Your inbox: it’s overflowing. Your desk: it’s piled high. Your mind: it’s scattered, to say the least.
A seller’s market can be a godsend when you’ve just rehabbed a promising fix-and-flip property. But when a seller’s market brings you a high volume of offers, things can get complicated fast. Overwhelmed by your good luck, you may be tempted to simply select the highest offer from the stack.
Don’t. Competition breeds excellence. Use the forces at play in the market to your advantage. Borrowers may lie to you. Markets never will.
Follow these negotiation best practices:
1. Highest and Best Offer
If you are staring at a stack of offers on your rehabbed property, then you have done something right. Now, take your game to the next level. Study the offers that have come in comparing price, closing timeframe, conditions to close, etc., and use the best terms of each offer to outline what would be your perfect offer from the perfect buyer. Pick the 3 to 5 of the strongest buyers that:
- Have the best price and terms.
- Have the most experience.
- Have the strongest proof of funds letter or balance sheet presentation.
Call these buyers and tell them they have been hand selected out of many to sharpen their initial offer into a Highest and Best Offer. Tell them they have until 5:00 PM to get their final offer to you. Tell them you will call them by 6:00 PM to inform them if they won or lost. If they ask, have your “perfect offer” list by your side to give them a hint of where they need to improve. And then, go enjoy your day until the clock strikes 5:00 PM.
Use our free Negotiation Notebook to keep track of your interactions with promising buyers
2. Go Until You Hear No!
Selling a house isn’t a fixed-price retail transaction; It’s a negotiation. The seller wants the highest price possible from the strongest buyer. The buyer wants the lowest price possible on the best possible house. Both parties are at the table for one thing – a transaction.
In a seller’s market, the next best tool on your belt besides the call for highest and/or the best offers is the Power of No. You miss 100% of the shots you don’t take. So, ask for the order even if you don’t see it on the offer. Try something like,“I really like your offer and I want to give you the deal, but you’ve got to come up $10,000 on price or I’m going a different direction.”, or, “Your price is right, but your closing period is too long. I need you narrow the closing to 20 days instead of 30 days or I am going to have to go a different direction.” Go until you hear No! What’s the worst thing that can happen?
3. Begin with the End in Mind
As mentioned previously, sitting down to define your perfect offer from the perfect buyer will help you stay focused on your end goal when the offers start coming in. Before you list your property, set a final acceptable outcome: How much do you want for your property? How quickly do you want to close? What kind of buyer are you looking for (experienced or desperate)? Do you want to establish an on-going relationship with your perfect buyer? Beginning with the end in mind will allow you to manage the emotions of multiple offers as you visualize and plan for the right final outcome.
4. Don’t Overplay the Hand
You’ve made the call for the highest and best offers, you’ve pressed and negotiated like a champion, you’ve maintained focused and are nearing the end of the transaction where you sign on the bottom line of the contract- Don’t Overpay the Hand! Look and listen for a concession or two that is important to your buyer and give it to them. Maybe it’s an accommodation of timing, maybe it’s an accommodation of the title company you close at, maybe it’s a little smaller earnest money deposit – if it can build goodwill, use it. The buyer will remember that you didn’t press for the last drop of blood and may just come back for more on your next deal.
It’s easy to lose track of your goals in a seller’s market. When your desk is flooded with offers, use our free Negotiation Notebook to keep track of your interactions with promising buyers – and keep your eyes on the prize.