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Negotiating The Sale of Your Home
Prepare for negotiation by reevaluating your goals,
scheduling an offer
I: Step 1: Reevaluate Your Goals Reevaluate your goals before you begin negotiations with prospective buyers. You have numerous advantages when you understand the consequences of each decision and make choices based on that understanding.
Give some thought to the following goals, so you will be prepared before negotiation begins. • How low will you go? The minimum selling price you will accept. • Awareness of the type of terms to which you will agree. • Items to be on the alert for in negotiating.
Consider Price and TermsConsider both the price and your acceptable terms when you negotiate. The following chart indicates points that are of most concern to the buyer and seller and the probability of closure. • Seller and buyers are both primarily interested in price, they rarely sign a contract. • A seller is primarily concerned with terms and buyers are mainly concerned with price, they generally sign a contract. • A seller is primarily concerned with price and buyers are mainly concerned with terms, they usually sign a contract. • Seller and buyers both have the greatest concern about terms, they generally reach an agreement. SellerPrepare Negotiating Goals The Goals/Negotiating Goals Worksheet in Section VI, “Worksheets and Contracts” helps make your priorities in negotiating the sale of your home clear to you. 1. Write out all of the goals you wish to achieve relating to negotiating the sale of your home. 2. Prioritize the goals you listed by placing a number to the left of each goal. (Make the most important goal 1, the second most important goal 2, and so on.) 3. Rewrite your goals in their order of importance. This prioritized goals list provides you with a reference as you negotiate the sale of your home.
Prepare Estimate of Proceeds Worksheet—Preliminary To get a clear idea of how much you plan to receive from selling your home, prepare an Estimate of Proceeds Worksheet— 1. Enter the information requested at the top of each page. 2. Check the costs you intend to pay when you sell your home. • Appraisal fee: Cost for hiring an appraiser to determine the current market value of your property in order to make a loan to the buyers. Buyers usually pay. • Assessments: Taxes or charges by a governmental body in addition to normal property taxes for a property owner’s proportionate cost of specific improvements, such as schools, streets, and sewers. You and buyers usually pay your prorated share of assessments. • Assumption fee (transfer fee): A charge for the work involved to transfer the mortgage from you to buyers. Buyers generally pay. • Attorney’s fees (legal fees): Charges by an attorney for legal advice and/or assistance. Whoever hires the attorney usually pays. If you hire an attorney to assist you with your home sale, you pay unless you negotiate otherwise. If the matter is decided by a court of law, then the person against whose favor the case is decided must pay the fees. • Beneficiary statement: A statement provided by a lender using a trust deed type of loan. On this statement a lender usually lists the remaining principal balance, interest payments, loan due dates, terms of payment, insurance data, taxes, assessments, and any other claims that do not appear on trust deed documents. Whoever handles the closing usually requires a beneficiary statement when buyers take over a trust deed. You generally pay. • Credit report: Charge for a detailed report of buyers’ credit history. Lenders usually require a credit report before making a loan to buyers. Lenders may include this charge as part of a loan fee. Buyers usually pay. • Delinquent payments: Failure to make loan payments when they are due. You usually pay. • Demand fee (demand for payoff charge): A fee for a written request to a lender for the lender’s demand for the payment of the loan in full and the supporting documents necessary for release of the lien against the property. Demands are used if you intend to pay off the existing loan in full. You usually pay. • Document preparation: Charges for drawing up and preparing legal papers. The party that pays generally depends on the type of document being prepared. You typically pay for preparation of documents in favor of (to) the buyers. • Drawing deed: A fee for the preparation of a deed. The party that pays depends on the type of deed prepared. The party that benefits from the deed generally pays. • Escrow/closing fees: Charges paid to the escrow holder or closing agent for handling the escrow or closing. Usually split evenly between you and the buyers. • Homeowner’s association fees: Monthly fees owners of homes pay to their homeowner’s association. These dues can be for such items as maintenance, gardening, trash collection, outside lighting, pool, spa, and tennis courts. These dues are generally prorated. • Homeowner’s insurance: Insurance protection against stated specific hazards, such as fire, hail, windstorms, earth quakes, floods, civil disturbances, explosions, riots, theft, and vandalism. Lenders usually require at least minimum NEGOTIATE ----------------------------------------------------------------------- How to sell a home Costs associated with selling a home and coverage to protect interest in a property and who is typically responsible for these costs.
