When sellers think about negotiation it usually refers only to the purchase price of their house. Let’s talk about how negotiation skills are important when choosing a Realtor to help you sell your house.
Price is the first and most important part of marketing your house. Depending on how much you list your house for in relation to other comparable sales in your neighborhood you could generate multiple offers above list price. It is also the most important part of negotiating offers with potential buyers. Your focus, as the seller, is on how much money you can walk away with when the deal closes. Your Realtor should have strong negotiating skills to help you with obtaining the highest price possible. One way you can know you have a strong agent is if you tried to negotiate a lower commission and that agent influenced you to accept their original sales commission when signing the listing agreement. If you were able to negotiate a lower commission chances are your agent will be weak when negotiating with buyer’s agents. That’s not what you want!
Negotiations don’t stop there…what about the other terms of the contract? I can already hear you asking, “What other terms could possibly be that important?”
Here are a few terms of the CA purchase agreement that will be important when considering what offer to accept on your house.
- Earnest money deposit (EMD): The EMD is a percentage of the purchase price that the buyer is willing to deposit with a Title/Escrow company to reserve the home for the escrow period. Many agents advise buyers to deposit a minimum of 1% of the purchase price. The higher the EMD a buyer offers the more serious and financially capable they are. You want a serious buyer for your house. When in a multiple counter offer situation this can help weed out the not so serious buyers.
- Loan Contingency: Most people ready to purchase a home will be relying on obtaining a mortgage to finance the purchase. The standard CA loan contingency is 21 days. Depending on the type of pre-approval letter that accompanies the offer I always review and recommend a shorter contingency if any at all.
- Buyers who have a fully underwritten approval may offer no loan contingency. These buyers are the best besides an all cash offer. They have secured financing and have capability of purchasing your house.
- Buyers who are not underwritten will usually submit a pre-approval letter “subject to underwriting”. These buyers have had credit checked and income verified, however; an underwriter has not reviewed their entire financial picture to determine they are truly qualified to pay the mortgage payments. The loan contingency offered is usually the standard 21 days and may be shortened slightly to make the offer more attractive. I don’t recommend taking a shortened time on these unless I’ve worked with the lender and have received written confirmation that they will be able to obtain full approval before the contingency time expires.
- Buyers who submit an offer accompanied with a Pre-Qualified letter are the weakest offers and should be approached with caution. These buyers have not had their income or credit report verified.
- Your Realtor should contact the lender to verify the loan contingency terms and status of the buyer’s financing prior to presenting the offer.
- Appraisal Contingency: The appraisal contingency allows the buyer to come back to renegotiate the price if the appraisal does not support the purchase price. The appraisal contingency in a CA purchase agreement is a standard of 17 days. When a buyer’s agent is confident in the lender’s process sometimes they will shorten the contingency with the lenders approval. Some buyers will remove the appraisal contingency, however; this is very rare. Every situation is different and if the offered purchase price for your house is higher than comparable sales I recommend a partial appraisal contingency release. The buyer will pay the difference between the purchase price and appraised value, sometimes with a cap on how much over the appraised value they will bring to the closing table. This will relieve you of having to stress about renegotiating the price of your home if the appraised value is lower. Your Realtor should contact the lender to verify the lender will be able to perform within the contingency period before presenting the offer.
- Inspection Contingency: The standard CA purchase agreement contingency period is 17 days. The shorter the period the more motivated a buyer will be to inspect and negotiate repairs and/or release the contingency. I recommend accepting offers with shorter inspection periods to give a buyer less time to potentially back out of the contract. This allows the seller to get the home back on the market quickly if a buyer finds something unfavorable about the condition of the house.
- You, the seller, can potentially avoid losing a buyer to an inspection contingency when you perform your own inspections prior to listing your house. You can repair any issues that could be a potential turn off for buyers and you create a higher perceived value for your house.
- Typical inspections are Pest Inspections for wood destroying pests and dry rot; General Home inspections; Roof inspections; Chimney inspections for wood burning fireplaces and stoves; Pool inspections. Other inspections may apply depending on the features of your house.
- Repairs: In California a buyer has the option to submit a Request for Repairs based on their inspections. You are not obligated to respond, however; if the request is reasonable and supported with copies of the inspections and quotes from reputable contractors you may want to respond in order to keep the sale moving forward.
- Contingency on Buyers Sale of Property: This contingency is most common when the buyer may or may not have listed their house for sale, however; their new mortgage depends on the down-payment they receive from their sale. Your Realtor should call to discuss the buyer’s listing with their agent to get as much information as possible to help you make the best decision.
Ultimately, all final decisions are up to you. I will advise you how to best respond in any of these contingency situations and negotiate the best purchase price and terms for you.
Call or email me for a personalized needs analysis and marketing consultation.
Cheers to your success!
