Negotiating With the Buyer When It’s For Sale By Owner

By Jan McBee

One thing to remember when you begin to negotiate with a buyer is that it’s business and not personal. Sure, there are personal aspects of the sale of the home for both buyer and seller, but keep in mind they’re separate from the deal itself. Your objective is to sell your home at a fair price. Do your best to keep feelings and emotions to the side, even if the buyer is not as good at doing so.

A quick word on Fair Housing: As a seller, you must know that when selling your home, it’s illegal to show “any preference, limitation or discrimination based on race, color, religion, sex, handicap, family status or national origin or an intention to make any such preference, limitation, or discrimination.”

The Starting Point

When the time comes to negotiate, have the buyer make an offer. This is the starting point. They know how much you’re asking for your home; it’s up to them, now, to tell you what they want to pay. A buyer can make a verbal offer, but it’s best to put it into writing as soon as possible. Use a standard Contract to Purchase form, which can be found easily on the Interent. In addition to the purchase price, there are provisions on the form for items such as fixtures that will remain in the home, financing contingencies, closing expenses and more. All of these are negotiable.*

Here’s an important note: Part of negotiating is never tipping your hand by telling he buyer what your lowest acceptable price is. This seems obvious, but it’s surprising how many sellers let it slip. Savvy buyers will start there and try to work the price down even further.

Considering an Offer

When you receive an offer on your home, your options are to accept it, reject it, or make a counteroffer in which you negotiate the price or make some other concession, such as offering to pay the buyer’s closing costs or pay for the cost of a repair to the home. When an offer comes in, study it carefully. You should consider any reasonable offer made on your home. An offer that at first appears ridiculously low may bounce up to something close to acceptable after you make your counteroffer. Buyers often test the seller to see how much they’ll budge. With your counteroffer, you’ll get a sense of how much the buyer will budge.

When considering an offer, calculate your bottom line. The price a buyer offers may appear acceptable, but they may want you to pay their closing costs, which could cost you thousands more. Carefully go through the offer and add up everything.

Closing Date

Another consideration is time. Even if you’re not in a hurry to sell your house, a closing date several months away can be risky because it in effect takes your house off the market. If the buyer backs out for any reason, you’ve lost valuable time.

Earnest Money

An offer will come with an earnest money amount. This is the amount of money the buyer will give up front as good faith money once the offer is accepted. This money will go to your attorney and will be held in an escrow account until the closing. The amount of the earnest money will be applied to the purchase price of the home. The larger the earnest money check, the more serious the buyer. A buyer stands to lose this money if they back out of the deal for any reason not specified in the contract.

Look at the earnest money amount in the offer. If it appears low – for instance if you feel it wouldn’t hurt the buyer too much to lose it if the deal fell through – ask for more. Instances in which you would want an even larger amount of earnest money include a contract with a far out closing date or a contract that requires you to make modifications or repairs to the home that you would otherwise not make.

Pre-qualified Buyers

Before accepting an offer, make sure the buyer is pre-qualified and can afford to purchase your home. You don’t want to tie your house up for any period of time only to find out that the buyer can’t afford it. If the buyer hasn’t been pre-qualified, send them to your banker before accepting the offer.

Another option is to qualify the buyer yourself, though this does not give you the security of a lender’s certified pre-qualification.

Accepting an Offer

Don’t accept an agreement until your attorney has reviewed it first. He’ll identify any shortcomings that otherwise could cost you time, money and possibly even litigation. In addition, he’ll provide all of the other necessary paperwork to complete the sale of your home.

Once your attorney has looked over your agreement, both you and the buyer will sign it. Congratulations. You’ve successfully negoatiated the sale of your property.

*Any form used to negotiate the price and other contingencies of the sale should be used for informational purposes only between you and the buyer and should not be signed by you or the buyer until your attorney has had a chance to review them. This is an added safety measure that could save you time and money later on.

Here are examples of a Contract to Purchase agreement and other real estate forms. If you decide to prequalify a buyer yourself, get your attorney to advise you on how to do so.

Jan McBee is a senior writer and research adviser for DwellWell.com.

Are you a seasoned negotiator?  Or are you kicking yourself because someone out-negotiated you?  Add your experiences to this topic in the comments below.