|The Process - What to Expect
What Is The Procedure For Negotiating?
If you're new to real estate, the negotiating process may seem arcane. However, it's actually well thought out and
when handled correctly, is effective and protects both buyer and seller.
Negotiation begins when the buyer makes a written offer. An earnest money deposit should accompany the offer,
demonstrating that the buyer is serious.
If the offer is for less than your asking price, you have three choices:
You can accept the offer exactly as proposed. If you do, you've just sold your home!
Or, you can reject the offer outright, in which case your home is still for sale.
Or, you can reject the offer and counter with an offer of your own, called the "counteroffer."
It's important to understand that, contrary to what most sellers would like to do, you cannot both accept and
counter an offer.
What Is A Counter Offer?
A Counteroffer is your offer back to the buyer. Usually, but not always, it's for a compromise price somewhere in
between what you were originally asking and what the buyer originally offered. Or, it could be for the buyer's price,
but terms different than what the buyer offered.
When you reject the buyer's original offer and make a Counteroffer, it's very important to understand that you may
be tossing away a potential deal. The buyer is under no obligation to accept your Counteroffer. Rather, he or she
can simply walk away with the deposit and no regrets or penalties. You should not counter a buyer's offer unless
you are prepared to lose the deal.
Your Counteroffer is open to the same possibilities from the buyer's side as the buyer's original offer was open to
you. The buyer can accept, reject or counter your counter. The same rules apply. The buyer cannot both accept
and counter your Counteroffer. This protects you from having a buyer accept what you've offered and then, for
example, add a clause lowering the price. The buyer's new Counteroffer is a brand new offer to you.
This countering can go back and forth many times until either agreement is reached, or no agreement is possible
and both parties simply back away from the deal.
At any time, you can withdraw a Counteroffer, providing you haven't been informed that the buyer has signed it.
The same rule holds true for the buyer - he or she can withdraw any offer made prior to communication of your
Although the process may seem confusing, actually it works quite well, particularly when it is well-oiled by the
competent back-and-forth help of real estate professionals.
What Happens to the Deposit?
Until there is complete agreement, the deposit belongs to the buyer. The moment both buyer and seller agree on
price and terms, however, the deposit belongs to you, the seller. In actual practice, however, buyers are loath to
give sellers the deposit. The reason is that if for some reason (not the fault of the buyer) the deal is not completed,
it could be difficult getting the deposit back from the seller. A recalcitrant seller might simply refuse to give it back,
or worse, spend it and not have it to give back!
For this reason, most buyers wisely insist that the deposit be held by a neutral third party until the sale is
consummated, usually in escrow or an agent's fiduciary account.
Should I Accept The Buyer's Offer...Or Counter?
Before making this important decision, you should consult with your agent and, perhaps, with your attorney. The
wrong move could cost you money... or lose the deal.
Ask yourself these questions:
· How desperate are you to sell? If you must sell, then you simply may not be willing to risk a counteroffer.
· How bad is the offer? Many times buyers will "low-ball" or come in at a very low price. You don't know for sure, but
they may very well be expecting you to counter higher. Not doing so might mean you're agreeing to sell for too little.
· How strong is the market? If you lose this buyer and this deal, is the market sufficiently strong that another
buyer/deal will likely soon come along?
· Can you live with the terms? The buyers may have inserted a contingency that makes the sale improbable. For
example, they may be insisting that your sale be contingent upon them selling their existing house. If their old
house doesn't sell, they aren't committed to buying your house. In a strong market with lots of buyers, you might
want to counter by removing this contingency or by giving a short time limit for them to sell their old home.
An agent can be very helpful in explaining your options to you as well as framing the various counteroffers you
might want to make.
What Happens During Closing?
There are many things that must be accomplished before the escrow can be closed. They include the following:
· All purchase contingencies must be removed. This usually includes having the buyers approve a disclosure
statement you provide, approve an inspection report they order (and pay for) as well as having them remove any
other contingency they have holding up the sale.
· Property title must be cleared. That means you may need to remove any liens or encumbrances (such as
judgments that may have arisen from a failure to pay a debt) or other items that "cloud" or restrict your title.
· There must be termite clearance. Required in most sales involving a mortgage, this means you will need to order
an inspection, do any required repairs or treatment and get the written clearance to escrow.
· Any prearranged work must be finished. This includes such things as repairing a roof or repainting a portion of
the home. All work agreed upon between you and the buyer must be completed.
· All ends must be tied. Any other task required to close escrow must be accomplished.
It's important to have someone in charge, tracking all of the things that need to be done and seeing they are
accomplished in a timely fashion. You can do this, or your real estate agent can do it for you. The escrow officer
cannot normally be relied upon to do all of this work.
