Home Seller Negotiations: There are many things to do, decide, and negotiate when selling your home. There’s the cleaning, repairing, prepping, storing personal belongings, hiring Realtors, negotiating the listing agreement, dealing with contingencies in the offer contract, inspections, title searches, insurance and loan requirements, etc. Whether you have done it a dozen times or never, it can be nerve-wracking.
Negotiation skills are a combination of luck, perseverance, and an understanding of human behavior. Practicing sharpens our skills. Whether it is practicing yoga, basketball, or negotiations, the more you participate, the better your skills. Here are some of the things we have learned to help make your home seller negotiations go more smoothly.
Below you will find answers to some of the most frequent questions about home seller negotiations. We cover how the seller can negotiate the listing agreement, the most common contingencies in the purchase agreements, and what negotiations you can expect during the sale. You will find more in-depth information on other home-selling topics on the pages linked below.
Once your home is ready for tours, it is time to consider pricing, marketing, and expenses. How do you price your home in that sweet spot where buyers flock and the offers come in at or above the list price? What should you expect if you sell it on your own? Who do I market to when selling my Tallahassee home?
The Home Seller Negotiations: First Up – Agents’ Contracts
Seller Negotiations Tips for the Listing Agreement
The first seller negotiations are often with a Realtor. The Florida Association of Realtors and the Tallahassee Board of Realtors have listing agreements available for members. These forms are fill-in-the-blank. Don’t hesitate to contact an attorney if you have any questions!!!!! Watch for hidden fees and costs. Remember that most terms and conditions are negotiable on any contract.
How long should a seller give a Tallahassee real estate agent to sell a house?
On the Tallahassee Board of Realtors’ listing agreement, clause five deals with how long the agent has to market your home. Some agents ask for a year to sell your home. The longer they can market it, the more buyers they will find. Researchers found that the length of the listing agreement made no difference in how long the sale took or how much the seller earned. Most homes sold in the first couple of weeks on the active market. We usually ask for a 90-day listing when there are plenty of comparable properties. If we have not sold it, we must regroup and figure out what is missing. Any longer than 90 days and buyers start to wonder what is wrong with the home. Rural homes do take longer to sell.
What is a reasonable termination fee for Tallahassee Realtors?
Zero is a reasonable fee. The seller’s termination clause is a common place to hide costs and fees. Let’s say the seller feels their agent listed the house and forgot them. The agent does not call with weekly updates. Buyers come and tour, and there is no feedback. Can the seller fire the Realtor? It depends on what is in the termination clause on the agreement they signed. Some agents require sellers to pay a fee to terminate the listing agreement early. Some brokers require sellers to reimburse the marketing expenses to the listing agent too.
What is considered personal property, and what can be negotiated with the buyer?
Everything can be negotiated with the buyer. If you want it, remove it from the house. Most of the time, if it is attached to the house, it stays. Sellers can designate what personal property will be excluded from the sale on the listing agreement with the agent. We still suggest removing anything you do not want to sell, fridge, chandelier, door, etc. If the buyer never sees it, there is no possibility of hard feelings if it is not included in the sale. If there is anything you want to KEEP after the sale, please consider removing it from the property before photos are taken.
What sellers’ responsibilities can be negotiated on the listing agreement?
The seller agrees to provide the broker with a set of keys. They will allow opportunities for buyers to see the house. Research has shown that requiring notice to sell lowers the chance of the seller closing above the list price. Sellers will send all inquiries to the broker. In the contract, the seller also agrees not to encumber the house. That includes leasing it without updating the broker.
Are there brokers’ responsibilities that can be negotiated in the listing agreement?
The seller and broker will agree on when the house will be marketed. Give yourself enough time for quality photos and the creation of online marketing. The broker also agrees to work with other brokers to find a buyer for your home. When you negotiate the commission, the listing agent agrees to pay the broker who brings the buyer. Brokers sometimes agree to lower the commission rate if they find a buyer for the house. The answer is always no if you do not ask.
The seller will acknowledge that negotiating a sale before the house has been marketed may reduce market exposure AND the sale price.
This has been added recently to the Tallahassee Board of Realtors’ listing agreement. Pocket listings mean the listing broker does not market your home to the public. If they have sold enough homes, they have a list of investors that are always looking for their next investment. Investors do not pay top dollar for a home they are investing in to rent. It is better to market your home on the open competitive market.
Can a seller negotiate the brokerage fee?
