How to Negotiate a
Real Estate Offer

Are you wondering how to negotiate a real estate offer successfully? The most critical choice is for you to put your trust in a professional agent to intervene in what is effectively a mediation between parties. However, if you intend to give it a try by going it alone, to improve your chances of success, to learn how to negotiate effectively, I advise you to study the techniques, methodology and protocols described throughout this website, and learn how the pros do it.

How to Negotiate if You're a Buyer

If you choose to forgo taking advantage of the knowledge and experience of a realty agent, who often (not always) possesses the necessary know-how to negotiate the best terms for you, and whose services don't usually cost you a dime, then read on.

Assuming you've obtained a professional opinion of value, a guesstimate really, for the property of interest, prior to submitting an offer, to help you decide what's it's worth, that is how much you end up paying for it, just ...

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Follow Your Feelings

How much do you want it? What's it really worth to you? If you absolutely love it, be prepared to pay more. If you can live without it, and if the seller is unreasonable in their expectations, be prepared to walk. The ultimate purchase price often boils down to emotion.

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 have done the necessary due diligence. An experienced agent can easily study recent sales history in the immediate neighbourhood and apply accumulated industry knowledge, along with instincts honed during a long career, to arrive at an opinion of value.

I ask my buyers how they feel about the property. It's very personal. Your agent can't tell you what to offer - only how to negotiate a successful Agreement of Purchase and Sale. However, if you're playing solo, that is without a representative, well, you're pretty much on your own.

It's Your Call

In either case, to negotiate a successful Agreement of Purchase and Sale, you should be reasonable. If the asking price is fair, don't offer too low. Unless the prevailing circumstances are unusual, you'll obviously not buy it at such a low price, and you're likely to alienate the seller. It'll be more difficult negotiating an offer with an insulted homeowner. They may even refuse to negotiate with you. Or they might choose to counter-offer at a higher price than what they might have agreed to if your opening bid had been fair. They certainly have the right to go so far as to refuse to sell you their home.

In the greater Toronto real estate market, for example, at the time of writing, many homes sell within a few percentage points of the asking price - most even well over the list price. Thus, don't 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 ...

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Under Duress

Maybe the seller has bought unconditionally or is in the middle of an acrimonious divorce. Or maybe the buyer has already sold their home or submitted a notice to terminate their tenancy, and moving dates are rapidly approaching. Suffering under such stress is certainly not how to negotiate the best terms.

However, if realty agents are involved, agency law precludes them from disclosing motivation of their respective clients prior to or during negotiations. This is considered confidential information. Therefore, as a private buyer, you should also avoid that type of disclosure.

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 accepting the counter if its terms are satisfactory, or countering back to the seller again. 

Heed the Advice of Your Agent

It's advisable to follow the advice of your trusted adviser. Of course, if you've opted to go it alone, you should follow your instincts. Your agent should have a fair idea as to whether or not another counter-offer to the seller would succeed. If the seller is being fair, it's a good idea to show the same respect. If you feel the terms are not realistic or just not affordable, and your agent feels another counter would be futile, maybe you should search for another home.

Who knows - the listing agent may call the next day to request that 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, do the right thing by disclosing this preference to your agent at your first meeting. Or if offering on a FSBO, forget about stealing it. Your agent can either focus their efforts on finding an appropriate bargain-priced listing, or terminate their services with you. If the former, it could be a power-of-sale or foreclosure. Or it may be a vacant home owned by an anxious seller, or a handyman special. In any event, you're going to make an offer on a property appropriate for you and your budget. But to get the best terms while negotiating an offer, be prepared to walk away.

Negotiating an Offer if You're 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.

There's an old adage that the first offer is often the best offer. At times, I've been met with situations when homeowners have regretted refusing or wished they'd 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. Hey - it happens.

Two general types of sellers exist - those who are committed to selling for fair market value, and those who will only sell if they get their minimum price. Many failed listings fall into the latter group.

What type are you?

To be fair and honest, inform your agent before they agree to accept your listing. If the odds of a successful sale are low, the agent might choose to decline the listing. Or with your understanding and agreement, they may agree to accept it, but with a mutual understanding of minimal effort and expense on their part during the marketing process.

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A Last Note

These days, especially since the pandemic, but even prior,  most listing agents instruct that all offers be submitted electronically. The buyer's agent is not given the opportunity to be present during the offer presentation. 

I believe this is not how to successfully negotiate an offer. I guess they think they're protecting their sellers from the buyer agent and their pressure tactics. Or they don't want to waste their time. Whatever their faulty reasoning, I feel they're actually doing their seller a serious disservice.

The absolute best way to negotiate a successful agreement is to have the buyer agent sitting at the negotiating table. This way, the seller's agent has the opportunity, in person, to ask questions about the offer and the buyer. For example, before advising the seller, it's 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, the listing agent should know the terms of the listing of the buyer's property. Is it priced correctly? If not, the offer isn't worth the paper it's written on.

These details are important while negotiating an offer. If the listing agent is good at reading people, they can also interpret the body language of the buyer agent. People can speak volumes without saying a word. Unfortunately, as in any sales-driven industry, negotiation skills vary considerably in the real estate industry. Unfortunately, many sales people are not much more than order takers.

Various options can also be discussed with the buyer's agent when considering counter-offer terms. In other words, it's a great opportunity to negotiate terms and avoid making a decision in a vacuum. Prior to making any changes and countering the offer, I often first ask the buyer's agent to call their client to talk it through.

A personal presentation also provides the buyer's agent with the chance to actually participate in the negotiations and do their job for their buyer client.

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

Insist Your Agent Fully Participate

Learning how to buy a house and how to negotiate, whether with the assistance of an agent or privately, 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 (CMHC) has a great website in which you can learn more about the real estate offer process and how to negotiate.

If you're interested in learning how to negotiate like a pro, check out my book The Happy Agent. It's full of techniques and methodologies that could prove highly helpful to you in a private negotiation scenario, or even help your agent during their negotiating proceedings. A small amount of time and money could save you thousands on a purchase or sale.

Available virtually everywhere print and e-books are sold.

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