If no one keeps track, something critical may not get done in a timely fashion and the deal could fall through.
What If There Is A Problem?
It's rare that closing an escrow will have no problems at all. You can almost always count on at least a few things
cropping up. What's important is that you learn about the problem as soon as possible and then take appropriate
steps to correct it.
For example, some repair work that you need to do involves removing moldy flooring in a bathroom. You have the
work started immediately. Later it's discovered that the damage is more extensive than originally thought and it will
take longer than anticipated to complete. Because you started early, you still have time to finish it and close escrow
by the agreed upon date. If you had waited, things might not have turned out as well. Moving quickly is the key to
Additionally, you will want to carefully track the buyer's attempts to get financing. If the buyer cannot get a needed
mortgage, the deal probably cannot be completed. You want to learn about a buyer's difficulty in getting financing
early on, so you can take steps to get your home back on the market as quickly as possible. Selling to a buyer who
has been "pre-approved" by an institutional lender helps to avoid this problem.
Listing Your Home or Property
Once you've decided to list your home or property, you'll want to meet with a Realtor in your area.
Avoid using Realtors that are unfarmiliar with the area your property is located in. For example: Maybe you have
a friend that is in the business, but he lives 150 miles for your home and is a member of a different real estate
board. There is a good chance that he/she might not be farmiliar the local market values or advertising that
works best in that location. Also, if someone would like to set up an appointment to see your home, the distance
between your home and the listing agent might make the process difficult.
Make sure that your real estate agent is a member of the local MLS (Multiple Listing Service). This will give your
property much greater expossure in the market place. This system provides a means of networking with other
local real estate companies. What this means is, when you list with a real estate company that is a member of
the MLS, all agents within the local and participating MLS Boards are able to access your homes information
and can potentially show your property.
Does your Realtor offer VIRTUAL TOURS? Virtual tours are an excellent tool that Realtors can use to showcase
your property. Potental buyers can preview your property without having to make an appointment with a Realtor
first. This saves you valuable time, plus it exposes your property to more educated and interested buyers! Ask
your Realtor about Virtual Tours!
Once you've decided on a real estate company, you will meet with an agent who will then do a CMA
(Comparative Market Analysis) on your home or property. The agent will research other similar properties in the
area that have sold or are currently up for sale. This may include homes of similar size, age, condition, land size
that have sold within the past two years.
Deciding what price to list your property at in the beginning is VERY important. Overpricing can work against
you in the end. To learn more about what to consider when deciding on a price, visit our pricing page.
After you decide on a fair price for your property, it's time to go through the paperwork required to list your
The Listing Agreement
The listing agreement usually consists of two pages. This may vary depending on the real estate
In the contract you and the real estate company will agree in writing, the listing price, the length of
the contract, what items might be included with the sale, commission percentage or flat fee and any
other conditions that may be agreed upon.
The Sellers Disclosure
The sellers disclosure is a form that has to be provided to every buyer before completing the
purchase of any home. This is state law in Michigan that the seller is to provide this information.
When filling out a sellers disclosure, it must be filled out by the owner to the best of their knowledge,
without the aid of the real estate agent. There will be questions on there asking what items work or
don't work (if included in the sale), well and septic information, insulation, roof age, if there are any
easements or encroachments, farms in the area, etc.
The Lead Based Paint Disclosure
The lead based paint disclosure is another form that is required byt the state of Michigan to be filled
out and provided to the buyers prior to purchasing a home.
Homes built prior to 1978 could possibly contain lead based paints. The form simply asked the
seller if they have any knowledge of any lead based paint being present in the home.
The Agency Disclosure
The agency disclosure in another required form in the state of Michigan. This form simply clarifies
which party the real estate agent/company is representing in the sale of a property.
Once all of the necessary documents are signed and completed, the first step is placing a "For Sale" sign on the
property. This is very important! Some people might opt not to have a sign placed on their property because
they'd rather not have the neighbors know that it's up for sale. If your are truly serious about selling your
property, you will want to have a sign visable. You may miss out on a potential buyer simply because they never
knew your property was for sale because they didn't check with a real estate agent first.
After a sign is placed on the property, the Realtor will get your property information submitted into the local MLS.
This will give all other participating real estate companies access to your property's information.
Now it's time to get your property advertised! There are several areas that your property could be advertised in.
Real Estate Magazines
(If your real estate company doesn't do much advertising on the Internet, then you're possibly
missing the boat! A survey taken in June 2002 estimated that approximately 66% of the real estate
and mortgage business was done with the aid of the Internet).
Ok, now that your property is listed,
what happens when you get an offer on your property?
|(c) Copyright 2004 - Ivie Baker