• Home warranty: Fee for insurance that the items listed in contract (such as plumbing, wiring, water heater, a major appliances) are in working order for the sped length of time. Traditionally, The seller pays. • impounds (reserve fund): Funds held by the lender to assure payment in the future of recurring expenses. This money, generally held in a trust-type account. These expenses c include FHA mortgage premiums, insurance premium real estate taxes, and sewer and water taxes. Impounds a generally prorated. If you have prepaid these expenses, you should receive the excess at the close of escrow. If however, you have not paid these expenses, you will be charged for your portion of the costs. • Interest: A charge or rate paid to a lender for borrowing money. Interest on existing loans is paid from the last monthly payment until the closing date. Interest is paid after the charge is incurred (in arrears). Interest on an existing loan is usually prorated. • Loan origination fee: Lender’s charge for arranging and processing a loan. The fee is usually based on a percentage of the loan. Buyers typically pay. • Loan tie-in fee: A fee charged by whoever handles the closing or escrow for their work and liability in conforming to the lender’s criteria for the buyers’ new loan. Buyers generally pay. • Notary fee: A charge paid to a notary public to guarantee signatures on some of the legal documents in the transaction. • Pest control inspection (structural pest control inspection fee, termite inspection fee): The cost of the inspection of your property by a licensed pest control inspector for infestation or infections by wood-destroying organisms. Seller generally pays. • Pest control repair charge (structural pest control repair charge. Cost of repairing any damage done by infestation or infection of property by wood-destroying organisms. You usually pay all charges, unless you negotiate or use a contract that states otherwise. • Physical inspection fee (home inspection fee): A fee for a study of the property’s site, structures, systems, and appliances. Buyers usually pay. • Points (discount points, loan discount fee): A one-time charge by the lender to adjust the yield on the loan to current market conditions or to adjust the rate on the loan to the level required by federal or state regulations. Each point is equal to 1 percent of the loan balance. This fee is treated as pre paid interest for tax purposes. Buyers usually pay; however, you are legally required to pay VA discount points. • Prepayment penalty: The fine imposed on a borrower by a lender for the early payoff of a loan or any substantial part of a loan. You usually pay. • Property taxes (taxes): The amount of the tax usually depends on the amount of the valuation of the property. The seller typically pays for property taxes due but not yet paid. • Reconveyance fee: A fee charged for the deed filed at the county recorder’s office to record payment in full of a trust deed and transfer legal title from the trustee to you. You usually pay. • Recording fee: Fee charged for the entry of your transaction into the official records at the county recorder’s office. You usually pay for the recording of documents in favor of buyers. Buyers generally pay for the recording of documents in favor of the lender. • Satisfaction of mortgage: A document signed by the holder of the mortgage that indicates you have paid your mortgage off in full. Seller generally pays. • Sub escrow fee: A fee charged by a title company for the firm’s costs and liability when it handles money. Seller usually pays. • Survey fee: Charge for a survey showing the exact location and boundaries of a property. Buyers usually pay. • Title insurance: A policy for protection against claims in the future based on circumstances in the past. This type of insurance is issued by the title company on completion of the final title search. Title insurance coverage requirements vary depending on the need of the parties (seller, buyers, and lender) for a specific type of coverage, the amount of money each of the parties will pay for coverage, the type of property covered, complexity of the transaction, and exceptions and encumbrances to the title. o Basic coverage: All title insurance has basic coverage, including matters of public record such as encumbrances, liens, and judgments; forgery and fraud; lack of capacity (persons not being able to enter into a contract because they are minors or not of sound mind); and improper delivery (the deed has not met the criteria for proper delivery). o Standard coverage insurance: The regular investigation for standard insurance reveals only matters of record and the location of the improvements with respect to the lot line. These matters include access to public streets; defects in the title; charges, claims, or liens on the title; inability to sell the property because of unacceptable encumbrances on the title; and vesting (interest that cannot be revoked) being other than stated. Seller or buyer may pay for standard coverage depending on what you negotiated or local customs. Standard owner’s (joint protection) policy provides insurance to the buyers and the lender. Standard lender’s policy provides coverage for the lender only. Extended coverage insurance: Extended coverage protects against numerous risks that are not a matter of record. This coverage usually requires a survey, which includes a thorough search, checking with government agencies, and on-site field work. Extended coverage policies generally cost considerably more than