For the next installment in our step-by-step blog for the process of selling a home For Sale by Owner, we’re going to look into the world of sales negotiations.

One of the most difficult and stressful parts of selling a home For Sale by Owner is the negotiation process with a particular buyer, or, if you’re doing things right, many buyers. For the inexperienced, like all of us are at one point, you might find yourself in a little bit over your head in dealing with offers. But fear not! Negotiating with buyers is not as hard as it sounds especially if you understand a few selling basics—tricks of the trade if you will.

When dealing with a buyer you will either be dealing with the buyer directly, or you will be dealing with a buyer’s agent, which is a realtor who has found the listing and proposed it to the buyer. Either way, your approach should be the same.

Competition

You should really get familiar with your newest and best friend: competition. In the form of many buyers, competition will up the selling price of your home. If you’ve done everything right up to this point (i.e. proper staging, marketing, advertising, etc.), and you’ve observed how the housing market behaves in your area, you should have found yourself with many buyers competing bids for your home. Of course, not every market supports that. If you’re market behaves differently, then you might not have buyers knocking down the door to make offers. You might only be looking at a few timid offers from two potential buyers. In this case, use competition to stir up the punch a bit.

Buyer 1: “Hello. This is Buyer 1. I was calling to see what you thought of my offer.”
FSBO: “Hi Buyer 1. It’s a good offer, a little bit below my asking price though. We’ve had a few other offers come in that were also currently considering.”

FSBO has just let Buyer 1 know that he/she is not the only offer on the table and that the other offers are very much competitive with their current offer. Even if you only have one other offer on the table, it’s a smart sales approach to inspire a little competition in your buyer if it doesn’t come naturally. Of course don’t push your potential buyer to the point of losing a descent offer, but don’t act as if your desperate—that is a telling sign that buyer’s agents will surely pick up on to lower the asking price.

Now as far as fudging a little in sales negotiations to inspire some competition, that’s about as far as I’m willing to go. It’s important to maintain a level of professionalism, honesty, and responsibility throughout this process of selling real estate, especially when doing it yourself. (After all, it was dishonest business practices that got the housing market into trouble in the first place, right?) Many websites out there are suggesting to home sellers that they belie their true feelings and act like a stoic. Nothing can rush them. No auxiliary circumstances can persuade them to make a deal without first consulting other buyers concessions. I even read some advice that suggested the FSBO create a fictional, absent party that denies offers, making the FSBO look like the reasonable counterpart. This, I think, is too far. It is too much charade, and too much risk to take after properly researching and preparing you home to sell.

When buyers approach you with a particular offers, that offer will either meet your asking price or be less than the asking price depending on market conditions. If home prices are on the decline, then typically, if the buyer is smart, they will offer lower.

Defining Your Price

If you’re at this point in the For Sale by Owner process, you undoubtedly have already set your asking price for what you home is valued at. If you felt market conditions were in your favor, perhaps you increased the price a bit to see if anyone offered to meet it. If you are obligated to sell your house in a timely fashion, then you probably priced it lower to sell it sooner. Either way, it’s important for the seller to be very clear on two distinct items: your asking price and your bottom line.

Let’s say that, ideally, you would receive $175,000 for your property. In that case you might want to ask for a figure near $185,000 making your bottom line $170,000. Typically, buyers and agents will try shave a little off the top and renegotiate from there. With a higher asking price, you can negotiate down with the buyer and still get the ideal sum. But, if offers aren’t quite stacking up, then it’s safe practice to be prepared for a bottom line price so you have a point you are willing to negotiate down to. This is merely a measure of preparation. The less surprises you have in the negotiations, the smoother they will go.

When considering offers from different buyers, it’s really up to you. Does it meet your desired price? If so, then consider other things, like the amount of the down payment and closing costs. Those can sometimes offer extra incentives to sweeten deals that might not be from the highest bidder.

In the end, you want your negotiations to run as smoothly as possible and make it easy for both parties to get what they want out of the deal. Always conduct yourself with professionalism. Since you won’t have a broker to escort you through the process, it’s all the more important that you, the FSBO, assume the responsibilities to the full extent.

This entry was posted on Friday, December 4th, 2009 at 1:36 pm and is filed under Selling Your Home. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.