Home Buyer Negotiating Mistakes Part 1
March 19th, 2011 Filed under: Negotiation Course — Negotiation Author
1. Skipping Research. I know this is the boring part of finding a house. You want to start looking at houses right away. After all, how do you know what is out there if you don’t start looking first? Well, let me pose another question. How do you know where to look if you don’t know how much you can afford? If you want to avoid overpaying for a home, you will have to negotiate. I am probably preaching to the choir but seller’s price their properties high. It is human nature. Sellers start high expecting to be negotiated down.
In order to effectively negotiate, you have to do research. Specifically, you have to do research in three areas: yourself, the property, and the seller. You need to have information like your financial position and how much house you can afford. You must have information on comparable sales and the average days on the market for houses, among other things. Finally, you must know the seller’s motivations. Information is power in negotiation and usually the one with the most, wins.
2. Becoming Emotionally Attached. Again, I know. After all this is the house you will be living in for the rest of your life, right? There should be emotion involved. However, that doesn’t mean you let the seller or seller’s agent know you love this house more than any other you have seen and must purchase it at all costs. Real estate agents are trained to sense this emotion like sharks sense chum in the water. If you let on that you will get this house at all costs, you lose “walk-away” power. The seller won’t come down on the price because they know you are on the hook and they are just reeling you in. Always play the reluctant buyer.
3. Being Talked Out of Negotiating. You found the perfect house. You were stone-faced during the tour. Now, with your po-poker face, you will negotiate the deal of the decade. Then the real estate agent says, “There is another interested party that will be making an offer in the next day. The owner would like you to have the house but you better make an offer quick and I’m sure they wouldn’t consider anything less than full asking price – due to this other party.” Oh NO! We’ll take it!
Don’t fall for this. This is the famous Phantom Buyer technique. What if I told you the phantom buyer was a couple that may get married sometime in the future, has not even talked to a bank, and were just driving by and thought the house may be something they would like someday. Does this sound like a serious buyer?
I’ve often said that most real estate agents don’t know how to negotiate because there is simply very little training in negotiation to become a real estate agent. Where agents are exceptionally trained however, is convincing a buyer it isn’t worth negotiating. It is almost always a good idea to negotiate because as I said, seller’s price their property high. The phantom buyer is usually just that.
Ladies and gentlemen, these are just the first of six mistakes buyers make on a regular basis. In the next article, I will highlight the final three. However, if you are considering buying a home, I recommend having a strategy to circumvent these three mistakes. Adequate research and multiple options will go a long way in avoiding these costly errors.
Josh Gwin is the author of The Expert Home Buyer Negotiation Course, the proven effective negotiation course for home buyers. He has extensively studied real estate negotiation and international negotiation through Harvard Business School, Massachusetts Institute of Technology (MIT), and the World Trade Organization. He is a real estate Accredited Buyer’s Representative (ABR) and has negotiated hundreds of deals across multiple industries. You can contact him at his website at http://www.theexperthomebuyer.com
