Tips & Tools : Negotiating

Secrets to Closing Last-Minute Pre-Foreclosure Deals

RE.com Tips & Tools — Sat, 01 Aug 2009 12:00:00 GMT

EDITOR'S NOTE: With foreclosure properties still dominating the housing landscape in the U.S., we've asked our friends at RealtyTrac® to guest author some articles to shed light on the foreclosure crisis. RealtyTrac is the most trusted source of foreclosure information in the country. We hope that the information provided here and in other articles will be beneficial to understanding, avoiding and even leveraging (as an opportunistic buyer) home foreclosures.

By James J. Saccacio, Chief Executive Officer

If you’re interested in investing in pre-foreclosure property, you should know that owners in default may not agree to sell until the last minute — sometimes only a few days before the public foreclosure auction. You’ll need to act quickly and may even need to take steps to postpone the auction if you want to realize pre-foreclosure bargains.

"I like to have the deal worked out with the homeowner at least 10 days prior to the auction. This allows enough time to settle on the pre-foreclosure without worrying if the foreclosing bank will postpone the auction and allow me enough time to settle," said Lance Young, a real estate investor and author of several real estate investing eBooks.

Depending on state foreclosure laws, the pre-foreclosure period can last less than one month or more than one year. Owners in default often are more motivated to sell the closer it gets to the date of the public auction. So even if you’ve contacted owners early in the pre-foreclosure period, you shouldn’t be surprised if they wait until the last minute to sell the property. Once the owners indicate they wish to sell, you’ll need to spring into action immediately to make sure that you are able to negotiate a price that’s acceptable to both parties, sign a sales contract and close the deal before the date of the public auction. Young recommends the following steps to get all this accomplished in as few as 10 days.

1. Pinpoint the amount owed
You should already have an estimate of the amount owed on the property based on your research of the notice of default or notice of sale and any liens and loans on the property. Once you’re ready to put an offer price in writing, you need to determine the exact amount needed to satisfy the foreclosing bank and any other lien holders — including missed payments, late fees and foreclosure attorney fees and the loan balance — by having the homeowner sign a disclosure authorization.

"This is as simple as having the homeowner write down his or her name, address and loan number on a short note that states the bank has permission to release this information to you," Young said, noting a disclosure authorization should be obtained for first and second loans. For other liens, such as a mechanics lien for work done on the property, you can usually just contact the lien holders and ask for the payoff amount.

"Be aware that many junior lien holders will sell their liens at a huge discount prior to the auction – especially when you inform them that the house is in foreclosure and their junior lien stands a good chance of getting wiped out at the auction," he said.

2. Negotiate and sign a sales contract
When you have the exact numbers to work with, you can negotiate the final purchase price and other terms of the sale with the owner. If your homework shows the property has a solid amount of equity, you’ll be able to make a pre-foreclosure offer that benefits you, the owner and the foreclosing lender. You purchase the property below market value, the owner walks away without a foreclosure marring his or her credit history and some cash for a fresh start, and the lender recovers the amount owed without the expense of continuing the foreclosure process.

Put your purchase agreement in writing in a standard sales contract, which you can obtain from a local real estate agent or escrow company. Young recommends including a clause in the contract that releases you of any legal or personal obligation if the sale doesn’t close before the public auction.

"If you cannot settle on the house prior to the auction, you lose the deal. If you do not clearly write into the contract that it is null and void if you cannot settle in time, you might get sued by the former owner," he said.

3. Open escrow and close the deal
Take your signed purchase agreement to a local escrow company and open a case for the transaction. The escrow company acts as a third party, making sure all the terms of the transaction are properly enforced.

"In addition to disbursing all of the funds properly and transferring the title, escrow companies ensure that all documents are correctly filled out and signed." Young said. "You should also obtain title insurance through the escrow company. Obtaining title insurance from the escrow company is very important because it insures you against any defects on the title."

If you’ve got your financing in place and the escrow company doesn’t have a lot of other cases in front of you, escrow could close in as little as one week, according to Young. It’s best to have your financing secured before you even contact owners in default so that you’re prepared to act quickly to make a purchase.