standard policies. These policies insure against all risks insured against by the standard policy plus claims not previously disclosed by examination of public record. Buyers usually pay for an extended coverage owner’s policy. o Special endorsements: Special endorsements are clauses used to modify, expand, or delete the coverage of any policy. • Title search fee (title examination fee): A charge for the examination of information recorded on your property at the county recorder’s office. This examination is to verify that the property has no outstanding claims or liens against it that could adversely affect the buyers or lender. It also verifies that you can transfer clear legal title to the property. The party that pays traditionally depends on the customs in your area. • Transfer tax (documentary transfer tax): A tax that some states allow individual counties or cities to charge on the transfer of real property, including homes. This tax is often based on the amount of equity being transferred to the buyers. Seller typically pays. • Other fees: Include fees you use that are not on the list above. 3. Obtain estimates for items you checked from sources listed. a. Costs 0 Appraisal fee—Local appraisers or lenders. 0 Assessments—Your property tax bill. 0 Assumption fee—The lender who made your home loan. 0 Attorney’s fees—Local attorneys or the local bar association. 0 Beneficiary statement fee—The lender who made your home loan. 0 Credit report—Lender who made your home loan or other local lenders. 0 Delinquent payments—Lender who made your home loan. 0 Demand fees—Lender who made your home loan. 0 Document preparation fees—Whomever you want to handle closing, such as your lawyer, escrow or title company, or the escrow department of your bank. 0 Drawing deed—Whomever you want to do the closing, such as your lawyer, the escrow department of your bank, or an escrow or title company. 0 Escrow/closing fees—Whomever you want to do the closing, such as your lawyer, the escrow department of your bank, or an escrow company. 0 Homeowner’s association fees—Your homeowner’s association. 0 Homeowner’s insurance—The company that currently insures your house. 0 Home warranty—Home warranty companies, represented locally. 0 Impounds—Lender who made your home loan. 0 Interest—Lender who made your home loan. 0 Loan origination fee—Local lenders. 0 Loan tie-in fee—Local escrow companies or the person whom you plan to have handle closing. 0 Notary fee—The person or company you plan to have handle closing or escrow. 0 Pest control inspection—Local pest control companies. 0 Pest control repair charge—Local pest control companies. 0 Physical inspection fee—Local home inspection companies. 0 Points—Local lenders. 0 Prepayment penalty—Lender who made your loan. 0 Property taxes—Your property tax bill. 0 Reconveyance fee—Trustee on your trust deed. 0 Recording fee—Your county recorder or the person whom you want to handle the closing. 0 Satisfaction of mortgage—Lender on your mortgage. 0 Sub Escrow fee—Local title companies. 0 Survey fee—Local survey companies. 0 Title insurance—Local title insurance companies. 0 Title search fee—Local title insurance companies. 0 Transfer tax—Whomever you want to handle closing, such as your lawyer, the escrow department of your bank, or an escrow or title company. 4. Decide the expenses that you feel will be prorated. Prorations are adjustments to the amount owed by you and the buyers. These adjustments must be made because escrow rarely transfers title exactly corresponding to the paid-up dates of expenses, such as assessments, bonds, homeowner’s association dues, impound accounts, insurance premiums, interest on existing loans, maintenance fees, property taxes, and rental payments. Buyers owe you for any time period after escrow closes for which you have already paid. You owe buyers for any time period before escrow closes for which you have not yet paid. For this estimate, base prorations on a 360-day year of 12 months, each containing 30 days. 5. Check the monetary encumbrances (claims or charges against a property) that exist against your property. • First, second, or third loans (mortgages or trust deeds). • Improvement bond (a debt secured by a government loan financing improvements within a district). • Liens (charges against property for the payment of a debt or obligation). • Other (such items as delinquent property taxes). 6. Check which of the estimated credits you feel will be due to you. These items will be the prorations for which buyers owe you because you have already paid. 7. Add each column separately to obtain total estimated amounts for each column. 8. Add total estimated costs and total estimated encumbrances to obtain estimated debits. 9. Calculate your net proceeds from your proposed home sale. a. Enter your proposed selling price. b. Subtract total estimated debits. c. Enter the subtotal. d. Add the total estimated credits. e. Obtain your estimate of proceeds from the proposed sale. 10. If you plan to finance a note for buyers and you want to estimate how much cash you might receive in that case: a. Enter the amount you plan to finance. b. Subtract the amount you plan to finance from your estimate of proceeds. c. Enter the difference, which is the estimate of cash from such a sale. Step 2: Set up Offer Presentation When? Choose a time for an offer presentation when you are at your best, a time when: • You are rested, calm, and feeling well. • You are able to have an offer presentation conference in a convenient and unhurried manner. • You have reviewed not only what price and terms you will con sider but also how to conduct the negotiation. Where? Have buyers present their offer at your clutter-free dining room or kitchen table. Maintain a quiet, businesslike atmosphere in this area during the discussion. How? Consider: 1. Informing everyone concerned about the exact location and time of the offer presentation. 