Tips and Traps When Negotiating Real Estate: Should You Go For a Better Price or Better Terms?

Negotiating a Sales Agreement: Should You Go For a Better Price or Better Terms?

Some agents think of the sales agreement as having two major parts. The first part is simply the price, the amount to be paid for the property. It occupies only a single line on the document. The second part, however, refers to the terms by which the price will be paid and how title will be given. Virtually all of the remainder of the docu­ment comes under this heading.

The two-part breakdown, however, underscores the relationship between price and terms. In any real estate deal, there is usually a trade-off between price and terms. For example, if the buyer is pay­ing all cash within two weeks (or as soon as clear title can be given), you would naturally expect that the price would be lower than if the buyer is putting down no cash, but instead is borrowing money from a lender, the seller, and everyone else. In other words, the worse the terms (usually), the higher the price; the better the terms, the lower the price.
When negotiating the sales agreement (in essence negotiating the deal), therefore, it is valuable to remember the two parts—price and terms. Give on one, get on the other. (This does not mean that you cannot increase the size of the pie or the total package, as noted in earlier chapters. It just means that within the sales agreement, use­ful division is into the two parts.)

TRAP

Sometimes one party or the other (usually the seller) will get hung up on price. That party becomes con­vinced that the only way they can get a good deal is to get the desired price. If the other party is savvy, they will go along with the price and, in return, insist on receiving terms that are extremely favorable to them­ selves. As a result, while one side gets the price they wanted, they may actually be giving up so much in the terms of the deal that they end up losing! Beware of hanging onto price like a lifeboat. It could end up sinking you.