Negotiation is there an art?

You have discussed marketing your home with a professional realtor; you have read through his or her presentation of the Current Market Analysis (CMA), you decided to list your property – taking account of the market circumstances, your realtors recommendations and your own motivation and circumstances. The marketing kicked in and your first viewings have been held.

Now what happens – yes you get an offer – but it is early days in your mind, what should you do – do you accept it in its current form? Do you counter? Which points should you negotiate? Or simply should you wait to see what maybe around the corner?

As you might imagine with all these questions racing through you mind you can easily make the wrong decision or worse not make a decision at all.

Hopefully as part of the listing process you have worked through the numbers – gross to net – to decide a good pricing strategy. This has to take account of your future needs and to some extent your past needs if you are currently holding a mortgage on your property.

Fortunately here in the Cayman Islands we have not been subjected to the problems associated with Sub Prime mortgages, so for most vendors negative equity is not an issue. For some, true, they may have bought when markets were stronger but unless they are looking to sell within the same year of purchase then this issue is somewhat lessoned.

So back to the offer – what should you do? The first and most obvious is to discuss the offer with your realtor – he or she should be able to put some context to the words and conditions on paper. Then you should consider where the offer sits in comparison to your “number” from above. Then you should look at the detail of the offer. On Cayman all property transactions are conducted by law in writing, so if it isn’t written then it doesn’t exist. The Cayman Islands Real Estate Brokers Association (CIREBA) has developed over many years a standardized Offer to Purchase which should win an award for a plain English presentation. All the information you would need is contained in the preformatted clauses – the only things required are:

•             The offer price and the deposit

•             The time the offer is open until

•             The anticipated closing date of the sale

•             The conditions attached to the offer and the dates therein that they will be waived, deemed waived or rescinded

•             The attachment of the inventory of chattels and their valuation.

The above represents the detail of the offer and it is this you need to balance with your expectations. A strong offer will have few conditions, a weak offer will be subject to a range of clauses ranging from financing to survey, valuation and a wide range of other potential damaging conditions. A very conditional offer often will show that the purchaser is not sure or serious about his purchase – he may be struggling for finance or he may not have even made a mortgage application. A long closing date suggests uncertainty or a dependency on some other factor – like the sale of his own property.

You need to weigh these factors up – a good price but numerous conditions often can only go one way with a resultant reduction in price to accommodate “issues”. A long closing date with conditions that last through much of the closing period will result in you effectively stopping marketing your property for that period only to find the purchaser rescinds the contract with all of the resultant lost time.

What can you do – well depending on the level of offer, if it is very low then use your agent to send a message back to the purchaser saying thanks but you are only interested in looking at realistic offers that will open a discussion between the purchaser and your realtor as to what is a realistic offer. If it is closer then consider countering – if you know you can move a good deal then drop a reasonable amount such that if they then “split the difference” it will still be in your comfort zone of acceptance. Leaving countering until nearly the time limit on the offer is concerned shows a strength that an immediate response doesn’t – unless it is to say get real through your agent.

When you have decided that a price and terms are good enough accept the offer - don’t look back – work toward making this offer happen – there are a lot of things to do once you have accepted the offer but prior to closing, don’t take your eye off the ball as things will certainly go wrong with dire consequences. Why don’t look back – why beat yourself up about why might have been -  sometimes in these current markets you need to be glad you were in a position where a decision had to be made!

Overall use your realtor for advice – that’s what you are paying him for, it is what he does for a living and he will have come across just about all of the issues and negotiating stances and he will know how to counter them and don’t forget he has a route through to the purchaser – here on Cayman it doesn’t matter whether you are the listing or selling agent both have a duty to the vendor, we do not have buyers agents here – not unless special circumstances apply and this is declared upfront.

Lastly good luck!