4. Request an auction postponement if necessary
Sometimes you won’t have enough time to close the deal before the auction, even if the owner has agreed to sell. In this case, you can ask the lender to postpone the auction date so that you have time to complete the purchase transaction.

"The best way to get the bank to postpone the foreclosure auction is to present the lender with a signed sales contract, along with a loan qualification letter from your bank, Young said. "The sales price must cover all of the money owed to the foreclosing lender, including the principal balance and the reinstatement amount. Bear in mind that the lender is not required by law to stop the foreclosure, although most of them will if you have both a loan qualification letter and a signed sales contract. If the homeowner has waited until the day before the auction to sell, you still have a good chance at getting the auction postponed by showing the lender your loan qualification letter and a signed sales contract.

Purchasing Pre-Foreclosure: Create a Win-Win Scenario

RE.com Tips & Tools — Fri, 31 Jul 2009 14:41:00 GMT

By James J. Saccacio, Chief Executive Officer

When it comes to buying a home from a financially-distressed homeowner, many people conjure up the image of vultures swooping in on their helpless prey. And, sadly, there are more than a few unscrupulous opportunists looking to take advantage of homeowners who find themselves in foreclosure. In these situations, the homeowner often loses everything, while the homebuyer reaps a windfall. But thanks to services like RealtyTrac, there’s an opportunity for a much more positive transaction—one in which everyone wins.

Buying a pre-foreclosure property from a homeowner in default can be a very attractive option because it has the potential to create a win-win scenario for everyone involved. In an ideal transaction, the seller is able to get out from under a defaulted mortgage without destroying his or her credit rating, the lender is saved the time and expense of foreclosing on the property, and the buyer gets a below-market price on a home.

A property enters pre-foreclosure when the lender files a default notice against the owner. You can find default notices at the local recorder’s office or through online services like RealtyTrac, which maintains the nation’s largest database of pre-foreclosure properties – updated daily.

Pre-foreclosure properties can often be purchased for prices well below market value because the owner is very motivated to sell and has a limited timeframe in which to sell. When a property is in the pre-foreclosure period, the owner still has an opportunity to pay off what is owed or to sell the property, thereby stopping the foreclosures process. If the owner doesn’t stop the foreclosure process, the property will be sold at public auction. The sensitivity associated with these sales is important to note when making offers on properties in pre-foreclosure. More so than with any other real estate sale, it’s important to present an offer that benefits all parties. Read on to find out how you can create positive outcomes all around and still score yourself a deal.

Make contact
Before you attempt to contact the owner directly, call the lender’s trustee to confirm whether the property is still destined for a foreclosure sale. The trustee will have the most current information on the property, including whether the owner has sold or reinstated the loan on the property. However, any specific questions about the property must be addressed to the owner directly.

Contacting owners in default can be uncomfortable, since they may feel a bit vulnerable, like the vultures are hovering. They are probably being contacted by a host of people including credit repair services, bill collectors and creditors. So as not to overwhelm the homeowner, it’s best to make your initial contact via the mail and explain your intentions as a private buyer who is interested in the property. Failing that, you can attempt to make contact via phone or in person. Keep in mind, however, that these more direct interactions may not be the most pleasant because you’re confronting a person with the prospect of losing his or her home.

Regardless of the mode of contact, always be respectful of owners, especially if their wishes are to not be disturbed. If this is the case, it may be an indication to wait until the property goes up for sale via public auction or to look into other pre-foreclosure purchase opportunities in the area.

Time your offer and price it accordingly
Timing your offer can be tricky. Since the pre-foreclosure period can last several months, you need to be patient when attempting to contact an owner in default. Conversely, last-minute transactions can require quick action, since there is pressure on the owner to complete a sale before the property goes to auction. It’s best to make contact as early in the process as possible and continue to do so regularly in order to gauge interest as the clock continues to tick. Make sure you stay on the seller’s radar throughout the process. Chances are that an offer that wasn’t of interest early in the process may sound quite attractive when the seller is facing an imminent foreclosure auction.

