I believe in making offers. I believe the only way a Buyer and a Seller can get to the “nuts and bolts,” of the purchase/sale of a house is through the offer process. Too often the Buyers delay on this most important tool. When you make an offer in New York, it doesn’t commit you to anything. You’re not legally obligated to complete the transaction until you sign the contract. Up until that moment—I have always advised—Buyers should use the offer as a negotiating tool.
On the other side of the table, Sellers could behave better with offers, too. Problem is, the Buyer has no way of knowing what’s going on with the Seller in regards to an offer because there is a “middleman:” the Realtor.
Let’s look into the offer process from a negotiating standpoint to see how Buyers can improve their offering skills.
1. Make offers early and often. If you see the house Thursday evening and you “kind of-sort of-maybe-possibly” like it, make an offer anyway. This will give you some time to change your mind. The offer doesn’t commit you to buy the house (more on that below).
2. A NYS Licensed real estate agent must present all offers. The agent can’t say things like, “Oh, no, I can’t possibly present that offer, it’s too low,” or, “The Seller will never accept this,” or, “You’re going to have to come up some more in price for me to present your offer.” The fact is, even if you offer $1.00 for a house, the agent must present your offer. Mind you, the offer won’t be accepted, but still it must be presented.
3. Make offers in writing. Yes, I know the offering form says, “This is a Legal Document. You should consult an attorney before signing.” I know it says that. But the legality of the document has all to do with the real estate agent protecting a potentially earned commission from the Seller and nothing to do with binding the Buyer to the purchase transaction. You can sign 32 offer forms for 32 different houses on a Sunday afternoon and you don’t have to go through with a single one of those purchases until you sign the contract.
4. Be prepared to act quickly after you make your offer. There are two ways to move. First action is away from the house if they don’t accept your offer and you really don’t think you’re willing to pay more than you offered. The second action is to offer more than your opening bid. If the Seller counter-offers, have your backup or next-step-price ready to go. You can choose to meet the Seller’s counter offer or raise your bid somewhere in between your open and their counter.
This backup plan is very important and requires your careful consideration, to wit:
5. Set a Maximum Price you’re willing to pay. What you want to do is realize the maximum price you are willing to pay for a house. That shouldn’t mean it’s your opening bid. This is the price you set and negotiate towards. DON’T COMPROMISE ON YOUR MAXIMUM! If you are getting tossed around in a bidding joust with the Seller, the transaction can get you heated and emotional. That’s the worst time for a Buyer to make pricing decisions. You must have a maximum number in advance (before you present your opening bid) and adhere to that price. This will help you remove as much emotion as possible from the negotiating process (you can’t eradicate emotion: it’s what homebuying is all about, but you can control it!).
6. Timing is everything. No, you don’t want to appear too eager. Yes, you want to appear enthusiastic, prepared, and paint the portrait of the best possible buyer for that house. You’re better than all those other Buyers! Yes, you KNOW you are!
When the Seller counters you have to decide how long you will wait before increasing your offer. If you are the diligent buyer who shows up on time for the appointment, returns the Realtor’s calls in a timely manner, and has your prequalification letter lined up, then you can be sure you look pretty good in the eyes of the Realtor and the Seller. Remember that as you consider how long before you raise your offer.
7. Walk away. Harvey Mackay in his book, “How To Swim With The Sharks Without Being Eaten Alive,” says, “Lesson 24: The Single Most Powerful Tool For Winning A Negotiation Is The Ability To Walk Away…” This is so difficult to do when you’re negotiating on a house. The homebuying experience is so emotional that a Buyer gets wrapped up in the momentum of buying the house. That emotion makes it really tough to walk away when you have to.
Harvey goes on, “…walking away from the table is not just for when you don’t want to deal. Sometimes it’s the only way you can make the deal you want. If you have to have a deal, then all the other side needs to do to win the negotiation is to outwait you.”
I can’t emphasize enough how important this tool is for a Buyer. It works. It gets results. I know because my clients do it and we have seen the results time and again.