On the agreement, you will agree that if the broker must order something to get you to the closing table, you will pay this expense, even if the house does not end up closing. The most likely thing a seller would be responsible for ordering is a survey or title insurance or wood repairs. Title insurance requires a survey. Surveys cost around $400-500. VA loans require a clear Wood Destroying Organism report.
PLEASE NOTE: there is language in listing agreements that state that the home does not have to close for the commission to have been earned. Also, you agree that if you sell to a buyer that your broker submitted marketing to, even if another broker showed the property, within ___ (fill in the blank) months, you will compensate the broker unless you sign a listing agreement with a new broker.
Who negotiates the payment to the buyers agent?
The commission amount on the contract gives the option of a fixed price or a percentage of the sale. The commission is not based on the listing price (unless that is what you negotiate). There is also space for a transaction fee. We see this fee more often for agents in the big brokerages. Those agencies charge their agents monthly and/or transaction fees. That is a dirty trick. That fee should be the cost of doing business and not a seller’s expense. Two notes about the commission clause on the listing agreement:
- Under Florida law, brokers are assumed to be transaction brokers. If you choose single-agent representation, other agents in the same brokerage will not be able to submit offers to you unless you sign another form agreeing to allow your agent to transition back to a transaction broker. This is because dual agency is not allowed under Florida law for residential transactions.
- The commission is also split with the buyer’s agent. How this is split tells you how your agent will play in the sandbox with other agents. Some agents do not evenly split the commission you agree to pay. There are many ways buyer’s agents can overtly and subtly influence a buyer through the closing process. If a buyer’s agent feels treated unfairly by a listing agent, it could result in a negative outcome for the seller. Do not get caught in that crossfire.
What happens if the buyer loses their deposit? Who gets to keep the money?
If the buyer cannot close the loan and defaults on the offer to purchase your house, they will lose their earnest money deposit. This clause determines who receives this money, you or your listing agent. Many agents try to keep the deposit money. We don’t.
The Next Step in Seller Negotiations: Purchase Agreements with the Buyers
What seller negotiations are options on the purchase contract?
Everything in real estate is negotiable. The things that can be negotiated are as varied and unique as the sellers and buyers. Before sellers list their house, they often tell their agents that they want the most proceeds possible AND XX (fill-in-the-blank). The seller can negotiate a move-out date later than closing (also called a rent-back). Often sellers offer credit towards closing rather than repairs. It is important to keep the word “repair” out of the contract, if possible. Banks will alert on that phrase and may require additional paperwork.
Here are the top Six things we see negotiated on the Tallahassee Board of Realtor’s contract:
- The sales price of the house.
- Whether and how much the seller will pay towards the buyer’s closing costs.
- Repairs or credit for repairs after closing.
- When the closing will happen.
- How much earnest money is deposited with the closing agent.
We have heard it is better to negotiate an ‘as-is’ contract. What does that mean?
Most contracts in Tallahassee are ‘as-is’ contracts. This means the buyer is not expecting the seller to make any repairs or alterations to the house. Buyers can end up asking for repairs if they are required by the lender. After reading the appraisal report, some lenders will require repairs before closing. (This depends on the severity of the deficiency.) This is another reason to keep the house in showing condition until after the appraiser’s visit.
More often in Tallahassee, it is the insurance companies that require repairs before they insure a home. Depending on the house’s condition, they may offer a temporary policy contingency on the repair completed within 30 days. The insurance industry is a mess in Florida. It is often the case that a house they have insured currently would not qualify for insurance if a new policy was issued.
Should a seller market their home ‘as-is’ to ensure the buyer does not ask for repairs?
No. Research has found that using the words ‘as-is’ in the listing description made the house statistically LESS likely to sell above the listed price. This also applies to the using the phrase ‘appraised value’ in marketing. Unless repairs are obviously needed, most contracts in Tallahassee are ‘as-is.’ Research backs up our experience. Telling potential buyers that you will only accept ‘as-is’ contracts makes them nervous. They wonder why and what sellers could be hiding. Nervous buyers do not offer top dollar.
During seller negotiations, why would a seller agree to pay the buyer’s closing costs?
During the past couple of years, Tallahassee home sellers did NOT agree to pay for any of the buyer’s costs or repairs. That was the market then. In the fall of 2022, buyers are asking for and receiving concessions. Most concessions involve the sellers paying a portion of the buyer’s closing costs. Lending guidelines limit the percentage a seller can contribute toward buyers’ closing costs. (For example, 4% for VA, 6% for FHA).
