When Does the Negotiation Start?

“The most dangerous negotiation is the one that you don’t know that you are in.” -FBI Lead International Hostage Negotiator Chris Voss.

I have seen many times when a seller has set themselves up to be held hostage by the market. What do I mean by this? Everything rests on the basis of the first decision. A decision to list high can ultimately mean that you are chasing the market throughout the entire time you are listed for sale.

For example, in my initial meeting with the seller on Nectar Way, I laid out all the reasons why $335,000 was top dollar for her home. I want to get the highest price possible for each of my clients. The seller, however, wanted to list her home at $350,000. She didn’t understand that this first negotiation was her most dangerous one. She didn’t even know she was in a negotiation! One of my jobs as a Realtor is to get the seller to list their home at a price that will cause the most amount of buyers to look at the home. The only meaningful negotiation happens when a seller is actually negotiating with a buyer, not their Realtor.

She wanted to “try higher and have room to negotiate.” In our market area, we don’t usually get offers on properties unless they are priced within 3% of the asking price. Based on that figure, I knew that we were outside the price range to attract a decent offer and if we did get one it would be substantially low. After years of experience I can share with you that when a home is priced too high and there aren’t any buyers swarming around it, there will generally be one person who will write an insanely low offer just to throw it out there. It will always be below what the home could actually sell for, given that it was priced right. This is exactly what happened. She received an offer of $320,000. Whoa! Much lower than what I knew she could sell her home for. The seller wouldn’t negotiate with the buyer because she was offended by the offer.

Did you know that in every real estate transaction there are over 25 negotiations that take place? Here we were two negotiations down and they were not going in the right direction. Finally, after weeks of negotiating with the seller, she reduced her asking price to $340,000.

Now, this was within the 3% range, but still higher than the price that would have created multiple offers. She was getting plenty of showings. We were upwards of 20+ showings by then, but no other offers. I had been keeping in touch with the agent who’s buyer wrote the initial low offer. I was able to convince my seller into giving a verbal offer to the buyer of $335,000 without reducing her price online. This was the start of meaningful negotiations between buyer and seller. The buyer verbally brought their offer up to $330,000 asking for $3,000 in seller paid concessions.

We were still $7,000 apart! After many many conversations, I was able to get the buyer to put an offer in writing for $335,000 having the seller pay the $3,000 in closing costs. It was a net offer of $332,000. Did the seller go for it?

YES after many more negotiations and six addenda later we had an agreed-upon contract. It closed 25 days later after many bumps and bruises along the way. Now you say, did it really hurt the seller to have to learn through the process? Did she really lose any money?

YES, it hurt. It hurt financially for her and it hurt because of the frustration she experienced. I am positive that if she would have listed at $335,000, to begin with, she would have walked away with a cool $5,000 more than she ended up with and she would have had a great experience.

Are you thinking about listing high so that you can have room to lower the price later? Why? List where you’ll get the most amount of buyers through the door and that could drive the price up!