Mak-ing An Of-fer Re-quires A Care-ful Strat-egy

Question:

I’m hoping to buy a home soon, and now that I’ve gotten myself situated and have learned a bit about the process and the market, it’s time to start looking more seriously. Because my criteria is pretty specific, I’d like to be prepared to quickly make an offer when the time comes. Obviously I want to get a good price, but I’m new to the concept of bargaining and negotiating. I don’t want to mess it up and lose the perfect home! What factors do I need to consider?

Ian's Answer:

As a buyer, being fully prepared prior to an offer is the single most important aspect in negotiating to win. “It goes beyond the conscious decision to purchase, receiving pre-approvals, and mentally preparing yourself for the next step in your life,” says Ian Charlebois.

A seller’s varying reactions, depending on what the buyer submits as their initial offer, can determine whether the homeowner sells or not. The seller will be hesitant with any offer received, no matter how high or low it is. “Naturally the seller is on the defensive and will continue to be until they are ‘sold’ or realize that the current offer ‘is what it is’ and make a final decision,” Mr. Charlebois says.

He explains that most home sellers, after consulting with a real estate professional, know the true value of their home and use MLS as a tool to receive top dollar. Often homes are listed high, with the intention of negotiating.

For buyers, the actual decision to go forward with an offer is made based on tangible and intangible factors which affect specific buyers. Before submitting an offer one must contemplate the offer price versus the list price. But the buyer wants the lowest sale price possible and often wants to make that their offer.

“It’s important to assess the situation: what is the actual true value of the home, the tangible and intangible items that will affect your decision to buy or not, what is the home worth to you and what is the difference between the true value and what it is worth to you. Evaluating these factors will help to lay everything all out in plain view,” explains Mr. Charlebois.

How you go about an offer will strongly influence the outcome. “The lower under the true value you go the harder it becomes. Remember you are trying to win, not lose. After thoughtful consideration and market analysis a true value will become apparent. As a buyer the main focus is getting the property for the best price – knowing the final true value will suggest a starting price,” Mr. Charlebois says.

An initial offer should include all terms/conditions (closing date, duties of each party, inclusions) specific to the buyer with every detail included. Buyers should be flexible to the sellers’ requests, but the goal is to eliminate other factors leaving only price to discuss.

Things to consider: What is the expected response from the sellers? Should they be given 24 hours to respond or pressure them to decide quickly? Should you include/exclude any terms/ conditions that the seller wants, knowing they will counter with those requirements and give you a bargaining tool you can use without losing anything?

“Your agent can help you to develop an execution plan for different scenarios that could occur in response to your offer,” says Mr. Charlebois. “It is all about winning during negotiation – but the seller shouldn’t know you, as the buyer, did.”

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Featured in the Ottawa Citizen on 05 February 2011