Before pricing an offer on any property, it’s wise to obtain up-to-date information on ownership of the property and the loan amount, as well as any outstanding debt or lien information. You should also assess the condition of the property by enlisting the services of a professional property inspector. Don’t rely on your own knowledge and inspection; only a professional can fully assess the condition of a home and identify repairs that will be needed. Once you purchase a property, you assume responsibility for any additional repairs that weren’t discovered before the sale, so the cost of hiring an inspector is worth every penny.

Offers on pre-foreclosures often resemble those for any other real estate purchase, stating that the offer is contingent upon a title search and full inspection of the property. Educate yourself on how much is owed on the property and investigate what its market value is by looking at comparable sales in the area. You can estimate the gross equity in the property by subtracting the amount in default (which is publicly available and listed on RealtyTrac) and the outstanding loan balance from the approximate market value. As long as there is some calculated equity, purchasing the property can provide you with a profit of some amount. Of course, how much profit you earn will depend on your ability to negotiate your price with the homeowner. As a rule of thumb, you should present an offer that is below total market value of the property but above the total amount of outstanding loans, liens and necessary repair costs. This enables you to purchase the property at a substantial savings, while keeping the owner, lender and any other parties satisfied.

In negotiations, be sensitive but hold your ground
Negotiations between the buyer and seller of a pre-foreclosure can be difficult, especially since the seller would typically prefer not to sell the property in the first place. Remember that you are, in essence, doing both the lender and the owner a favor by purchasing the property early in the foreclosure process, saving the lender money and time, and potentially even allowing the owner to make a profit if you pay more than they owe.

Avoid mentioning the foreclosure situation in any written communication to the owner that might be seen by others, but once you meet with the owner in person, it is completely appropriate for you to express an understanding of the situation and indicate your willingness to help stop the foreclosure process and alleviate some financial concerns. Most importantly, treat the owner with the respect and dignity they deserve.

That said, it’s just as important to stand firm on what you plan to spend, especially if you want a sale price below market value. After all, saving money is the main reason people entertain the idea of a pre-foreclosure purchase in the first place! In this market, it’s imperative to be patient and understanding of the circumstances, but ultimately diligent about getting what you really want. You may have to work a bit to motivate the homeowner to make a sale, but a bit of extra effort is completely worthwhile if it wins you the property at a savings to you.

Following these suggestions should help you identify opportunities to make the pre-foreclosure process work for you as a buyer. For more information about pre-foreclosure and foreclosure or to locate properties for sale, check out resources available online at www.realtytrac.com.

How to Negotiate a Home Sale Without Torpedoing the Deal

RE.com Tips & Tools — Mon, 12 Mar 2007 18:06:00 GMT

Both sides want to win, so don't get too greedy

Unreasonable expectations can ruin all kinds of relationships, including ones between prospective home buyers and sellers.

That’s the word from real estate professionals who have watched deals fall through because one side or the other made unrealistic demands. To be effective, they say, negotiating a home sale must be a win-win process. In other words, both the buyer and the seller need to feel they have won.

Start by negotiating a home sale in good faith. It’s reasonable in today’s slower housing market for a buyer to start out offering 5 percent below the asking price, says Matt Dolesh, an agent in Oakton, Va., for Prudential Carruthers REALTORS®. Even 10 percent below the asking price could be reasonable, he says, but it depends on the situation and how close the asking price is to recent comparable sales.

Buyers and sellers generally agree on a price 1 or 2 percentage points below the asking price, Dolesh says.

“You need to put a reasonable offer in that shows you have room for negotiation, but you also cannot put in an offer that’s 20, 30 or 40 percent lower than the asking price,” he says. “That puts a bad taste in people’s mouths. People have ownership and pride in their home, and a low-ball offer can almost insult them.”

Experts say buyers should be prepared to give up something they want in exchange for the sellers giving up something they want. Both buyers and sellers need to be prepared to suggest options and consider options proposed by the other side.

Being flexible about such things as contingencies, closing dates, alternative financing and repairs signals you will be reasonable and is likely to keep negotiations focused on the positive.

“You want to have an offer that protects you, but you also don’t want to nitpick at things,” says Dolesh. “Keep the contingencies to a comfortable minimum.”

