I just picked up this article on boston.com (originally from Inman News) about getting into negotiating position as a buyer in the current market. There are some helpful suggestions like:
Before you make an offer on a listing that's priced over market, try to find out as much as possible about the sellers' motivation, and if there's any flexibility in their price. A lot of time and emotional energy goes into making an offer. Save your efforts for listings where the sellers are motivated. That is, they don't just want to sell -- they need to sell.
I can't stress enough how important this is. Find out the seller's needs and their circumstances before submitting an offer. Ask questions or have your buyer agent probe the listing agent and seller for answers about their financial needs, the circumstances surrounding the move, when they are moving, etc..... No, you are not going to get all the answers you want all the time, but a skilled negotiator with great interpersonal skills can extract information through simple conversation that will enable you to craft an offer that gets you the price and terms you want as a buyer but is attractive enough for the seller to accept. The key to a successful negotiation is for each side to feel like they got what they needed. No side should be taken advantage of and no side should feel like they "lost". However, that doesn't mean you shouldn't push for what you want and what's in your best interests. Good information is the first step to doing just that.
So, without further ado, here are my top 5 questions to ask a seller before making an offer*:
- Why is the seller moving? (simply ask for their motivation to sell)
- When is the ideal time for the seller to move? (an offer is not just price, other terms like closing date can be very important - plus it gives you a sense of motivation)
- Have their been any previous offers? If so, what happened with those offers? How far apart were the two sides? (this can help you determine what type of interest there is and potentially what the seller is willing to accept....learn why other negotiations failed and use it to your advantage)
- How long has the seller owned the home? What did he/she pay? (this is irrelevant to what the market value is today but it can give you an idea of the sellers financial position)
- How did the seller arrive at the asking price? (this is a great end around to help you determine how much "room" the seller has in their asking price without directly asking)
Another key factor is to have a goal in mind. Don't just craft an offer and submit. Create an offer strategy...think about your first move and possible counter moves from the other side. Decide what is an acceptable outcome beforehand and negotiate towards that point. Proper planning (using the valuable information you got before making the offer) leads to a successful outcome for you far more often than not.
One last point: keep emotions in check throughout the negotiation. This is much easier said than done when you are negotiating a "home" that involves a lot of emotional attachment. Especially in the current market, there will be a lot of back and forth, but a superior negotiator will focus on outcome only and remain emotionally detached. If you choose to hire one, a great buyer agent can be an invaluable resource in your negotiations by efficiently getting information about the seller and about the property, creating a thorough market analysis to give you an accurate value on the property, and keeping you level headed and as unemotional as possible throughout the process. Notice I said "great" though. Don't settle for less.
*note: I am assuming you have already collected "home specific" info (like what the taxes are, are there any defects, etc.). These top 5 questions are to find out the sellers motivation and create a negotiating strategy with the seller.