Top three reasons sellers will agree to concessions:
- It can close the transaction with little to no impact on the seller’s proceeds. (Zillow has research that indicates 80% of sellers pay concession.)
- If you do not close, you will not pay the expense. (Most of the time, read the contract.)
- Concessions can be noted on appraisals so the home value will meet lender guidelines.
Once a seller negotiates an ‘as-is’ contract, can the buyer ask for repairs?
If you wanted to start an argument in a room full of Realtors, ask this question. The buyer can ask for whatever they want. The seller does not have to agree. The contract is a meeting of the minds. Sometimes minds change. Sellers should weigh the seriousness of the repair and offer a repair credit rather than agreeing to complete the work.
We have worked with many buyers. When we negotiate an ‘as-is’ contract, we set the expectation that the buyer will not ask for any repairs for anything obvious or written in the seller’s disclosures. If the inspections reveal something that was not visible or readily seen during a walkthrough, the buyer will likely request a repair or a credit. That does not mean the seller must agree.
Sellers are more likely to agree to repair credit if:
- Lenders or insurance companies require the repair.
- The repair impacts the perceived value of the house.
- House’s condition will deteriorate if the repair is not completed soon.
A final note on home sellers negotiations.
The reality of the situation is that the seller does not determine the market value of the house. The buyer does. The house is only worth what a willing and able buyer agrees it is worth. The best way to know what a buyer would be willing to pay for your home is what a buyer was willing to pay for your neighbor’s similar house. Buyers, and their agents, recognize when a house is priced over- or under-market value. Pricing is the starting point and the beginning of negotiations. We dedicated a whole page to pricing your home correctly.
Seller Negotiation Tips on How to Evaluate Offers From Buyers
A lot of work goes into prepping, listing, and marketing a house before the first home tour. The first five days of the listing tell sellers a lot. Buyers who have seen what is on the market are watching for new listings. If two weeks go by and there have been no home tour requests, the house is priced at least 15% above the market. When there are home tours, but no offers, it means the list price is at least 5% too high.
1. Get an updated comparable market analysis
If there are any additions to the neighborhood market, it will influence how the buyers perceive your house’s value. Sold properties will inform the sellers of common concessions. We do not recommend using the price per square foot. It is used and abused often in real estate. Matching homes and neighborhoods are a more accurate way to judge a home’s value.
2. Do you or your Realtor see any red flags in what the buyer presented?
This comes from experience. Local Realtors like to see local lenders used. Listing agents like to see experienced agents bring offers too. The top three red flags seen in buyer’s offers:
- Did not send a letter from a local lender.
- The offer is more than 5% lower than the list price.
- The buyer does not have ‘skin’ in the game, i.e. not paying closing costs or a down payment.
3. What are the contingencies of the contract? Are any common contingencies waived?
There are financing and inspection contingencies in the boilerplate language of every contract. Some buyers will waive the inspection contingency. This means the buyer will not terminate the contract based on any inspections. They may still have inspections, but the house’s condition cannot be used to terminate the contract and receive their earnest money deposit back.
If buyers are financing, they cannot waive the bank’s requirements. If the buyer waives the financing contingency and cannot close the loan, the buyer will lose their earnest money deposit.
4. Evaluate the sellers’ proceeds. Does it include everything the buyer is asking for in their purchase offer?
We have a spreadsheet that includes estimates for all closing costs. Look over the estimate closely and ask questions until you are clear on the numbers.
5. What is the buyer’s skin in the game?
Buyers with nothing to lose are more likely to terminate a contract. Sellers should carefully consider any offer without ‘skin’ in the game. This means the buyer is offering no, or a very low, earnest money deposit OR a loan without a down payment. Please note that many of our veterans buy homes without money out of pocket. Please do not penalize them for using their VA benefits.
6. Who is the lender? Is there a local loan officer?
There are places in Tallahassee that do not qualify for financing. New agents learn these places the hard way by having lenders call and explain why the offer they wrote will not work. Those big online mortgage brokers do not know those areas. They will often be past the contingency timelines before they figure it out. It costs buyers and sellers time and money. One more reason to shop local and use an EXPERIENCED LOCAL lender.