Negotiations can sometimes fall apart over the home inspection, which comes after the buyer and seller have agreed upon a sales price. “Don’t present a long list of things to be repaired, just five or six things that will really make a difference,” he says. Besides signaling that other parts of the negotiations could get bogged down in details, a buyer’s insistence on having minor problems fixed can offend sellers the same way a low-ball offer can.

Other key ways to negotiate without torpedoing the deal:

Put down a large earnest payment to show you are serious about buying the home.
If you’re a seller, consider offering to pay all or part of the closing costs.
Keep emotions out of it and be ready to make a decision.

Finally, realize that some deals aren’t meant to happen. Dolesh recalled a deal in which a seller decided at the last minute to reject the highest offer. Her late husband had been killed serving in the military, and she decided to sell to a lower bidder who had military ties.

“Those are the kind of things you can’t control,” he says

Real estate commissions: What you need to know

RE.com Tips & Tools — Wed, 17 Jan 2007 18:58:00 GMT

Confused about real estate commissions? You're not alone. Here are some answers to a few of your most common questions.

There’s no question a good real estate agent can be a valuable resource when it comes to buying or selling a home. But how much is that help going to cost?

First of all, if you’re the one buying the home, it isn’t going to cost you anything. The agent’s commission comes out of the selling price. That means it’s deducted from the amount the seller receives, not added onto the amount the buyer pays. Of course, it can be argued that as a buyer you are indirectly paying the commission by virtue of the fact that it’s included in the price. But following that logic, all homes for sale by owner should cost less than those being sold through an agent, and that certainly isn’t always the case.

Second, if you’re the seller, you don’t have to pay an agent anything up-front to market your home. A real estate agent generally doesn’t receive any commission until closing, at which time they will receive the amount stipulated in their contract -- typically somewhere between five and eight percent. But chances are (unless you’re in a particularly hot market) your agent is going to have to work hard to earn that commission by investing a lot of time and effort into marketing your home. And they’re going to have to give a cut of that commission to both their brokerage and the buyer’s agent (unless they represent both the buyer and the seller).

To help take the mystery out of real estate commissions, we provide the following answers to a few of your most common questions.

Q. What is the average commission on a home purchase?
A. The average commission is about 5 percent, although 6 percent commissions are still common.

Q. Who pays the commission?
A. The seller. It is paid out of funds received from the sale of the home.

Q. Does the commission go entirely to the seller’s real estate agent?
A. No. The broker whose firm lists the house sets the commission. The listing broker then offers part of the commission -- often 50 percent -- to the broker whose firm represents the buyer. Both brokers then share their portion of commission with the agents who work with the seller and buyer. The agents’ share may be as little as 50 percent or as much as 100 percent, depending on their arrangement with the broker. If either brokerage is part of a franchise, it may also pay part of the commission as a franchise fee.

Q. Is it possible to negotiate the real estate commission?
A. Yes. An agent may be willing to negotiate his or her commission in order to get your business. This is especially true if the agent is independent and doesn’t have large operating costs. In some cases, both agents might agree to cut their commissions in order to bring down the price of the home if the buyer’s offer doesn’t quite meet the asking price. Sometimes a buyer’s agent may offer concessions such as paid closing costs, a repair allowance or a rebate in order to help close a deal. Buyer rebates are legal in most states.

Q. Will I pay less if I buy a house without using a real estate agent?
A. You might be able to negotiate a reduced price. Since the listing broker won't have to share the commission with another agent and broker, he may agree to a reduced commission and pass the savings on to you. This may also be possible if you use the same agent as the seller -- for example, if you toured an open house and retained the listing agent. This is called dual agency, and is legal in most states, although it may be subject to special laws and regulations.

Q. Is a real estate agent likely to push me to buy a more expensive home so he can make a higher commission?
A. There isn’t a big incentive for an agent to push you to buy a more expensive home because of the way commissions are divided. Your agent may be entitled to 65 percent of his broker’s share of the commission -- perhaps 3 percent of the sale price. Under that scenario, if you were to buy a home for $260,000, rather than $250,000, your agent would earn only an additional $195. However, there could be an incentive for the agent to steer you toward a house on which his broker has been offered a larger share of the commission. This practice is not prevalent, but it does occur.

