Negotiating Price in a Sales Contract
Negotiating price in a sales contract is an art. The offer came in and you are jumping up and down celebrating the sale of your home. The first thing you look for, in all the legal mumbo jumbo that makes up a sales contract, is the line that specifies the offer price. You find the line with the price. The offer is……………low. Real low. Lower than any sales price you ever considered for your home.
- How could they offer such a pitiful price!
- That is a lowball offer! They are bottom fishing!
- That is an insulting offer.
- We paid more than that when we bought the house ten years ago.
- The tax appraisal is higher than that offer.
- There is no way I would even consider working with these idiots.
- These people are wasting my time. I am not even going to make a counteroffer.
These and many more comments came from my sellers BEFORE we successfully negotiated and CLOSED offers to purchase their homes. Negotiating price in a sales contract is not impossible, it just requires getting in the right frame of mind.
Chill. If the offer is low take some time to separate your emotional feeling from the BUSINESS transaction at hand. Go do something that will take your mind off the offer. Go shopping, go play golf, work out, take a walk. Anything to give yourself a chance to calm down. Then we can reasonably, I said reasonably, evaluate the offer price and start thinking about negotiating price in a sales contract.
Start at the beginning. How much are they offering for the home? Is it a reasonable price? Does the sales price meet my financial needs for paying off mortgage loans and purchasing a new residence?
Calculate the net price. Even though the sales price is payment for the home, think if it only as a gross price for your transaction. You need to prepare a seller’s net sheet that lists all your expenses of the sale so you can determine how much money you will walk away with after the transaction is complete. Most Realtors include this as a part of their service. OK, now put the price part of the equation aside for a few minutes.
Make sure the sales offer is on a GAR form. The majority of purchase offers are made on forms prepared by The Georgia Association of Realtors (GAR). These standard contract forms allow Realtors and attorneys to quickly determine if anything is out of the ordinary in the purchase offer. If you receive a contract on a non-standard form, or if you are not familiar with the mechanics of a purchase offer and are going it on your own, you should consult an attorney who specializes in real estate and have them review the contract offer. A few hundred dollars spent in prevention could help you avoid many thousands of dollars in unexpected costs you may obligate yourself to in a contract you do not understand.
Once you have carefully read and understand the entire contract, you are ready to make a decision negotiating price in a sales contract. Reading the entire contract is critical. Find a quiet place and wade through the legal jargon. If you run across something you don’t understand, make sure to ask questions.
Now we can start negotiating price in a sales contract.
CHOICE #1 Accept the Offer “As Is” .
This is very rare but it happens. Negotiating price in a sales contract may mean not negotiating the sales price.
CHOICE # 2 Make A Counteroffer.
A counteroffer is nothing more than a new contract offer that the seller has initiated. Counteroffers should be made in writing with a specific period of time in which they are open for acceptance. Most offer a period of 24 to 48 hours after receipt for review and acceptance of a counteroffer. You are not required to make a counteroffer, but it may be a good way to educate a buyer as to what items are important to you in the negotiation. Many buyers anticipate a counteroffer and will not make their best offer on the first go around.
CHOICE # 3 Walk Away.
I have counseled my sellers to make this very decision when it was apparent the prospective buyer was not acting in good faith. Not my favorite tactic but it is sometimes acceptable. However, it is usually a very poor choice. Negotiating price in a sales contract requires two active parties. If you walk away, the conversation usually ends.
My main piece of advice on negotiating an offer is to be flexible. This is not the time to be overly controlling. Try to understand what is important to your buyer and see what you can do to make those things possible.
Don’t let hurt feelings about a minor issue taint the whole process. While it is a business decision, the negotiation does not have to be a “take no prisoners” battle between buyer and seller. Cooperative, win/win negotiating will get you a lot closer to where you ultimately want to be than a stubborn, warlike approach. Put your emotions away when negotiating price in a sales contract.
Understand your own limitations and do not be afraid to communicate with the other party about the areas where you have no room to give. Treat the other party with respect, and they are likely to do the same with you.
Honest communication trumps negotiating gamesmanship. Playing games in a negotiation is counter productive in most instances. Let your buyer know why you can’t accept a lower price. Give them some comparable sales to consider. Advise them of key difference between your home and the house on the street that sold for a lowball price. Tell them why you can’t give up possession in two weeks. Most buyers readily work to accommodate valid reasons for not accepting their first offer.
When you get to a bottom line point in the negotiations, communicate that to the buyer. Some buyers need a “foundation” to work on. They have to hear “no” before they feel they have struck their best deal.
Negotiating price in a sales contract is all about keeping your eyes on the prize and avoiding getting caught up in the “process” or keeping score on “points”. If you want to arrive at the goal of moving to a new home, negotiating price in a sales contract is mostly about timely and honest communication.