It seems that until the past couple of months, negotiating a home sale was off the table. The market was filled with bidding wars where sellers didn’t need to compromise. Over the last two months, the local real estate market has slowed down a bit. It’s still a great market, but it is becoming a more “normal” market. New listings are not vanishing. For example, going back two weeks and looking at single family homes that were listed, less than 50% those listings in the past two weeks are under contract. This is just a snapshot of the Rapid City market. Two months ago that percentage would have been significantly different.
I believe the days of negotiating will be returning. So, it’s important to understand why negotiating is difficult. Let me explain…
You want to buy a home and but you don’t want to over-pay for it because you know it needs work. You have a home to sell and you want to get it sold but you want to make sure you can get enough money out of the deal at closing. These may seem like two different scenarios but they can actually be two intertwined dramas—each on the other side of the deal.
A good home sale has both sides getting something that they want. Sometimes a deal may lean one way another, but it should have some give and take. However, market conditions will often dictate which side will need to be more flexible.
Negotiating a home sale can be frustrating, infuriating or disappointing. But it also can be rewarding and thrilling. Most of all, home sales are filled with emotions. Many deals fall apart when those emotions take over.
Let me take a moment to explain how the brain works.
Normally, you will use all parts of your brain as needed. There are some notable exceptions. When you are under stress, your amygdala kicks on. The amygdala is tied to our limbic system which is responsible for our emotions and our fight or flight response. Negotiating home sales are stressful—and often the most important part of your brain is not being used—your frontal lobes.
Your frontal lobes are responsible for problem solving, planning and decision making. When under stress your oxygenated blood is going elsewhere.
So, what can you do to prevent making costly mistakes?
Take lots of deep breathes and calm down before responding to any offer. If you’re the seller and someone just made an offer that is well below your asking price, don’t take it personally. Too often people get emotional about transactions. Yes, it is your home that you have loved—but try to think of it in terms of a building. Try to look at it from someone else’s perspective.
When receiving a low offer, think about it this way—if you were shopping and you found a hot deal on an item you wanted, wouldn’t you be thrilled? It doesn’t mean that you think that is all the item is worth because that is what you paid for it—it’s just that you were able to get a great deal. People are often trying to get a great deal with a low offer. Don’t take it personally.
As I noted, in general the market conditions will often dictate who has a stronger position in negotiating. If there is low inventory, the seller has the benefit. If there is high inventory, the buyer has a slightly stronger position. I note that is the case “in general” as there are always exceptions to the rule based on the uniqueness of a given property (whether it is uniquely desirable—strength to the seller, or if has more challenges than most—edge to the buyer).
Another important thing to do when negotiating is make sure you take a little time before responding—unless you have already thought out your response in advance.
When in doubt, go for a walk and clear your mind, then discuss the offer with your Realtor.
If you would like to have more information, or need a good negotiator to work with who understands emotions, please contact me at (605) 593-3759. I will gladly assist you.