When Do You Actually Negotiate in Real Estate?

Recently a colleague in the MLS Real Estate industry told me that during a seller’s market there really is not much negotiating happening. I was caught off guard by the concept because negotiation should occur in all MLS Real Estate transactions regardless of market conditions. As a matter of fact, there are 4 critical points of negotiation in every MLS Real Estate transaction and it is important for buyers, sellers, and real estate professionals to have these on their radars.

  1. Real Estate Agent CompensationAll buyers and sellers should interview their real estate agent looking for a problem solver that you can get along with as we discussed in a previous blog. MLS Real Estate expenses (commission or compensation) should be analyzed, just like you evaluate your expense ratio with financial planners. If the property is unique, such as a 10,000-square foot lakefront property, and will take non-traditional marketing, extensive time, energy, and effort to sell, then the seller should expect to pay a higher compensation than a more common single family residence or condo. Flat Fee Listing services and buyer commission rebates are ideal for common properties.
  2. Purchase AgreementThe offer/counteroffer for the price of the property is the negotiation opportunity that most people are familiar with. The market will dictate the sales prices of the home based on supply and demand but the wildcard here is the buyer/seller motivation – do they need to buy or sell quickly? The role of the real estate agent is to provide guidance and information to their client so they come to a purchase agreement on the fair market value of the property. Fair market value is relative when you have a motivated buyer or seller.
  3. Inspection & RepairsI always recommend doing a comprehensive inspection once a property is under contract. Inspections typically provides a detailed visual examination of property including electrical and plumbing systems; HVAC systems; interior and exterior ceilings, flooring, foundation, structure, doors, and windows; roofing; and potential pest & termite infestations. It’s common for a buyer to request repairs based on the inspection report which may include material and nonmaterial items. Real estate agents assist and provide feedback in the negotiation of repairs and may help find contractors with credible reviews to conduct the work.
  4. Mortgage & AppraisalMortgage lenders get paid in many different ways including origination fees, yield spreads, discount points, closing cost fees, and servicing loans. You should interview mortgage lenders and chose a lender that is transparent about their compensation and competitive on lending rates. Most lenders require an appraisal of the property, which may value the home above or below the price in the purchase agreement. If the appraised value is lower, then you may need to renegotiate the price for the loan to be approved by the lender.

It would be great to say these are the only 4 points of MLS Real Estate negotiation or that they are independent of each other; however, an experienced real estate agent knows that all of these are interconnected. An experienced agent will be able to guide you through the negotiation process and provide a great experience during your next home purchase or when you decide to sell a property in Austin. Do you agree that using Flat Fee Real Estate services can assist in the negotiation process and ultimately save you money?

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