Desiree Renshaw

Negotiation Strategies for Buyers and Sellers

Are you getting ready to buy or sell a Spokane, Washington home? There are a few things to note before jumping into the process, and our team can walk you through them all. 

In this post, we’ll delve into a topic that’s crucial to any successful real estate transaction: NEGOTIATION STRATEGIES! We’ll explore five specific essential terms you should negotiate to ensure a smooth and favorable deal from both the buying and selling perspective.

Interested in buying a home in Spokane? Take a look at our current listings!

1. Earnest Money: Security in Negotiations

Earnest money, a critical component of any real estate transaction, acts as a buyer’s good faith deposit. Typically, Spokane sees deposits of around 1% of the purchase price, but  given the competitive nature of recent markets  figures of 2% or higher have become more common. 

For sellers, a larger earnest money deposit provides greater assurance that the buyer is committed to closing. For buyers, it’s a testament to their seriousness about the purchase, a crucial factor in a seller’s decision-making process.

The right real estate team can help you navigate negotiation strategies during the buying and selling process

2. Closing Date Flexibility

When navigating the complexities of buying or selling a home, the closing date is a critical detail that carries significant weight for both parties involved. For sellers, the luxury of additional time after closing to facilitate their move can ease the transition into their next home. On the flip side, buyers often have to synchronize the acquisition of their new property with the sale of their existing residence.

The key to managing this delicate balance lies in open and transparent communication with your realtor. Discussing potential timelines and expressing your needs clearly can lead to solutions that serve both parties well. One such solution is the rent-back agreement, where the buyer, who may be in a position to close quickly, allows the seller to rent the property for a period after closing. This can be particularly advantageous for the seller who isn’t ready to vacate immediately.

If you can close swiftly but the seller requires more time in the home, offering a rent-back agreement can significantly enhance the attractiveness of your offer. It’s a gesture that demonstrates flexibility and understanding of the seller’s circumstances, potentially giving you the edge in a competitive market.

3. Appraisal Gap Coverage

In the ever-changing landscape of real estate, one of the hurdles that both buyers and sellers frequently face is the risk of an appraisal gap. This discrepancy between the sale price and appraised value can lead to fraught negotiations and, in some cases, derail a transaction altogether. Sellers are understandably anxious about appraisals coming in lower than the agreed price, which could put the sale in jeopardy or force a price renegotiation. Buyers, on the other hand, are concerned about the additional financial burden that an appraisal gap might impose on them.

To navigate this common concern, incorporating an appraisal gap addendum into the sales agreement can be a strategic move. Such an addendum stipulates that the buyer commits to covering any gap between the agreed-upon sale price and the property’s appraised value. This reassurance can be invaluable in maintaining the momentum of the sales process and ensuring that both parties reach the closing table with their needs met and their worries assuaged.

All this considered, it’s crucial for buyers to understand that offering to cover an appraisal gap means being prepared to bring additional cash to the table, which might not be an easy commitment to make. In a highly competitive market, buyers might be tempted to present the highest possible offer to secure a property. But if this offer isn’t backed by an understanding of the potential appraisal gap and the buyer’s ability to cover it, the transaction could become precarious. That’s why the guidance of a skilled buyer’s agent is indispensable they can assess the likelihood of an appraisal gap by analyzing recent sales and market trends, advising the buyer on whether such an addendum is a wise inclusion in their offer.

When used judiciously, an appraisal gap addendum can significantly strengthen a buyer’s offer. By signaling to the seller that the buyer is willing to cover differences up to a certain amount for instance, offering $485,000 with a commitment to bridge any gap if the appraisal comes in at $450,000, a buyer’s offer is strengthened. This clause not only positions the buyer more favorably in the eyes of the seller, but also minimizes the chance of renegotiation due to a lower-than-expected appraisal. In essence, it communicates a strong intent to proceed with the purchase, backed by financial readiness, which can be a deciding factor in today’s competitive real estate environment.

4. Seller’s Right to Perform

In Spokane, a vast majority of sellers ” approximately 95% ” are not aware of the existence of the “Seller’s Right to Perform.” When sellers accept an offer with a financing contingency, there are two significant choices: They can either ask the buyer to waive their financing contingency by a certain date specified in the contract, or opt for an automatic waiver of this contingency.

It’s essential for sellers to understand that invoking the “Seller’s Right to Perform” doesn’t force the buyer to waive their contingency. If the buyer chooses not to waive it, they’re still entitled to proceed with the sale. However, this right also gives sellers a potential exit if a preferable buyer comes along and the original buyer can’t or won’t waive their contingency.

On the other side, buyers must recognize the implications of these options on their purchase. By electing to shorten the contingency period or choosing an automatic waiver where the financing contingency is dropped after 21 days signals financial readiness and security to the seller. It’s a strong move, particularly if they’re backed by a competent agent or lender.

The automatic waiver is especially important for sellers because if financing falls through after the waiver period, the buyer is no longer protected by the contingency, and the seller may retain the earnest money. It’s a lower-risk strategy for buyers who are confident in their financing arrangements.

It's critical to work with an agent or team who understands your goals and priorities.

5. Home Inspection Timelines

Finally, streamlining the home inspection timeline can provide a significant advantage in real estate negotiations. By minimizing this window, buyers demonstrate commitment and readiness, potentially giving them an edge in a competitive market. A concise timeline ensures that if the deal doesn’t close, sellers can quickly re-enter the market or activate a backup offer, reducing downtime and maintaining momentum during peak seasons.

For efficiency, buyers should pre-arrange inspections, ensuring inspectors can meet the expedited timeline and deliver prompt results. This strategy not only strengthens the buyer’s position by showcasing their proactive approach, but also respects the seller’s need for a swift and decisive sale process.

Both parties are advised to align on a mutually agreeable inspection schedule that accommodates business days and holidays to avoid unexpected delays. Through this proactive and collaborative effort, the inspection contingency becomes a tool for advancing negotiations rather than a hurdle.

Effective negotiation in real estate is an art and a science, requiring a deep understanding of market dynamics, strategic foresight, and the ability to find common ground. Whether you’re a buyer aiming to secure your dream home or a seller looking to maximize your investment, these negotiation strategies are indispensable tools in your real estate arsenal. Reach out to us today and we can help you navigate the process!

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