Negotiating 101 - 11 Items That Can Be Negotiated In A Real Estate Transaction

11 Items That Can Be Negotiated In A Real Estate Transaction

As an agent it is our duty to help and guide our clients through every aspect of a transaction, from starting the home search to the closing table we are here for you every step of the way. This includes the nitty-gritty and the tough stuff like putting on our game face and negotiating on behalf of our clients! The term negotiation is defined as discussing something formally as to come to an mutual agreement.

Most people think that negotiating is only about wining and coming out on top, and while this is true in a sense it doesn't necessarily mean that one party is wining over the other. In real estate the end goal of good negotiations between parties is to come to an agreement where both parties feel like they are winning, or achieving something out of the deal. Sometimes under certain circumstances it does not always work out that way, but should always be the goal between the agents negotiating for their clients. Some negotiations are straight forward and easy to smooth out, and the parties can quickly come to an agreement. And other times they can be a little more challenging, but  negotiating doesn't need to be scary again this is where you agent is going to shine and go to bat for you and your needs!

Below we have listed 11 items that can be negotiated in a real estate transaction, what they are, and what to expect.

Negotiable Items In a Real Estate Transaction:

1. Sales Price - As you may know just because a property is listed at a certain price, this does not mean that this is the price you have to offer. The asking price can be determined in a number of ways, but is generally what the seller is hopeful they can get for their property. Your agent can help you determine a fair offer amount by completing a CMA (Comparative Market Analysis), this will show you what homes similar to subject property have sold for recently. It is good to keep in mind that once an offer is submitted, the seller may counter your offer and initiate negotiations so the hopefully both parties can come to a middle ground and execute a contract where both parties feel satisfied. 

2. Closing Date - How quickly are you able to close? If you are taking out a home loan for a property closing can be 30 days or more depending on the current state of the market, if you are purchasing a property for cash then you can generally close a little quicker. Negotiating this date can come into play if the seller has a certain deadline they have to meet, such as closing on a new home they are buying or simply just need to move on before a certain date. 

4.Closing Location - Most likely any agent will tell you if they have a preferred title company or escrow agent. They usually have built relationships and rapport with specific people, and in real estate its always great to work with people you are familiar with and know exactly what to expect. This minimizes the opportunity for surprises or hiccups throughout the transaction. 

5.Will The Seller Carry a Second Mortgage - This can be referred to in many terms such as seller carryback financing or second mortgage, but is typically referred to as owner financing or seller financing. This is when a seller acts as a bank or lender and carries a second mortgage on the subject property, which the buyer pays down each month along with the first mortgage from their lender. 

6.Contingencies - A contingency clause defines a condition or action that must be met for a real estate contract to become binding. It becomes a part of the binding sales contract once both parties, the buyer and seller, agree to the terms and sign the contract. Items that are typically referred to as a contingency can be financing approval, the sale of another property, or appraisal. 

7.Home Warranty - Will the seller pay for a home warranty? A home warranty provides coverage for items attached to or installed in the home, in case there is a future need for repair. They can be very beneficial in properties that have older HVAC systems, or items that have costly repair bills. You should always discuss this with your agent upfront and see what company to choose, what plans are available, what all they cover, and what the benefit of having it for the subject property will be. 

8.Repairs - It is VERY important that every buyer have a home inspection, unless purchasing a brand new home. The purpose of an inspection is to disclose the condition of every aspect of a property, and help bring attention to any issues within the home. While it is completely normal for there to be items listed as "deficient" on most homes, there are some big ticket items that can start to add up. Your agent can help you determine which items are most important to have resolved and depending on the type of loan you are going to carry out, you can ask the seller to repair the items, provide a concession, or take money off of the final sales price. 

9.Credits - As I mentioned in Repairs, if a seller is not wanting to make repairs on their own and you negotiate a concession the estimated cost of repair will be credited back to the buyer at closing. There are also other forms of concessions, this can include closing cost assistance to aid the incoming buyer. These items will show up as a credit to the buyer at closing, and will be applied to any costs the buyer will have at closing. It is important to know that depending on the loan type, there can be a limit to the amount a seller is able to credit a buyer at closing.

10.Possession Date - When will you take possession or the property, or be expected to hand over the keys? While it's most common for possession to switch after a loan is closed and funded, this is not always the case. Another negotiable term in a contract is called a leaseback, this is when the buyer agrees to the seller to remain on the property for a negotiated amount of time. During that time the buyer becomes the landlord, and the seller becomes the tenant. Another rare option is when a seller allows a buyer to move in prior to closing, with a similar agreement though this is not a common practice. Further items that can be negotiated within a leaseback include, when the tenant must vacate the property, will they be expected to pay for the lease back, and so much more. If this topic comes up in your transaction, your agent can walk you through making the best decisions. 

11. Items to Convey with the Property - Will the seller leave anything at the property? Remember if something is not installed to the structure then it does not automatically convey with the purchase. For instance if you wrote an offer on a farm property and had no farming equipment and the seller does, you could negotiate some of those items into the contract if the seller is willing to part with them. Other items that could potentially be negotiated includes appliances, furniture, or equipment. Our team has even negotiated boats and lawn mowers into deals! 

Again these are all items you can negotiate! Most likely you will never have a television worthy face-to-face meeting with the seller, where you duke it out and come to a begrudging agreement. You will typically will go back and forth through verbal communications with your agent or written and signed documents between yourself, your agent, the sellers agent, and the seller. It is always important to remember that an agreement must be in writing and signed by all parties to become a binding part of the contract! 

We hope that this post was helpful in highlighting all of the negotiable terms of a contract, and that if you are a potential buyer or seller that you feel confident in knowing your options and tackling negotiations head on in your future real estate endeavors!