Q. Are there other commissions that buyers don’t see?
A. In some cases, a seller, listing agent or builder might offer the buyer’s agent a cash bonus or other incentive to help sell the house. The buyer’s agent should disclose these fees if you ask.

Q. Can I get a lower fee by using a discount broker?
A. A discount broker may offer you lower fees, or a deal in which you pay only for the services you receive. However, discount brokers may be more suitable for those with a good knowledge of real estate, since they may not offer a full range of services.

Step 4: Reviewing and Negotiating Home Sale Offers

RE.com Tips & Tools — Tue, 16 Jan 2007 18:13:00 GMT

When considering offers, take into account more than just the price of the house.

Your house has been on the market and now you have an offer. What should you consider when deciding whether to accept, reject, or counter?

First, remember that the offer is not just about a price for your house. The potential buyer has written all sorts of other things into their offer. They want your refrigerator, curtains, and even your grill. Can they do that?

Understand what’s in the offer

A home sale offer can include these things and more. It is very common for
a buyer to want appliances such as your refrigerator, washer and dryer included in the home sale. Curtains are also a standard inclusion. However, the buyer might also want the custom-built furniture that fits perfectly in that little nook or your workbench in the garage. If the buyer wants it, they can always ask for it in the home sale offer.

Also look out for contingencies, such as the buyer needing loan approval or selling their home. These can create problems down the road, should either not come through.

Decide on your response

Once you have read through and understand the offer, how do you decide what to do next? First, is the price satisfactory to you? If the offer is at or above what you had hoped to get for your home, take another look at any contingencies. If there are none and everything else in the offer is satisfactory, then you should probably accept, or counter offer to get the sale details exactly right.

But what if the price is right, but the sale is contingent on the buyer selling his home? This is where you’ll want your REALTOR®’s expertise to help you gauge the market. Did you have a lot of other interested buyers? If so, another offer may soon come your way. But if it took a while to get to this offer, you may want to take it despite the sale contingency, or counter offer for slightly more because of the contingency.

Counter offers

Perhaps the offer was a bit under what you had hoped to get for your home, but the buyer is pre-approved and there are no other contingencies. In this case, it makes sense to counter offer. Many buyers submit first offers that are lower than what they’re willing to pay, so you’re likely to get a bit more for your home. Even if the offer price is right, you may counter offer on some other points in the contract, such as occupancy date or taking your appliances with you.

Low-ball offers

You may get some offers that are much lower than your asking price, especially if your house has been on the market a while. If the market is strong and you’ve had a lot of interested buyers looking at your home, you may not want to waste time on a low-ball offer. In this case, you can just reject the offer. However, if a lot of the offers you’re getting are low, you should talk with your REALTOR® about whether your home is priced correctly. Say your home is priced at $255,000 and you’re getting offers for much less. Reducing your price to $249,000 may bring in many more prospective buyers, who are capping their search at $250,000. By reducing the price slightly, the end result could be a better offer than the low-ball offers you’re getting now.

Multiple offers

A few sellers are lucky enough to have multiple offers to consider. This is a great position to be in, and you can use your leverage to get the price you want, with few contingencies. However, be careful not to get greedy. It is possible to turn off buyers, especially if there are other, comparable homes for sale in your neighborhood.

Negotiating points

When you’re negotiating, don’t forget the non-financial bargaining chips in a home sale:

occupancy date
home warranty
closing costs
major appliances
draperies, curtains, blinds and shutters
custom-built furniture
area rugs that fit a particular room
grill or fire pit
patio furniture, planters and garden benches
garden shed
lawnmower, leaf blower or other maintenance equipment
garden or household tools
recreational equipment, such as ping-pong and pool tables, above-ground pools, trampolines, climbers, swing sets and hot tubs

Decide what you can add to the sale of your home and what is non-negotiable. If your father created that built-in cabinet himself, no price could entice you to leave it. However, a refrigerator is easily replaced.

Make sure you work with your REALTOR® throughout the negotiation process. The last thing you want is for the deal to fall apart because you gave the buyer assurance that something was included, but didn’t talk with your REALTOR® about it. By negotiating through your REALTOR®, you have less to worry about.

