When it comes to negotiations within Real Estate, we first think of negotiating the actual price, which of course can include counter offers, a seller agreeing to pay closing costs and sometimes other types of concessions. Buyers and sellers sometimes find this step exciting, but also somewhat stressful. Hopefully the listing agent provided a good recommendation for a listing price, and hopefully the seller took heed to that recommendation. If indeed that’s the scenario, it’ll increase the possibility of the buyer and seller coming to an agreement.
Having said that, there’s another type of negotiation which is also common in a Real Estate transaction and that happens to pertain to repairs, and concessions related to repairs. Let’s say…the buyer’s home inspector provides a report on what he determined about the property. Most inspectors categorize these findings. The category we should pay the most attention to is the one pertaining to safety or critical concerns. Other categories might cover what should be investigated in the future with regard to maintenance, cosmetic issues or what might be of minimal concern. For an example of a critical concern, let’s say the inspector found damaged shingles on the roof and then noticed water damage in the attic. More than likely the buyer upon learning this will ask for one of the following:
- Have the seller repair this before closing OR
- Get an estimate from a licensed contractor to determine what it’ll cost to be repaired professionally. Then, the seller could drop the price by that amount, so that the buyer will have these funds after Closing.
Now, the seller might make a counteroffer or will possibly reject this request…but again, this is all part of a second negotiation.
A third type of negotiation which occasionally comes up is when appraisals come in below the agreed purchase price. The agreed price might be $300,000 but if the appraised value is determined to be $285,000, the Lender will now loan ONLY $285K. So that then presents three new options.
- The seller dropping the agreed price to $285K
- The buyer makes up the difference with $15K in cash…OR
- The buyer withdraws from the contract.
Option 1 would be wise for the seller because if this deal falls through, the next potential buyer will probably receive a very similar appraisal. If however there was a lot of competition for this property, the buyer may want to make up that difference in cash, assuming he or she has that amount available. If the buyer can’t make up that difference, the seller will most likely turn to one of those other offers to strike a new deal.
When you consider how many stressful types of negotiations can arise, the fact that there is probably Earnest Money on the line, and various steps to navigate with conventional and government loans, you really shouldn’t try to do this on your own. Interview REALTORS® and find the one who will look truly guide you through this process.
Eve Leombruno, 2023 MBOR President
