It blows my mind that simplistic strategies in real estate negotiation, may still used and even perceived as the best way to keep a deal together. Let me give you an example of a current transaction I have on the go and how this pathetic strategy is attempting to be used from the other side. We’ll let you decide what you think about the idea of the meet in the middle strategy.
Because the transaction is current, there will be no reference to any party just the process. First let me set the stage. A property is viewed and appeals to the buyers but the advertising is way off the reality. The new is not new, it’s refreshed, a cheap way to look new. The property has had some updates done in the last few years but there is clearly still a lot that needs to be done in this 40 year old property. From needed updates to deferred maintenance. The property has also been on and off the market for several years. No material defects have been declared.
The Buyers Like The Property & Want To Buy It – We Start The Negotiation
Jump Forward To:
My buyers have decided that they would like to buy the home although the property is in need of some repair work, including all new windows because almost every-one is fogged (broken thermopane seals). The windows are all poorly functioning. Even with the deferred maintenance and updates that are needed, if the price is good enough the buyers will buy it and take on the needed work themselves. An offer is made and we advise that we will not come back and ask for credit on the windows even though they will appear on the home inspection report.
Note: There are reasons homes don’t sell, over-pricing and poor maintenance of homes are the two primary turn offs for all buyers.
Having reviewed all comparable sales, our offer appears to be very good on price, even without factoring in the cost of new windows. Of course the seller may think differently and the listing agent too. We have no control over that. The seller and his agent are worried that we’ll come back for money to replace the windows so they want us to write the contract as an AS-IS sale. Meaning the seller will not do any repairs at all. NOT A GOOD IDEA!
Our terms are agreed (not AS-IS) and we move on to the home inspection. Most inspectors provide a comprehensive report and a summary sheet. A one page summary sheet is good, one and a half not so bad. Our summary sheet is 4 pages long. There were items on the summary that suggested more specific inspections be carried out, which the buyers did. The buyers went through the summary and selected the most dire of safety issues and asked for those to be repaired. Some they decided to take on at their own expense before moving in.
The serious defects are:
Chimney with a dangerous defect and bees nests inside the flue as well as years of built up “crud”.
An electrical panel with a number of safety issues.
Electrical outlets burnt!
A compromised fire door.
Would you like to live in a house with all these safety issues? …….Me? No thanks! Fire, fire, fire is all that comes to mind.
A request was made to have an electrician and chimney company repair these, the firewall door cost but no labor, the buyers would take care of that. We already provided specialist reports and costs. The seller comes back with a credit suggestion of $200. That represented about 4% of the actual cost of the repairs. At this point in time I chatted with the buyers and agreed I should reach out to the listing agent to discuss.
Send us your request and then let’s meet in the middle.
Really? Is that really what you consider the right way to negotiate these issues and settle on terms agreed. We’re not asking for all the repairs, those enter into thousands and thousands of $$. The windows alone are going to cost $20,000 and we are still paying you comparable value for the property. (We can show you comparable sales). We are deciding to accept 70/80% of the summary items and take on ourselves. All we have asked for is the really bad safety issues to be either repaired by licensed tradesmen, or a reasonable credit. We’ve already reduced our request by far more than 50%. So on what planet does anyone think that meeting in the middle for our request is the right way to settle the issues so we can move forward?
Seller wants a certain amount of money.
As I dig a little more the agent tells me the seller wants a certain amount of money. The seller needs it because…………….. The reason does not matter. Real estate is only worth what someone will pay for it, not what a seller wants. We all want things, but none of us can have everything we want! The mere fact this property has been unsold after several years until now is clear. The property needs a lot of work and the inspection now reveals some telling issues. Safety issues. Material defects. Many buyers at this point will walk away. My buyers are still ready to buy but safety issues are a big concern and not something they expected. It’s a cost not allowed for in the agreed offer. The buyers are thankful that they did not agree to the AS-IS contract, they would already be out. At this point though, the transaction hangs in the balance. Meeting in the middle is such a basic strategy. Let’s get a little more honest, realistic or creative, please!
What would I say to a seller that needs a certain amount of money? Stay put until your value increases to the point you’ll get that. But right here and now it’s not possible.
Disclosing Material Defects.
If the transaction falls apart, the seller and his agent now have to re-write a new property disclosure. On the original neither of them new about the chimney defects, or the fire safety issue, let alone the electrical panel issues. These are all material defects and are specifically asked as questions on the disclosure form. Having gone through this process, they must now be disclosed. It’s the law!
Because as part of this transaction all parties on the seller side were provided the inspection report summary; and specialist estimates and confirmation of the issues. Both of them are subject to this law. They cannot sweep it under the rug and pretend no-one knows. I know! Imagine how these disclosures are going to affect the future sale-ability of this property!
A Tip For Home Sellers.
None of us will always be aware of all the issues in our property but regular maintenance goes along way to success when it comes time to sell. Understand an inspection is going to reveal problems with your home that you may not know exist. I’ve never had a perfect inspection report yet. Some pretty good ones and others not so hot. To keep your sale on track, realize and accept the responsibility of health and safety issues. Repair them. As for this darn meeting in the middle concept. It’s juvenile!