In today's hot sellers' market, many of the standard rules are reversed.
For example, buyers usually have the upper hand in negotiations -- in normal times. But according to a recent report from the National Association of Realtors, the inventory of homes for sale is down 21% from last year, and sellers are receiving an average of three competing offers.
With these record-low inventories and continued buyer interest, sellers start out in a strong position when they list their home. That said, getting the best price is still a long and involved negotiation process -- and it pays (literally) to know how to play your cards right.
Here are five things to keep in mind when negotiating the best terms for the sale of your home.
1. Set Yourself Up for Success
The more perceived value a home has, the higher the price it fetches. And one of the best ways to give your home that initial wow factor is by marketing it well. That means picking up the clutter around your house, staging it with your best furniture and paying to have professional photos taken.
"Some things I always tell my sellers to complete (before the home goes on the market) for the best price and first impression is to make sure it's light and bright and to get rid of clutter or large and bulky items," says real estate agent Kristen Banner.
Beyond staging your home for the best first impression, you should also make sure you're actually pricing it to sell. "The key to negotiating the best price is pricing the home correctly in the first place," says Banner. "You can't go too high or you risk sitting on the market, with buyers overlooking you."
While it might be tempting to name your top price and see if you can get it, it's important to have data to back up your home's listing price. One way to go about this is by checking sites such as Trulia to compare the cost per square foot of similar homes in your area.
If you're selling your home with a real estate agent, they'll be able to help you price your home so that it attracts buyer interest. If you're going the for sale by owner (FSBO) route, be sure to do your research before throwing out a number.
2. Know Your Home
Another key part of getting the best price for your home is understanding what you're selling, and what about it will draw buyer interest.
Think: location, rarity or updates, Banner says.
Maybe your home is the only one for sale on a popular city block, or maybe you're selling one of the last three-acre lots in a coveted neighborhood. Beyond exceptional circumstances, you should also share any work you've done on the house. Older homes with modern features that are move-in ready will always fetch more money than those that are perceived as "fixer-uppers."
3. Negotiate the Right Things
As a seller in a seller's market, it can be tempting to start negotiating left and right to get the absolute best deal. But keep in mind the goal, which is to get the best offer a buyer will agree to, and ultimately to sell your house.
"Sellers can negotiate sales price, closing cost, closing date, home warranty cost, survey cost, title company, title policy (although this is usually a seller-paid item), items physically in the home, and even repairs," Banner says.
Although you can negotiate each and every one these things, it doesn't mean you should. If you've listed at a good price that the buyer is also happy with, that's the most important thing. After that, you may just consider negotiations based on logistics and convenience. For example, you might want to negotiate a later closing date so that you have more time to move.
If you haven't reached that perfect price agreement with your buyer, it might be time to throw in a few extras to add more value to your asking price.
"One great way to stick to your asking price when buyers refuse it is to offer additional benefits or concessions," says Michael Dean, real estate broker and co-founder of Pool Research. "The buyer may not be open to your original asking price initially, but that could change if you include some furniture or appliances, offer to pay a percentage of the closing costs, or simply set a move-out date your buyer favors."
4. Know Your Buyer
If your buyer really loves the home or needs to find a new place quickly, you might have the upper hand. Otherwise, you or your agent will need to do some research.
"Say I'm doing a for-sale-by-owner and get a call from a potential buyer telling me they're interested," says real estate investor Aaron Norris of PropertyRadar. "Rather than wasting time (or risking my health) showing my property to ill-qualified buyers, I ask a string of basic questions that seem innocent enough: Name, current address, phone number, email and if they're pre-qualified with a lender."
Armed with this info, sellers can search online for local county public records (and even social media sites) to determine things like how long the buyer has owned their current property and their current job situation. All of this gives the seller a better idea of who the buyer is, if they'll have any contingencies (like needing to sell their old home to afford the new one) and how likely they might be to qualify for a loan.
These factors will help you pick the best, most reliable buyer in the early stages of bidding and negotiations.
5. Don't Underestimate the Importance of Negotiating
Fairly negotiating the price of your home might be one of the hardest things you do as a seller. Not only is it a challenge to land on the right numbers, it can also be hard to objectively negotiate the terms of parting with something as personal as your home.
If you're unsure your negotiation skills are up to the task, then it might be time to consider the pros and cons of working with a real estate agent.
This story was originally published by The Penny Hoarder.
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