Property Auction Negotiation Techniques For Fair And Advantageous Deals – While many of our articles discuss negotiation theory and the latest research, it helps to discuss real-life negotiations while sometimes offering tips and advice. The following discussions are based on real estate negotiations, a negotiation scenario that most of us will encounter in our lives.
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Property Auction Negotiation Techniques For Fair And Advantageous Deals
Imagine you and your family have moved to a new city. You’ve been renting month to month and you’ve finally found the perfect home to buy. Unfortunately, the seller is unreasonable.
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The house is on the market for $600,000, but your research, backed up by your broker’s opinion, tells you it’s worth more. You estimate the fair price to be $500,000, but when you offer that amount, the seller tells you you’re “not even close” and doesn’t respond. You may think the seller is in denial about the downturn in the housing market, which has significantly affected prices in your city.
Sellers are looking at the prices their neighbors paid for their homes a few years ago, while buyers are looking at comparable transactions from the past few months to determine the “fair” price. You may consider creative contract structuring to overcome the resulting impasse. Start by recognizing that a typical home purchase is a very “hard” deal: if the seller commits to a specific buyer, the seller cannot (legally) sell the home to anyone else. Despite offering a significantly higher price.
In your situation, a “loose” contract structure may provide a way forward. Imagine you make an offer of $525,000 (this is your “perfect” home, slightly above all else). Then you give the seller 60 days to proceed with the home purchase. If a better offer comes in during that time, the seller has the right to walk away, paying you a “breakup fee” of $25,000 or less.
When A Property Is ‘passed In’ At Auction
This contractual structure creates value based on different beliefs about the value of the home. In effect, you’re saying to the seller: “You think the house is worth $600,000, but I don’t think you’ll get a better offer than my $525,000. I’m pretty sure I’m wrong.” I am ready to give you 60 days to prove it. If you get a good price, I’d be looking for the perfect home. If you don’t get a good deal, we’ll close in 60 days. Our price
Although this type of contract structure is not very common in the United States, it is actually the norm in the UK. There, a homeowner can formally accept an offer from a buyer, but remains open to competing offers until the moment of closing. The British have a word to describe what happens when a third party contracts: gazumping. Buyer can also purchase “Gajumping Insurance”.
As you can see, selling real estate in the United Kingdom is a free-for-all until closing. Not that the British system is any better – in fact, stares can ruin people’s lives. But in some cases, creative contract building can break the deadlock.
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Adapted from “To Break an Impasse” by Gohan Subramanian (Professor, Harvard Business School and Harvard Law School), originally published in the Negotiation Newsletter. A specific time auction. Sales deadlines create a sense of urgency in buyers and sales consultants.
An auction is a short, fast and intensive marketing campaign for the property at no cost. Our goal is to get the seller the highest possible price for their property by the end of the auction campaign.
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A well-executed auction program may take a lot of time and effort on the part of the consultant but will maximize the exposure of the property. This is certainly the method that provides the most shared responsibility and control between the consultant and the vendor.
High profile auction marketing highlights the property in the lead-up period, generating the most exposure during a period when inquiries are likely to be highest.
The auction is the shortest part of the process, but it is the best opportunity to sell during open competitive bidding.
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Post-Auction Period – Some believe that the auction system has failed if the property is not sold on the day of the auction. This is not true. The third step provides an opportunity to negotiate with someone who needs to sell another property or arrange financing before committing themselves unconditionally.
A sense of urgency is created by a defined time frame, which drives interested buyers to a decision.
Buying at auction avoids the traditional offer/counter-offer negotiation process. Everything is open. If successful, the buyer will have the satisfaction of knowing they bought at “true market value”. In addition to:
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“Buyers can be sure they are dealing with motivated sellers, which reflects their willingness to invest in good auction marketing campaigns to get results. Furthermore, many of the best properties have been shown to be auctioned, so the selection of properties is good.
Selling a property always starts with one question – “Which selling method will suit my needs and ultimately get me the best price?”.
Following fair trade and legal conditions, selling property at auction continues to be popular for a number of reasons, and while it is certainly a great option for many sellers, we want to make sure you are fully informed and confident in your decision. you move ahead
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Of course, there are pros and cons to auctioning your home, so we’ll do some basic research for you and gather information about homes, real estate auction fees, auction rules and more. Convenient, central location. Below you’ll find the how, what and why to sell at auction tips. If you want information straight from the source, real estate agents will be more than happy to recommend a sales method that they think is appropriate for your property. To find a top performing, local real estate agent, visit our homepage and compare local top sellers.
The above seems pretty straightforward, but we know you have some other pending questions so we took the time to answer some of them below.
The seller will first appraise their home – often with the help of their auctioneer – and do additional research on similar sales in the area to establish their approximate market value. This is combined with a number they feel 100% comfortable with to determine their reserve price.
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If your home sells at auction, the buyer will be encouraged to sign a contract and pay a deposit. We recommend letting an agent handle all the details until this step is fully completed. Once done, you can meet and interact with buyers.
If your reserve price is not met and the property is not sold on the day of the auction, the auctioneer may declare the property ‘passed in’ and this means the property will be awarded to the highest bidder. The seller has the first right to negotiate with the seller. If you can’t reach a sale or reserve, you can usually discuss options for re-advertising and marketing the property with the agent, or consider listing for sale at an agreed price. The agent follows up with interested buyers to post the auction result, generating renewed interest from buyers who were unable to attend the auction.
Download our free 2023 seller guide on how to increase your selling price. Get a guide How much is the auction fee?
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There are a few pieces of the puzzle to consider so we’ve broken it down into a list:
Professional photography is used exclusively to capture the best features of your home in high-quality images. As they say – a picture can speak a thousand words and it is often the first impression of a property, the more the better so don’t be afraid to capture as much of the property as possible. A basic professional in-home photography session costs between $100 – $400 and includes photos only (no video).
To achieve a successful advertising campaign, multiple levels and channels are often required and used to achieve maximum coverage. You’ll find that this marketing ranges from large signage to website listings to print.
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