Negotiating is a key component of any real estate transaction. It’s very rare for the ideal home to pop up on the first search or to get the perfect deal without first going through a bit of back and forth. Most people have experience negotiating business deals and buying cars but negotiating to buy a home is a little different. The key difference between this type of deal and the others is one thing, pride of ownership. Sellers tend to be proud of their homes and if they’ve been living in them for many years there will be an emotional attachment.
Buyers and their brokers need to understand the seller’s motivations and what mistakes to avoid. If you’re hunting for an apartment in NYC, whether it be a co-op, condo or townhouse, here are the top negotiating mistakes you need to avoid.
1. Bashing the property
Blatantly pointing out the flaws and shortcomings in a home might be a common negotiation tactic in other markets but it doesn’t work so well in the real estate market. As mentioned, sellers have an emotional attachment to the home and may even be very reluctant about selling. Insulting the property to get a better price is more likely to get the sellers angry and go instead with another buyer. If you must point out certain flaws, try to do it tactfully.
2. Talking too much in front of the seller’s agent
The presentation is everything in negotiating, meaning you should be very careful about what you say and don’t say in front of the other party. This should be kept well in mind until you have a binding contract. When you visit an open house, be careful of what you say about your current financial position or eagerness to buy as the seller’s agent will be looking for any leverage they can use in negotiations. There’s nothing wrong with asking them questions but don’t show any of your cards. Saying the wrong thing may give the agent reason to believe you can afford more than you initially offer, or you could disqualify yourself by underselling your qualifications.
3. Letting emotions get in the way
This applies to all negotiating but it’s worth stating it again here, keep your emotions in check. Don’t appear either too eager or too desperate. Have your buyer’s agent conduct all the hard negotiating so you’ll have a buffer against sudden emotional outbursts which can tank a whole deal. Be completely neutral, if you look desperate you could end up paying more, if too eager they could pull on your heart-strings during price and concession negotiations.
4. Seeing it as a zero-sum deal
This is a particular problem with New York buyers, many of which are attorneys or executives in other fields that are used to negotiating in a zero-sum fashion. They think they have to win and the other side has to lose. When conducting real estate negotiations, you must look at it from a more collective bargaining perspective. Move slowly, stress your qualifications and, where you can, be willing to give ground and meet somewhere in the middle.
5. Not taking the time to write a proper offer letter
There’s far more to an offer letter than simply scribbling a number on a piece of paper. It should explain the reasoning behind the offer such as references to comparable market sales and include your financial documents to prove you can close the deal. It should be neatly typed up on a Word document with your agent’s letterhead and include a “Love Letter” to sweeten the deal. This shows a lot more sincerity and seriousness to close. If you’re financing, you should include your mortgage pre-approval letter and the standard REBNY financial statement. If buying all-cash, include a proof of funds/bank statement to give the seller a sense of comfort.