How to Negotiate a
Real Estate Offer

Wondering how to negotiate a real estate offer successfully?

The most critical step in how to negotiate to buy a house is to put your trust in a professional REALTOR®.

For a Buyer

Take advantage of the knowledge and experience of a REALTOR®. They often (not always) possess the skills necessary, and know how to negotiate the best terms for you. Prior to submitting an offer, they'll provide you with their educated opinion, an estimate really, as to what they believe is its market value.

Then, when it comes to what you end up paying, just ...

Follow Your Feelings

How much do you want that home? What's it worth to you?

When asked for my opinion of market value, I rarely reply immediately. I explain that it's a very important question, and that I prefer to offer a considered opinion after I've done my due diligence. As a very experienced REALTOR®, it doesn't take me long to study recent sales history in the immediate neighbourhood, and apply my industry knowledge, along with instincts honed through a long career, to arrive at my opinion of value.

I ask my buyers how they feel about the property. It's very personal, and your agent can't tell you what to offer - only how to negotiate an agreement.

It's Your Call

How to negotiate a successful agreement of purchase and sale?

Be Reasonable

I suggest, however, that if the asking price is fair for the property, don't offer too low. Unless there are unusual circumstances, you'll obviously not buy it at that price. And you're likely to just alienate the seller. It'll be more difficult negotiating an offer with an upset or insulted home owner. They may even refuse to negotiate with you, or counter offer to you at a higher price than what they might have agreed to if your offer price had been fair in the first place. They certainly have the right to refuse to even sell you their home.

In the greater Toronto real estate market, many homes sell within a few percentage points of the asking price. Some even sell well over the list price. So, I advise you not to offer something ridiculous like 10% or 15% under list. If you have price limitations, as do most people, and you can't afford to buy a particular property ...

Move On to a More Affordable Home

In most cases, if you offer fairly, the seller will likely be fair in negotiating an offer with you too.

The final agreed price may be affected if either party is ...

Under Duress

Maybe, the seller has bought unconditionally, or they're in the emotional throws of an acrimonious divorce. Or maybe the buyer has already sold their home, or already submitted their notice to terminate their tenancy, and moving dates are rapidly approaching. A party being under this type of stress is certainly not how to negotiate the best terms.

However, the REALTORS® involved must not disclose motivation of their respective clients prior to, or during negotiations. This is considered confidential.

In most cases, the initial offer is refused by the seller, who then makes a counter offer to the buyer. At that point, you have the option of simply accepting the counter offer if you find the terms satisfactory, or you can counter offer again. It's advisable to ...

Heed the Advice of Your REALTOR®

As your trusted knowledgeable adviser, they should have a fair idea as to whether or not another counter offer to the seller would succeed. If the seller is being fair, then it's a good idea for you to show the same respect. If you feel the terms are just not realistic, or are simply not affordable for you, and your agent feels another counter would be futile, then maybe you should search for another home.

Who knows - the listing agent may call the next day to request you re-submit your offer since the sellers changed their minds (maybe they were bluffing).

If you're a buyer who must absolutely 'steal' a property, let your REALTOR® know this at your first meeting. They can then either focus their efforts on finding an appropriate listing that may be a bargain, or terminate their services with you. If the former, it could be a power-of-sale or foreclosure. For more details on how to negotiate this type of purchase, click here. Or it may be a vacant home owned by an anxious seller. Or it could be a handyman special. In either event, you're going to make a real estate offer on a property appropriate for you, or through the services of an appropriate REALTOR®

But to get the best terms while negotiating an offer ...

Be Prepared to Walk Away

For a Seller

The advice is pretty much the same. How to negotiate a successful agreement of purchase and sale is to be fair and reasonable.

The First Offer is Often the Best

Many a time during my career, I've come across situations when home owners have regretted refusing, or wished they had been more reasonable with the first offer they'd been presented. Later, they had to reduce their asking price to an amount actually below that first offered price. It happens.

I have found that there are two general types of sellers - those who are committed to selling, and will accept fair market value for their property. And there are those who will only sell if they get their price. Many listings that fail to sell usually fall into the latter group of homeowners. So, I suggest you decide what type you are. And to be fair and honest, inform your REALTOR® before they agree to accept your listing. If the odds of a successful sale are low, the REALTOR® may decide not to accept the listing. Or with your understanding and agreement, they may agree to accept it, but with a minimum of effort and expenditure commitment during the marketing process.

A Last Note

... about how to negotiate an offer.

Nowadays, some listing REALTORS® insist on all offers being faxed to their office. They refuse the buyer's REALTOR® the opportunity to be present during the offer presentation.

Mistake. Big one

I believe this is not how to successfully negotiate an offer. I guess they think they're protecting their sellers from the big, bad buyer agent and their mysterious pressure tactics. Whatever their faulty reasoning, I personally believe they're actually doing their seller a serious disservice.

The absolute best way how to negotiate a successful agreement is to have the buyer agent sitting at the negotiating table. This way, the seller's REALTOR® has the golden opportunity to ask questions about the offer and the buyer. Before advising the seller, I feel it prudent to know if the buyer is pre-qualified for the mortgage, or if the closing date is set in stone or if the deposit can be increased. If the offer is conditional upon the sale of the buyer's home, it's really important to know the terms of the listing of the buyer's property. Is it priced correctly? If not, then the offer to the seller is not worth the paper it's written on.

It's all very helpful while negotiating an offer. If the listing agent has the skill, they can also read the body language of the buyer agent. People can speak volumes without saying a word. Unfortunately, negotiation skills vary considerably in the real estate industry. Many sales people are not much more than order takers.

Various options can also be discussed with the buyer's REALTOR® when considering counter offer terms. In other words, it's a great opportunity to negotiate terms, and avoid the situation of making a decision in a vacuum. I often even ask the buyer's REALTOR® to call their client to 'test the waters', prior to putting pen to paper.

It also provides the buyer's REALTOR® with the chance to actually participate in the negotiations, and do their job for their buyer client - to professionally plead their case, as it were.

So, whether a seller or buyer, how to negotiate a real estate offer with the greatest chance of success is to ...

Insist Your REALTOR® Fully Participate

... during the negotiation process.

Learning how to buy a house is like learning how to dance. It's a sensitive balance, a gentle give and take between two dance partners. With good guidance, it can be a rather pleasant process, or it can be a terrible ordeal. Be sensitive to the needs of your 'negotiating' partner. See things from their perspective as well as your own. Making unreasonable demands usually fails to make the sale.

Canada Mortgage and Housing Corporation has a great website in which you can learn more about the real estate offer and how to negotiate.

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