2. After everyone arrives, introducing everyone who is present and explaining each of their roles in the offer presentation. 3. Insisting on seeing a written offer signed by buyers before you negotiate. 4. Giving buyers a copy of the disclosure statement and all inspection reports issued in the last two years on your home before they make the offer. For multiple offers in a short time period, you might have buyers make offer presentations in the order that the buyers contacted you. Legally you can consider offers in any order in most areas. Maintaining the order may discourage hard feelings or unfounded charges by some potential buyers. Step 3: Handle the Offer Presentation Handle the offer presentation so that it works well for you. Manage Offer Presentation To manage the offer presentation to your best advantage: 1. Have buyers or their agent make the offer presentation. 2. Be aware of some possible buyers’ techniques. Some buyers may use a number of subtle but often powerful techniques to attempt to make you feel ill at ease and negotiate less effectively. If you recognize these techniques, you may be able to avoid their pressure. • Buyers arrive late for your meeting. a. Remain calm if buyers are late. Becoming upset may cost you money. b. If buyers are more than 20 minutes late or you become upset, consider rescheduling the meeting for another mutually agreeable time. • Buyers make a telephone call when you are meeting. a. Request that they make the call after the meeting. b. Ask to set up the appointment for a time that would be more convenient for you both. • Buyers seem to care less about buying your home than you do about selling it; they appear disinterested. a. Remain objective. b. Be prepared to make a counteroffer. c. Sign only agreements with which you are comfortable. d. Talk only to your consultants about the agreement you are negotiating. You will not be embarrassed if the agreement changes or does not go through. e. Spend money only after you receive it so you do not force yourself to accept costly changes. • Buyers make misleading or incorrect statements. a. Only believe what you hear if it is verified by someone without an interest in the transaction. b. Obtain a written copy of the statement signed by the buyers. • Buyers voice their opinions about things they feel are wrong with your property. a. Realize that buyers are trying to unnerve you and better their own bargaining position. b. Remain calm. • Buyers make many notes. a. Understand that buyers may think that making many notes will unnerve you. b. Remain calm. • Buyers may get too close to you for your comfort. a. Recognize that buyers may be trying to take your mind off the negotiations. b. If you are bothered, ask them to move away. • Buyers may use statements that seem to sound authoritative. a. Understand buyers are seldom authorities; they may be opinionated or trying to cover up their own ignorance. b. Ask questions, even if you fear buyers may think that’ you don’t know the answers. c. Remember, the price or terms you get for your property may depend on your response. Buyers may try to pressure you into making an agreement at the last minute by appealing to your emotions using dramatic actions and words. a. Recognize that buyers may be attempting to play on your emotions. b. Tell buyers you need time to consider the offer. 3. Study each section of the offer carefully, particularly: • The contingencies listed in the offer. • The time limits set by the buyers. Time limits should be adequate but not needlessly long. 4. Ask questions about each point covered in the contract that you are unsure of or do not understand. 5. Allow buyers or their agent to answer your questions and fully explain each point. 6. Inform buyers or their agent that you want time to consider the offer. a. Thank buyers courteously for their offer. b. Tell buyers you will consider their offer. c. Inform buyers you will let them know your decision within three business days (or an appropriate time limit under the circumstances). Consider never rejecting buyers’ offers immediately. d. Take your time and prepare a counteroffer. e. Remember that negotiation is a give-and-take process. 7. If you decide to negotiate, remember these tips: • Use logic to explain the soundness of your requests. • Compromise: exchange a buyers’ request for one of your own. 8. If you decide to accept the buyers’ offer: • Accept a written offer only, to prevent any questions from arising later as to when the contract was signed. • Sign your acceptance on the same form on which the offer was made. Be Aware of Revocation Possibility Be aware that an offer may be revoked (called back) in writing by buyers at any time before you communicate to buyers that you have accepted their offer. After you have prepared for the negotiation, you are ready to study the contract in detail so that you understand it well. (Publisher note: Would you like to publish an article on this topic about Homes or other related topics? This article will be linked back to your own web site. Visit our Affiliate Publisher area to submit an article)
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