Contrary to popular belief, the bottom line in contract negotiations is not always the bottom line.
Obviously, how much you’re going to pay for or gain from the sale of a house is on the top of the spreadsheet; however, there are a certain percentage of contracts that fall apart because of the terms or non-sales price parts of the contract, rather than the financial bottom line.
Let’s take a $350,000 offer on a house listed at $350,000. You would think that’s it. Full price contract, what more is there to talk about? Well — seller subsidies, sale of home condition, financing, deposit, inspections, appraisal, third-party approval, just to mention a few.
While many of the above items come with some sort of financial link, not all do, and that’s where some buyers and sellers can’t come together.
Closing date is a big one. A “quick” closing can sometimes be more of a curse than a blessing — especially if the buyer expects the seller to move out at that time. A contract written on the 1st of the month, for instance, requesting a closing in three weeks (by the 22nd), can cause a lot of havoc in a household.
If all we had to deal with were the financial ramifications — no problem!
At times, the terms are a matter of “principle,” and sometimes “pride.” While other times a seller may believe that, while the buyer surely can purchase his home, the buyer is just being plain old unreasonable.
Sometimes, it’s the principle of the matter (in the seller’s mind) about whether he should pay for the leaky faucet or leave it as is. “It’s a leaking faucet, for cryin’ out loud,” he might say. “I just gave them $5,000 in reduced price. Let them pay for their own leaky faucet.” To which you may get the buyer to reply: “It’s a leaking faucet, for cryin’ out loud. I just paid him $350,000 for a house … .”
Other non-money items could be something like rent-back to the seller, where the home seller becomes home renter for a month while they are trying to find a home of choice. Some buyers are okay with this type of arrangement. Another buyer may want a clean break and want possession right after the closing day.
Sometimes a contract can fall through or the offer won’t even get out of the starting blocks, depending on a buyer’s choice of financing and their deposit. Consider two contracts: one is full price ($350,000), with a $2,000 deposit and 100 percent financing. The second one is $345,000 with a $15,000 deposit and financing of $245,000 with a $100,000 deposit. Which buyer do you think has more to lose?
Obviously, it’s the second one, even though the price is $5,000 less. While the seller may walk away with less money, he at least has a stronger sense of security that the transaction will go to closing since the buyer knows if he messes up, he could lose his $15,000.
The world of negotiations in real estate is much more complicated than simply attaining the highest price possible. While dollars are very important, it’s not the only thing that matters. If the buyer can’t fulfill their promise and close the deal, none of the rest matters.