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Stage 4 Defined : Offer Acceptance

Stage 4 Snapshot

The Scenario








Price Negotiator leverages all Value Profiles to influence terms of the Purchase Offer. Dominate with a strong agent  and a multitude of ready strategies.
OFFER ACCEPTANCE

The Strategy


Your preparation from the previous 3 stages will pay dividends in Stage 4. 

Use Home Price Profile. There are 4 Prices to consider with every home on the market, not one.

Whether you're competing against other buyers or leveraging your offers as a seller, understand the significance of the Price Profile to effectively negotiate offers.

The Tools

Your Cash to Close scenarios and Term sheet scenarios are very handy.




Track your Agent's Service Plan & Lender Finance Plan during these last 2 Stages. There is alot happening.

The Art

Your agent represents your interest. Their ability to successfully negotiate this essential stage depends on your possessing a clear understanding. Make better decisions and avoid common and costly mistakes.

How well you collaborate together may be the difference between 10's of thousands of your dollars. 

You rely on a professional representative to sit at the bargaining table on your behalf. Price Negotiator and your Agent's Service Plan help you avoid the common and costly mistakes that most of us are inclined to make.

The Science

Many of the most powerful psychological elements of negotiating come into play. Anchoring, the Framing Effect, Loss Aversion, and others are key tools in the arsenal of seasoned negotiators.

Here, the Seller's Endowment Affect distorts his home's perceived value which his agent must help him overcome if he is to align the fair market offers. 

A Buyer's value perception may be distorted (Availability Heuristic) either by losing a home to another buyer or fearing that they will overpay.

The Formula

Intuitions vs. Formulas Human judgement fails us in predictable way. In Stage 4, a buyer or seller's ability make good value judgments is often impaired.

Because it's predictable, it's important to be aware and know when to rely more on your agent's judgement. Price Negotiator may guide you to understand the psychology at play here.

Contents

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Stage 4: Offer Acceptance

Dollar Value

Price Impact Range -10% to + 10% of home’s value (typical)

Summary

Welcome to Stage 2 of HomeToHome’s Price Negotiator.

From Stage 1 (Agent Aptitude) to Stage 5 (Home Acquisition), you will benefit from your Agent’s Value Profile. No single decision is more critical than choosing the right agent. A poor agent with a low Value Profile will cost you money. An excellent agent who understands how to increase value profiles through negotiation will save you money and increase your equity.

Understand the value that an agent brings to you. See your agent’s performance before during and after you hire them with their Agent Service Plan. Choose the best agent for the job and collaborate more effectively when buying and selling homes.

Buyer

Selecting an effective agent is on par with picking the right house. It’s that important. And yet, many people find a house they want first and pick an agent as an afterthought. That can be risky and often more costly than first evaluating and choosing your agent as a trusted advisor.

Seller

One of the most challenging conundrums in real estate today is how to determine your home’s List Price. Most people fall into one of 3 traps. Price Negotiator can steer you clear of these traps so you get the most money for your home when you sell.

6 Key Factors that Affect A Home's Value

Home Value Profile reflects property characteristics, the seller’s timing & motivation, and the market. Use HomeToHome’s MarketPrice and RateThisHome to set a realistic Home Value Profile.

($) Home condition
($) Market Conditions
($) Marketing
($) Market Timing/Buyer Pool
($) Seller Position
($) Title condition
  • Home condition : Size, location, age, structural integrity, upgrades, staging, curb appeal
  • Market Conditions : Comparables: active, pending, recently sold. Local economy
  • Marketing : Price strategy, media creation, target buyer type, advertising campaigns
  • Market Timing/Buyer Pool : Maximize demand of qualified buyers
  • Seller Position : Timing, motivation, & equity position 
  • Title condition : Clean, encumbered, restrictions, CC&R’s, liens, etc. 

6 Key Factors of Clients that Affect Your Home's Price

The 6 factors of Buyer or Seller “readiness” qualifies the client’s to act decisively and favorably. A strong buyer is always more attractive to a seller since they are more likely to close escrow on the home. Similarly, a strong seller is prepared and aligned with the market. Use your Lender’s Finance Plan and Profile, LoanSense and CashToClose tools to sharpen your negotiating position.

($) Agent
($) Home
($) Finances
($) Motivation
($) Execution
($) Credit
  • Representing Agent: Expertise, competence and integrity
  • Home: Expectations, location, condition, and list price
  • Finances: Loan(s), cash position, equity, tax considerations
  • Motivation: Readiness and desire to execute
  • Execution: Client’s ability to cooperate with trust and honesty
  • Credit: Client’s understanding of significance, qualification process, and true cost of credit

4 Key Factors that Determine a Home's Price Profile

After you have optimized your Home’s Value Profile, use Price Negotiator with your Agent to bend the Home’s Price Profile in your favor. The Home’s Price Profile is determined during negotiation between a Buyer & Seller. The Price Profile is described by these 4 factors:

($) List Price 70% correlation (est.)
($) Market Price 90% correlation (est.)
($) Appraised Value 80% correlation (est.)
($) Sold Price 100% correlation (est.)
  • The List Price is the advertised price of a home. It should not be confused with a Market Price or Sold Price.
  • The Home’s Market Price is what a ready, willing and able buyer will pay.
  • The Home’s Appraised Value, conducted by an independent professional on the Lender’s behalf, may affect the buyer’s ability to purchase.
  • The Home’s Sold Price is the price that the seller agrees to accept and a buyer will pay.

