I was recently part of an interesting negotiation during the attorney review period of a residential real estate contract regarding a buyer’s potential repairs that came up on an inspection report and other possible buyer credits. As the attorney for the buyer primarily it was eye-opening that the Seller is this particular transaction was taking such a hardline amidst the worst real estate market in recent memory. The Seller was adament about the fact that the Buyer’s prorated real estate tax credit should be 100% of the previous year’s tax bill and Seller would do no repairs nor provide any credit despite probably $2,000-$3,000 of substantial repairs that were raised in the inspection report.
What’s the sweet spot in terms of $$ when negotiating fairly straight forward deals like the above?
Generally I think Seller should be willing to compromise up to the amount of his total monthly expenses that she pays each month for the property that she’s selling. In other words, add up mortgage liability, condo assessment, property taxes, utilities, insurance, ect. Say that total is $2,000. I’d suggest that Seller should be willing to deal up to that amount in order to get a deal closed with the current buyer. Probably even more in a soft market, but I think that’s a good, easy guide for finding the “sweet spot” needed to get a deal closed.
My reasoning is that even if there is a backup buyer ready to step in, by the time you play with the first buyer’s attorney review period for 10-14 days, kill the deal, then second buyer has 10-14 days in attorney review…a month is eaten up and closing is delayed approximately a month. Thus the one month’s expenses as a simple barometer. And this likely even leans optimistic for Seller.
Are you really ever certain that there’s another offer out there?
This was a very good post to use as a barometer in negotiations. Thanks.