3 Points Of Negotiation In A Real Estate Deal

Dated: 11/19/2019

Views: 142

I was representing a homeowner in a recent sale, and we were in escrow on his house. After the buyer’s inspection period, the seller expressed great surprise when the buyer wanted to negotiate the price down further due to the results of the inspections.

I had informed my seller of what to expect during the escrow period, but there’s so much information, details, dates, and paperwork to focus on during the course of a sale, it’s easy for both buyers and sellers to miss some of it.

So, let’s review the three points of negotiation that may take place during the course of an escrow.

1) The Opening Offer 

Of course the first point of negotiation is when a buyer submits an offer on a property. The buyer’s agent and seller’s agent hash out the details based on the needs and desires of their respective clients. Once the contract price and terms are all agreed upon, both parties have Acceptance, and the deal moves into the escrow period. 

However, just because everyone agrees on a specified price and specific terms at the beginning of the deal, doesn’t mean you’re done negotiating yet!

2) Post-Inspection Negotiation

During the buyer’s inspection period, which is 17 days by default here in California, the buyer is taking a closer look at everything about the property. In addition to making sure there’s no major defects or concerns with the property that might kill the deal, the buyer is also hoping to compile a list of small problems or issues that they can present to the seller at the end of the 17-day period.

At that point, the buyer often asks for the seller to pay for some of the repairs, or to offer a credit towards the buyer, or to reduce the price in relation to the amount of repairs needed. It’s interesting to note that the seller is not obligated to agree to any of the buyers requests at this stage (it even states as much right on the Request for Repairs form), but in order to keep the deal alive at this stage, most sellers are willing to offer a little give-and-take at this point.

3) Appraisal Period

The third point of negotiation may take place after the appraisal happens. If the appraisal comes in “at value,” which means the appraised value is the same number as the agreed upon sale price, then both parties are happy. The buyer then removes the appraisal contingency, and moves towards closing.

However, if the appraised value comes in lower than the sale price, then there could be trouble, especially when a lender is involved. There are a few ways that this scenario could play out: The buyer could make a bigger down payment to make up the difference between appraised value and sale price, the seller could lower the price to the appraised value, or failing those two options, this could even kill the deal.

Most homes don’t have trouble appraising, especially when they’re properly priced. But, if it does happen, prepare to find yourself back at the negotiating table.

And, as I’ve outlined above, there are typically 3 points of negotiation throughout the course of an escrow. Getting an accepted offer on a house is the first one, but not the only one. Hopefully, cool heads prevail at each turn, and all the parties involved enjoy a successful closing.

If you have any real estate related questions, please feel free to reach out any time, and I would be happy to help.

~ Nikolas Allen, Realtor

J. Harris Real Estate, Mt. Shasta, CA

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Nikolas Allen

In 2015, I bought my first home in Mt. Shasta after decades of renting and fell in love with the experience of home ownership. I got my real estate license so I could help other home buyers and seller....

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