In today's market, home buyers can negotiate winning deals

RE.com Tips & Tools — Fri, 12 Jan 2007 21:52:00 GMT

In most areas, it's no longer a seller's market. Use this to negotiate a home purchase contract that gives you what you want.

A traditional buyer’s market, in which the supply of for-sale homes exceeds the demand to buy those homes, can be a great opportunity to negotiate not only the price of the home you want to buy, but also the terms of your purchase agreement. Financing, inspections, closing costs and other deal points might be yours for the asking in this type of market.

Purchase may depend on financing

Some of the purchase-offer terms you might want to negotiate with the seller concern the financing you need to buy his or her home. Examples include:

the amounts of your deposit and your down payment and the dates by which you will come up with those funds,
the dates by which you will first obtain and then approve of (or reject) an appraisal of the home’s value,
the type of mortgage you will be willing to obtain, the maximum interest rate and fees you will be willing to pay, and the dates by which you will first apply and then be approved unconditionally for your mortgage.

Walk away if inspection isn’t right

One of the benefits of shopping for a home in a buyer’s market is having time to think about your purchase and make sure that you are buying a home that meets your needs. Inspections are an important part of that process.

You might want to negotiate permission to hire a home inspector to evaluate the condition of the home or to hire other experts to look for structural problems or wood-destroying pests (e.g., termites), mold, radon, lead-based paint or other potential hazards. You also might want the right to not purchase the home if you aren’t satisfied with the findings of those inspections. You can also ask the seller to purchase a home warranty that would cover certain problems with the home that could surface after you purchase it.

Close on your schedule

A buyer’s market also might enable you to make your purchase dependent upon the sale of your current home and on specified terms that are acceptable to you. This type of contingency is often difficult to negotiate in a seller’s market because sellers are less willing to wait for the buyer’s home to be sold when buyers are plentiful.

You also might want to negotiate a walk-through shortly before the deal closes, the closing date and the time when you will take possession of the home. The closing date can be crucial if your purchase of the home depends on the sale of your current home. Payment of closing costs might be a point of negotiation as well.

A win-win is the perfect deal

Don’t be shy about asking for other contingencies, terms or concessions that you need or want to facilitate your purchase of the home. If you ask for what you want, you may get everything on your list and then some, but if you don’t ask, you might not get some very important protections that you need to complete the transaction.

Negotiation is a powerful way to buy a home on favorable terms, but don’t forget that the seller can nix the deal if he or she believes your demands are unreasonable. That’s why it’s a good idea to discuss your needs, wants and negotiation strategies with your real estate agent before you make an offer to purchase a home.

Negotiating the Best Price

RE.com Tips & Tools — Thu, 11 Jan 2007 21:57:00 GMT

It takes a keen understanding of the home-buying process to be good at negotiating. Be sure you have it down before you make any offers on homes

Be sure you have the process down before you make any offers on homes. Here are tools and information the best negotiators use:

CMAs — Comparable market analyses

Once you’ve found a home you want to buy, the first step in negotiation is to assess the fair value. CMAs show what similar properties in the area have sold for. Your real estate agent will have access to CMAs and can share them with you.

Generally, CMAs list houses in a particular location that are currently on the market, have sales pending, have expired from the market or have sold. It is the "sold" properties you need to look at because the list price and the offer aren’t necessarily the best indicators of what the house will sell for. There can be a big discrepancy between the two figures.

The CMA often gives you general information about the houses being compared: number of bedrooms and baths, square footage, the listing price and the sold price. Make sure you focus on houses similar to the one you’ve selected — both in description and location. The more recent the data, the better.

Condition

Once you have the CMA, drive by all of the properties listed in the sold column. Condition has a lot to do with the ultimate selling price of a house. Does the home in which you’re interested shine above or fall below those sold? Make a realistic comparison of condition, then adjust your thinking up or down according to what you see.

Extra amenities

Does the house you’ve chosen have more or fewer amenities than comparable homes? Although amenities won’t affect the value as much as location or condition, they can be a factor. Be wary, though. An outdoor hot tub may have been a major motivating factor in your choice of a house, but it won’t add much to the value of the property when you resell.

