purchasing a Home: The Negotiation Process

OK ... so, you've found the perfect home or condo in Park City and it's time to make an offer.  What steps do you take as part of the negotiation process.  This is a quick, high level overview of the process.  As our clients we'll walk you through the process in much greater detail and try to make any transaction as easy as possible for you.

STEP 1: RESEARCH AND PLANNING

Information is power.  You first need to work with your Realtor to arm yourself with the facts and plan out a negotiating strategy.  As Accredited Buyers Representative (ABR) agents we are trained to specifically help you.

When deciding what to offer for a property, current market prices and conditions are the most important factor.  You want to have access to information such as:

  • Average List Price Trends: Are prices in the neighborhood flat, decreasing, or increasing
  • Number of Homes Sold: This gives you an idea on demand in the area.
  • Absorption Rate: This is a statistic that tells you how long it takes to sell a property on average in a neighborhood
  • Average Selling Price To Listing Price: Are we seeing sellers with high listing prices and lower selling prices
  • Sold Price Per Square Foot: An analysis of price size and selling price ... it gives you an estimate on what the home you're interested in should sell for
  • Relative Property Condition: This is a subjective analysis that rates the condition and features in a particular property versus other in the neighborhood
  • Distressed Properties: What distortions to the market are being caused by distressed properties (bank-owned, short-sales, foreclosures, etc.)

STEP 2: SUBMITT AN OFFER

Any real estate transaction requires two things:

  • A written contract which conveys the initial offer
  • Valuable consideration (e.g. an earnest money deposit) when written agreement is reached between both the buyer and seller

The initial written offer will specify price plus the terms and conditions of the purchase that you want to negotiate.  We make sure that you have access to the latest, most up-to-date forms and will walk through the forms with you can have any questions answered.

We also talk about the strategy you want to take on the offer and how your want the negotiations handled.   It is important that any offer reflects your desires such as price range (called zones of possible agreement), persuasion approaches (what is the most effective way to reach a successful transaction -- whole discussion on things like how to show it's in the seller's best interest to accept the offer, why is this offer unique, that it is build on sound logic, determining what are the sellers motiviations, etc.), and overall negotiation plan.

When we present the offer, we normally try to do it in person to both the Seller and their Agent.  If the Seller isn't available, we will talk directly with the other agent at a minimum.  This provides a chance for us to explain the offer and the rational for the price and terms.  It is sometimes amazing how this simple way of submitting an offer can influence a successful outcome of the transaction (and strangely most agents don't do it).  It also gives us a chance to gather information that may be useful in the negotiation process.

STEP 3: THE SELLER'S RESPONSE

When the offer is presented, the seller has the option to:

  • Accept: If, after reviewing your written offer, the sellers sign their unconditional acceptance, then you will have a binding contract.
  • Reject: If the sellers reject your offer, you are released from any obligation.  The sellers can not later change their mindd and expect you to bind you to a contract based on that offer. 
  • Counteroffer: If the seller likes most aspects of your offer, they may send back a written counteroffer that includes changes they want to make.  You are free to either accept the counteroffer, reject it, or respond back with a counteroffer of your own.  This process can repeat itself many times as it takes until you and the seller agree to the terms and conditions of the sales contract.  Once agreement is reached, the contract negotiations are over and you have a binding contract.

It is important to note that the negotiating process always moves forward.  So, as a buyer, you can't decide at a later time to accept a counter counteroffer you previously rejected.  if the property is still available, buyer's would need to re-initiate negotiations by making a new offer.

WITHDRAWING AN OFFER

Can you take back an offer?  Ususally Yes, right up until the moment offer is accepted by both parties.  If you want to withdraw, you would need to provide written notification prior to the seller's written acceptance of the offer.

Normally, buyers also predicated thier offer on the property passing the buyer's due diligence.  This is an agreed to period in which the buyer has a chance to inspect the property to ensure it meets their criteria and their aren't any issues with the property.  As part of the due diligence, you have the right to negotiate the terms of contract to correct issues you've found during the due diligence.  If the seller doesn't agree to the correct the issues or provide funds for the repair of the problems you identify, then you have the right to cancel the contract or continue to purchase it.  In Utah, you will need to complete the inspection, negotiate the problem correction, and reach agreement/cancel the contract during the Due Diligence period.

 
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