The Art of Compromise in Real Estate: After Acceptance
Business is business, and oftentimes for many that means keeping emotions at bay and thinking with only a black and white palette. Real estate sales transactions are no exception, or are they?
There often comes a time in a real estate sale where the buyers discover information about their new home that they consider important, and as a result they appeal to the sellers for repairs, credit or a reduction in the purchase price. Most sellers are open to helping the buyers out in some way, but there are others who dig their feet in the dirt and refuse to budge. I have represented many buyers and many sellers, and I have seen both sides and understand where all parties are coming from. But there is something to be said about kindness and trying to understand viewpoints and concerns, and I think no matter what side you are on you can always be a good person.
Of course, each sale is very different and there is no way to formulate a plan that will apply in every situation. My best advice is to truly consider what is being requested and to try to weigh alternatives, then to make a compromise. Here are some tips on how to do just that.
1. Repair request compromises. When a buyer makes an offer on a home, especially for top dollar, and gets into contract s/he is unlikely to know of any problems with the home (unless of course they are obvious, as in a fixer-upper, or where the seller discloses defects prior to getting into contract). It is usually not until a buyer has a home inspection that s/he discovers issues that need to be addressed. At this point most buyers will ask the seller to either make repairs or credit money in escrow to fix items that need repair. In extreme cases, where the repairs are very high, a buyer might ask for a price reduction.
2. Price reduction compromises. These are harder for most sellers to swallow, and rightfully so. However, it is always imperative to look at the nature of the problem(s), and again to have an open mind. If your buyers are asking for a reduction in price because the home has old flooring or old appliances, that is something they knew when they made their offer, thus they had the opportunity to take that into consideration already. But if the buyer discovers something s/he could not see or did not know the extent of during investigations – like that the appliances had bad wiring that made them a fire hazard and have lead to their deterioration – that is an issue the seller should seriously consider.. Of course, it all depends on many factors and no two situations will be the same, so it is smart to have an open mind and imagine oneself on the opposite end of the transaction.
3. Avoiding pricey repairs or price reductions. A good solution for sellers in avoiding pricey repair requests or price reductions is to have a home inspection prior to listing. I do not suggest this to every seller, but only to those who are aware there may be issues OR who live in older homes. It is a good idea to gain an understanding as to what might need to be addressed – the seller can then take care of some items prior to listing to avoid surprises down the road.
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As a seller it is important to fully understand where the buyer is coming from. Minor items are easy to fix, and if they are safely hazards I always suggest to my sellers to take care of them – this not only makes you a good person, but it makes a statement that you understand your buyers want to purchase your home and did not anticipate there were safety issues to be resolved. Sometimes it is important to be able to compromise, just as it is important to limit requests to items that are truly a safety concern or could lead to even bigger problems down the road. Of course, there are different factors in each case so every seller or buyer will need to discuss with their agents.
Buyers too need to understand where the seller is coming from. If a home is in contract for a reasonable price (i.e. the price is in line with the comparable sold properties), the buyers need to take that into consideration when figuring out a reasonable repair request or price reduction. If the buyer is paying a premium for the home then the buyer will undoubtedly expect a home that does not have tens of thousands of dollars of repair work added on top of the price premium – if the tables were turned the seller would feel the same.
The best advice when discussing repairs or price reductions between buyers and sellers of home, is to go into them with an open mind. Sellers who deny any type of aid without trying to understand why the request was presented could end up losing the sale – and don’t forget that anything a buyer discovers in a home or other type of inspection must be disclosed by the sellers to any subsequent buyers. Buyers could similarly end up walking away from a home they really love by getting caught up in minutiae, so it is imperative to carefully consider negotiation tactics after contract acceptance. Compromising can often lead to a successful close of escrow.