7. Where will the closing be located? Who is paying for the title work? Who is the closing agent?
The buyer usually picks the closing agent on most contracts. The seller can recommend a closing agent, especially if title work is required to prepare the house for sale. In Florida’s most commonly used contract, whoever chooses the closing agent pays for the title insurance.
Home Sellers Negotiations in Multiple Offer Situations
Seller Negotiations: What are the options when there are multiple offers to consider?
Even in the slower market, some homes still have multiple offers. The seller can determine how they would like to handle the multiple offers. We have seen all these options when selling real estate in Tallahassee.
1. Do no sellers negotiations. Accept one of the offers as presented.
Sometimes the perfect offer comes along, and it makes sense to sign it and move on. Once, we listed a friend’s newly remodeled house at the top of the market. After 48 hours on the market, she had seven offers. All are incredibly good, and one is better than all the others. One agent from another office begged me to let her present an offer from her buyers in person. My friend did not want to meet with this other agent. She went with the offer through the open house we hosted. They knew they might make a few thousand more if they waited, but they signed what was in front of them. She was not cool with a high-pressure sales tactic.
2. Ask all the buyers for their highest and best offer. Giving them a deadline helps with fairness.
During the height of the market, listing agents would post the deadline for offers in the confidential section of the MLS. That way, everyone looking at the new listings would see when the seller would review any offers. This is the most common way multiple offers are handled in Tallahassee real estate.
3. Sellers can choose and negotiate with one buyer at a time until they reach the perfect offer.
This is what we recommend. This is especially helpful if the seller has specific terms and conditions they want.
4. Sellers can attempt to negotiate with multiple buyers.
The downside of this is a messy court case when you have a contract with two buyers! We almost had this happen once on a listing. We had sent a counteroffer to the buyer and expected an answer. Then an awesome offer came in that the seller wanted to sign right away. We tried multiple times to reach that first buyer’s agent to tell them that the seller had accepted another offer.
What Other Seller Negotiations Are There? What Should Home Sellers Expect From the Professionals Involved In the Sale?
Seller negotiations and the listing broker. What is negotiable?
Everything. We do not recommend changing the boilerplate language. Anytime you change a contract’s standard terms and conditions, it looks like practicing law. One of the things missing in most listing agreements is the amount and type of communication the seller should expect from the listing agent.
Do seller negotiations directly involve the buyers’ agent?
They can. Generally, sellers hire a listing agent to handle the negotiations. Sometimes buyer’s agents want to present offers directly to the sellers. Sellers can decide how they would like to handle these requests. We make recommendations on a case-by-case basis.
Is there any reason a seller should contact the buyer’s lender, and under what circumstances?
The seller can contact the buyer’s lender and ask questions. They can, but they rarely do, though. It is more common for all requests to flow through the buyer’s agent. If the lender is making a requirement of the seller or of the seller’s house, we recommend calling the lender. The lender can help explain why the lender requires the repair or what they can do to approve a credit rather than a repair.
Can the seller have to attend the inspection or meet with the inspector?
It is the sellers’ house until closing day. They can stay for the inspection and meet the inspector. We recommend allowing the buyer to have the house to themselves for the couple of hours it takes to complete the inspections. We recommend that the seller shows up just before the inspector leaves. The seller can often hear the summary of what was found. If the buyers find anything that concerns them, they will provide copies of the reports to the sellers.
What should a seller expect of the appraiser? Who meets with the appraiser, and is there anything special a seller should do before an appraisal?
If there is any question of the value of the house meeting the value in the contract, the appraiser should be met at the house by the seller’s agent. The seller should keep their house in showing condition until after the appraiser has completed their walk-through and inspection of the home.
Are there any seller negotiations with the insurance agent?
Sometimes we have found atypical homes that have unique insurance requirements. For example, solar systems over 12 watts require an additional policy that protects the utility company. Not all insurance companies in Florida offer this type of coverage. If the home is atypical, sellers may want to consider offering to pay for a year’s insurance during negotiations.
How do I know who the closing agent is and where I need to go to sign the papers?
This information can be found on the first page of the contract. The time is usually set the week before and is based on the availability of the closing agent. The seller only has a few pages to sign. They can drop by the closing agent’s office and sign any time before closing. If the sellers are married, both need to sign the paperwork.
When does the surveyor show up, and does the seller need to do anything special?
Nothing special is done for the survey. The survey is ordered two weeks before closing. This professional will show up during the week and put posts on the corners of the property. Often, the pink flags are the only way you know they were even there. The survey is needed for title insurance.