Motivation

A good negotiator gathers as much information as possible on the house and the sellers. The owner’s reason for selling is at the top of the list. Does she have to sell? Want to sell? Just throwing it on the market at a high price to see if it’ll move? If your agent representing you in the transaction is a buyer’s agent, they can try to secure this information for you. If you’re working with an agent representing the seller, they typically can’t disclose this information without the seller’s consent.

Preparation

Great negotiators always prepare themselves. The most important factor is your frame of mind. Never let emotions override common sense during negotiations. Set a realistic limit and stick to it. If the price isn’t to your liking or is outside your budget, walk away.

In addition to your emotional frame of mind, your finances should be in order. An offer carries more weight if there are no dangling financial problems and if you’re prequalified for a mortgage.

Realism

Make a realistic offer. Nothing turns a seller off more than a low-ball offer on a house that is fairly priced. Often, negotiations will stop, rarely to be revived again.

An example: Mr. and Mrs. Buyer find the perfect house after looking for months. The house is listed at $155,000.

Mr. and Mrs. Buyer have a CMA that shows average selling prices in the neighborhood to be $148,000 to $153,000. Ignoring the CMA, they offer $120,000.

Mr. and Mrs. Seller, annoyed at the low offer, counteroffer at full selling price, $155,000. The Buyers, still wanting to steal this house, make a second offer of $125,000. The Sellers, very frustrated, don’t move from their $155,000 price.

Suddenly, there is word that another offer is forthcoming from the Smiths. The Buyers up their offer to $154,000 and the Sellers accept.

A first offer in the $150,000 range (remember, the CMA showed $148,000 to $153,000) may well have been accepted by the Sellers. If this is the case, the Buyers have paid $4,000 more than necessary.

What Bargaining Chips Do You Have?

RE.com Tips & Tools — Thu, 11 Jan 2007 21:54:00 GMT

When you are selling a home, the haggling is not always limited to price

Prospective purchasers often make offers that include appliances and window coverings, for example, because these items are must-haves that are expensive to purchase new. Occasionally, a bidder also asks for other furnishings, recreational equipment or repairs and painting.

It isn’t just purchasers who use extras as bargaining chips. Sellers sometimes make counter-offers that include appliances and other contents as incentives for the bidder to agree to a higher price. This is an especially useful strategy when demand for homes in your area is weak and prices are low.

If you are selling your home, consider what you are willing to throw in to make a deal work and what items are off limits. It’s best to do this in advance of listing, so you are ready to deal with requests for inclusions and decisive about incentives you will offer.

Here are some of the items you may want to think about as potential bargaining chips:

major appliances, including washer, dryer, fridge, stove, dishwasher, water heater and water softener
draperies, curtains, blinds and shutters
custom-built furniture, such as bookcases or shelves that fit a particular spot in the house
area rugs that fit a particular room
barbeque
patio furniture, planters, garden benches and ornaments
garden shed
lawnmower, power washer, leaf vacuum or other maintenance equipment
garden or household tools
recreational equipment, such as ping-pong and pool tables, above-ground pools, trampolines, climbers, swing sets and hot tubs
boats, canoes, life vests and safety equipment, if you are selling a waterfront home

When deciding which potential bargaining chips you are willing to part with, you should consider how easy or difficult it will be to move them, how much you will need them and how much it will cost to replace them. You may love your top-of-the-line barbeque and patio furniture, for example, but they may not be worth the fuss and expense of moving them across the country. On the other hand, you may decide you can’t part with a china cabinet that’s been in the family for generations, no matter how much a purchaser wants it and how difficult it will be to move.

Light fixtures and built-ins such as central air conditioning and vacuum system, in-ground pools, water filtration systems, cabinetry and cook-tops are typically considered "includes," rather than extras. They should be factored into the asking price you and your selling agent decide on for your home.

Other requests come out of the blue and may seem downright odd or irritating. It’s hard to understand why a bidder would insist on including a coat of purple paint in a bedroom or a $30 shower curtain and matching bath mat in a deal worth $100,000 or more, but it happens. You can’t anticipate every demand, but as a rule, if it is easy and inexpensive to comply, you’re smart to agree graciously in order to expedite your sale.