Use HomeToHome’s HomeScene tool to generate different Term Sheet scenarios when negotiating for your most favorable Sold Price.

How To

No strategy will help unless you insure it’s successful execution.

Enhance your negotiating strength

With Price Negotiator: Stage 1, build your power base for negotiation. Begin with selecting an agent that is likely to be stronger than your opposition’s agent. To help you with this, HomeToHome provides the complete solution:

1. The Agent’s Value Profile (see above)

breaks down your Agent’s Aptitude into 6 Key Factors. When interviewing your agent, discuss each of the 6 Key Factors that define your agent’s value. Ask questions to decide your agent’s strengths.

2. Your Agent’s Service Plan

or our generic Agent Service Plan (if your agent is not yet a member). Have your agent walk you through their Service Plan to explain their unique value proposition. Your Agent offers this as services rendered in exchange for payment.

3. Our Agent Search database

of over 1,000,000 agents and brokers. We offer the most complete publicly searchable database with published Service Plans provided by our member agents.

4. Price Negotiator: Stage 1 Strategies

Explore strategies to sharpen your choices and strengthen your position.

Case Study no. 1

Oops! I Hired a Weak Agent

In an undertaking fraught with so many pitfalls, it’s important to trust the expert you hire. Unfortunately, most of us choose people we trust and assume they are also experts. It’s hard to know how strong of a negotiator your agent is unless you are one.

Let’s take a quick detour and visit the well-trodden path of mediocre performance and what it will cost you. Whether buying or selling, most people begin with the idea of first shopping for their next home.

You find a home, find an agent, apply for a loan, and buy the home.This approach skips 3 of the 5 Stages to build leverage. It’s very common that the first home you find is not the one you buy. In the worst case scenario, you find a home on a listing site or an open house and you hire the listing agent, hoping to save money by getting a portion of the agents sales commission.

It may work out for you; it may not.  But as you will come to appreciate, it is a colossal mistake when you don’t have a strong agent negotiating on your behalf. The other guy, your counterpart in the deal, will walk away with more of your money.

Case Study no. 2

Bargain Shopping for your Listing Agent

It’s the right thing to do to save money so long as you understand the trade-offs. You don’t want to overpay an agent who fails to bring more value than what they are paid. Nor do you want to hire the cheapest agent and end up losing valuable equity when your home sells.

Here is one very common costly scenario that occurs-one that costs home sellers tens of thousands of dollars. It is because nearly all of us are not experts and lack adequate tools to choose and evaluate our agent.

Until now, we’ve had no way to measure to evaluate quality of service or price negotiation that an agent offers. So, we shop for agents by two prices. The first price is what they say they can sell our home for. The second price is how much sales commission they will charge to sell our home.

Whether you are considering a poor agent or an excellent agent, you may choose the agent who charges the lowest commission as a condition for hire. A poor agent may actually cost you even more than their commission, whereas a strong agent may actually make you more money than they are charging.

This is quite a conundrum for a home seller.

If it’s a poor agent that accepts this condition, possibly they compensated fairly in the market. If it is an experienced and valuable agent who is asked to Discount their Commission, then it is likely that the seller is doing himself at disservice.

Why would an excellent agent discount is Commission? When there are too many agents and not enough transactions to support a professional agents livelihood, price wars ensue. Even experienced agents are forced to discount their services. However in a market of hyper competition, the situation is exasperated.

If a seller can lose a lot of money by choosing the wrong agent for the job, they can lose even more money by not accurately knowing their home’s market value. A strong agent will push up the sales price whereas a weak one will sell below

That’s exactly what happens the majority of the time.

Consider a seller wishing to get the most money for his home by applying the “fixed-price paradigm”. In this paradigm, he believes that the price as listed is his best chance to get the price he wants (within reason). This reasoning works against him.

With Price Negotiator, you will see the many stages in between the list price and the final sales price. The seller sets his list price in Stage 2, Market Awareness, when he enters the market. Presumably he has already chosen an agent but he may in fact have already decided on a price. This plan is flawed.

Warning

WARNING: As a buyer, having the Listing Agent represent you may be potentially expensive or risky. There are a few exceptions.

Case Study no. 3

For Sale By Owner

When it makes sense, what you gain, and what it costs you.

There are some rare situations in which selling your home on your own makes sense. Sales commissions are significant so you may ask if this is worth considering. In nearly all instances, you are best served by an agent who can get you the most money on the open market. Use HomeToHome to help you determine your best option.

When to consider selling your home on your own:

  • You have a ready and qualified buyer.
  • Both you and the buyer are agreed on price and terms.
  • You trust that the buyer won’t try to take advantage of you once you enter into an agreement.
  • You have a trusted and experienced attorney and escrow officer to handle the transaction.
  • You are prepared to walk away if any of these things change.

When selling your home on your own doesn’t make sense:

  • You are uncertain of how much your home could sell for or your home’s current value.
  • You are uncertain with how to attract a buyer.
  • You have a buyer who has an agent who wants you to pay them.
  • You do not know the buyer or the agent well enough to trust that you will not get any surprises.

The items in these lists show us that there are many unforeseen outcomes and uncertainties going in. Of course, there are many more.

Note that neither list mentions how much you owe on your home or what you believe the market price for your home to be. That’s because these reasons are secondary.

Tip

TIP: Ask your Agent to walk you through their Service Plan. You don’t need to understand everything. You just need to know that they do.

Unlock HomeToHome’s Price Negotiator. 

Get more  strategies, 18 tools & 9 Buy/Sell plans.