Brandy Christensen, Realtor / Keller Williams Realty
CA BRE# 01971181 / M: 916-600-1239 / E: firstname.lastname@example.org
Everything will sell for the right price! I know…it is tempting to want to price your home for a price you think is realistic. That price is sometimes too high!
You say, “But, I know my house is worth more than my neighbors and that’s what I should get for it.”
And I say, “That’s great and very well may be true…let’s take a look and see what other homes just like yours are selling for.” Because only one thing determines the value of your house in today’s market. It isn’t how much money you need to profit after closing costs. It isn’t an emotional value because of the family memories, blood, sweat and tears you’ve poured into your house. It isn’t what your friends say it is worth. It isn’t even what a real estate agent says it is worth.
It IS worth what other homes just like yours are selling for within your neighborhood.
You ask, “Why?”
I say, “Have you heard of a mortgage?” I’m sure you have and you most likely still have one that you need to pay off when you sell your house. A mortgage requires an appraiser to determine the value of the house for the lender to provide money to any potential purchaser of your house.
This is important because if the appraiser doesn’t find any homes in your neighborhood that have sold for the price you want then they are legally and ethically obligated to report a lower value to the lender. There are ways to negotiate a higher than appraised price for your house. That is a negotiation tactic not related to an agreed upon listing price. When we look at this from a buyer’s perspective, why would we want to pay more for a house than the appraised value and start with negative equity? We can NEVER predict what will happen with tomorrow’s real estate market and would be a poor choice for any buyer.
You say, “What about cash buyers?” Cash buyers are not exempt from obtaining an appraisal except when the property is majorly, physically distressed. Experienced cash buyers will pay for an appraisal and negotiate the right price.
Back to the original point…EVERY house will sell for the right price!
Pricing also takes into account other factors. Location is very important. Is your house located on a busy street or a cul-de-sac? Is your house behind a busy shopping center or in the heart of your neighborhood? What amenities does your home have that others may not have? Does your house have curb appeal or is the front yard a wreck?
I trust this information is helpful and gives you a balanced perspective on how buyers view market value.
Call or email me for your private consultation and marketing presentation.
Cheers to your success!
Brandy Christensen / Realtor / Keller Williams Realty
M: 916-600-1239 / E: email@example.com
When you are ready to sell our house and just met with a Realtor you might be shocked by the numbers on the net sheet they include with their presentation. Let’s look at the facts…the greatest expense when selling your home is that one line…COMMISSION!
Before you have a panic attack let’s talk about another fact…the time and expense your Realtor is about to embark on to market your home is not guaranteed to be compensated to them. Your house could potentially not sell due to any number of factors including price, location, condition, market, etc. Your Realtor is taking a risk in spending their own capitol on marketing your house with no guarantee of it selling and getting paid.
Let’s look at another fact…behind the scenes. Your Realtor is spending valuable time and resources prospecting for buyers and other Realtors with buyers. He or she (if they are like me) is making phone calls, knocking on doors, sending out mailers, holding open houses and paying for social media advertising to generate traffic (buyers) to sell your house. The countless hours spent on these efforts are all without guarantee.
You might even be thinking, “I should check with another Realtor to see if I can pay less commission to sell my house.” Just imagine working your full-time job and your employer says to you, there is no guarantee you will be paid for your work. And, you know, I’m just going to transfer your job to another person who will do it for me for a cheaper salary. Do you feel your time and skills are work that paycheck? Because you are worth that paycheck then you will find a company that will pay you what you’re worth. I am the same way, the commission is a representation of what my time and skills are worth to you.
Let’s talk about another important fact…the agent that charges you the least amount of commission will be more likely to spend very little time actively and aggressively marketing your house to sell it. That agent will also be more likely to negotiate a lower price for your house leaving you with less money in your pocket. Agents who charge less commission are less concerned with the quality of buyers than they are about the quantity of their listings.
Ok, here’s the last fact for today…commission is shared with cooperating agents who bring buyers with offers. Commission is also shared with the Broker’s involved in the transaction. Don’t forget about the IRS, they want their cut too! Add all this up along with the marketing costs and the Realtor is only left with a percentage of the total commission to support their family.
Here are some questions to ask about commission before listing with a Realtor:
- What percentage of this commission is budgeted for marketing my house?
- Where is the greatest money being spent on advertising my house for sale?
- What will you do besides spend money to market and sell my house?
- How is commission split? Co-operating agents split, Broker split, marketing budget, business expenses, taxes, etc.
This will be an eye opening experience and will help you understand the value of hiring the right Realtor to represent you to sell your house.
Who do you want working for you? A quality Realtor or a discount agent?
Call or email me for your personalized needs analysis and marketing strategy. I look forward to hearing from you.
Cheers to your success!
Brandy Christensen, Realtor / CA BRE#01971181 / Keller Williams Realty
M: 916-600-1239 / E: firstname.lastname@example.org