An Important part of Negotiations is Leverage.
Don’t give up your leverage if you don’t have to.
Don’t Negotiate Against Yourself.
Still, people put themselves in unnecessarily compromising positions for no reason. Let’s explain
You want to Sell Your Home and Buy Another
This is a very common occurrence.
Maybe your family has grown and you need more space. Maybe you’re relocating from one part of town to another. Maybe you’re ballers now and you can afford to buy your dream house 😜 💰
Here’s where most people go awry: They start looking for the new home, and fall in love with it, before they sell their current home.
Some people haven’t even started the process of putting their home on the market before searching for another one.
This is natural. This is normal. This is to be expected. But…it could end up costing you dearly. Because you’re going against an an unstoppable force – time.
You Find Your Dream Home to Buy
It’s perfect. It has the space you’re looking for. The school district is great for the kids. It even has a pool! It’s one of the hottest homes on the block. You talk to an agent. Everyone wants it.
You know that you have to move quickly. If you’re like the vast majority of Americans, then most of your net worth, 70%, is in your existing home.
This means that you’ll probably have to sell your existing home in order to buy this new home. Do you see where we’re going here? This could be a problem.
Problem #1 – Weaker Offer
Imagine you have two offers on your home, same offer amount, both putting down 20%. But one offer has the additional contingency that they can back out if their current home doesn’t sell.
Why would you want to take the risk on that offer? Chances are you’ll accept the offer that doesn’t have that additional contingency all else being equal.
Ok, a good agent will know this so perhaps they offer to sweeten the deal. They decided to offer another 20K, 50K, 100K etc…whatever amount to seal the deal. The agent has been told they HAVE to get this house.
Mistake #1: To recap, your offer is weaker because of the additional contingency you’ve added and to compensate you may have to overpay.
This is NOT the buyer’s agents’ fault. You put yourself in that position. There is not much the agent can do. You have no leverage.
#2 – Compounding the Problem – Selling Your Home
Now you have to sell your home. Fast. Typically, the contract will give you about 30-45 days to perform. You and your agent are under the gun.
We’re going to assume that if you’re thinking about making an offer on a new home, or have already done so, that you’ve gone through the pre approval process with a mortgage lender or bank.
Hopefully, you’ve also at least started the process of selling your home before falling in love with another. It can be quite a process:
- Have you interviewed and selected a realtor?
- Decluttered and cleaned your home?
- Perhaps staged the home?
- Taken professional photos?
- Hold open house(s).
- Choose which offer to accept.
- Wait for the buyer to do inspections, go through underwriting and pray their loan doesn’t get denied.
- Appraisal, title, closing….Whew!
How do you increase the chances that all of this happens, fast?
Maybe you take the first reasonable offer, not knowing that a better offer may have come a few days or weeks later if you had more time.
You probably left money on the table.
Maybe you accept a cash offer because you know they can close more quickly. Guess what, cash offers are often lower than offers from people with a mortgage. Cash buyers know they have this leverage.
You probably left money on the table
Maybe you go through an iBuyer like Opendoor who will buy your home for cash and close in a week? Same thing, cash offers are lower. Don’t believe us? Then why did the FTC go after Opendoor for lowballing home sellers?
Great. Your home is sold and something is better than nothing, right?
You probably left money on the table
Let time work for you, not against you.
The more time you have to sell your home, the more visibility it can get online on sites like Zillow or Realtor.com.
The more time you have, you may increase the chances of generating a bidding war of your own. The more time you have, you can be even more diligent about how your home is presented and what offer you will accept.
And if the buyer backs out for some reason? It’s not the end of the world, time is on your side.
Also, on the buy side, you will probably have an upper hand against many other bidders!
Agents know that an existing homeowner is on more stable financial footing than someone who doesn’t own a home. And if you’re flush with cash because you just sold?
You’re in great position to get that dream house.