An Important Lesson for Buyers and Sellers of Real Estate

This hub is written because in my experience over the years as an inspector of both residential and commercial property I have seen both sellers and buyers make the following mistakes in the negotiation process and in the due diligence phase before a property is offered for sale or put on the market.

I have seen these mistakes on all sizes of transaction regardless if it is a small single family home or a larger commercial project.

The result of making these mistakes costs the buyer and seller in many ways but mostly in the mistrust that is developed between the parties. The parties want to buy and sell only if they believe the other party is being fair and trust is present. If the element of mistrust is introduced the parties often panic until the point of a stalemate is present or the transaction collapses.

There is no doubt that reasonable minds in any transaction want to be respected and acknowledged. When you try to control the playing field completely you are not being reasonable and you fail to recognize that negotiations flow back and forth between the parties. If you fail to see who has an upper hand at the right point you may not purchase if you are the buyer and you may not sell if you are the seller.

So, what are the two biggest mistakes buyers and sellers make in my view. The common denominator is preparation and being prepared for when that flow of control shifts back and forth.

This preparation is important as it helps eliminates the mistrust that can and often develops during the tense negotiation, purchase, and closing process of a real estate transaction.

Buyer Mistake #1.

This mistake is very easy to avoid. The mistake is negotiation with the seller and getting a reduction in the asking price from the seller. The buyer then negotiates a clause allowing for an inspection of the property. The buyer then after the inspection wants to negotiate further a reduction in the purchase price after negotiating and getting a signed agreement.

This going back to the seller by the buyer after he accepted your less than original asking price is like trying to get a second bite of the apple. This second bite approach will likely infuriate the seller and force them to dig in their heels and not offer any more discounts. You are now forced to accept as is and walk away. Most likely you are irritated as you believe the seller should offer more.

Why did this situation develop? It was the lack of preparation and planning. It is now no longer negotiations but it was made personal. You as a buyer are now forced to buy as is or lose the deal because you failed to plan and lay ground work for fair negotiations based on the condition of the property and not because of your hurt feelings or ego. In addition you are not being fair with the seller as he already discounted the purchase price and are asking him to swallow his pride and allow you to take more advantage of him. It is here where mistrust often develops and a transaction is terminated.

Before you negotiate get the facts regarding the property. Perform your due diligence before making an offer. You can still do this with a written agreement of sale.

Seller Mistake#1

This mistake is also very easy to avoid. What is this mistake that sellers for some reason make way too often?

The mistake is engaging in negotiating with the buyer without providing full disclosure regarding the property whether it is operating statements, physical condition matters, legal, and or lease agreements terms with tenants. The specifics are determined by the actual property itself and its particular circumstances.

I have seen a number of sellers who fail to disclose all they know about the property and matters that may be pertinent to the buyer or prospective purchasers. If sellers disclose all that they know prior to negotiations then these issues will not likely become a serious stumbling block during negotiations.

They (disclosure's) put the buyer on notice and keep any issue on the property and not on the character or trustworthiness of the seller. The buyer views the seller in a positive light if disclosure is made especially of matters that are likely to be discovered during any inspection of the property, legal matter, or lease issue. Unless serious matters develop a buyer will not terminate an agreement if they are first made aware of issues and still agree to negotiate either prior to agreement or after wards.

At this point both parties integrity is still intact and respect for each other will likely go up. If a buyer believes or begins to believe the seller has not revealed important or critical information about the property the buyer will wonder what else is not disclosed and his mistrust of the seller will start to grow. This mistrust is often followed by the transaction failing to close or negotiations breaking down and everyone digging in their heels.

It is important to realize that the ebb and flow between the parties must be kept moving for a successful transaction to be completed and each party to respect each other even though the parties seldom get everything they want.

It is critical that a seller not let a buyer find anything during their due diligence period that the buyer thinks he knew and did not disclose. Further, a seller should not discount any finding or assessment by the buyer but openly discuss the matter. There is no property condition that likely cannot be resolved or discussed if it is not made personal between the parties.

I hope the above has been of assistance to both buyers and sellers. It is not weakness to discuss any matter or change positions to keep the deal together. If you take a take it or leave it attitude it will most likely not become a completed transactions.

Buyer’s want to buy just as much as sellers want to sell if both parties are truly interested. Sometimes you just have to take a little detour on the way to the closing table to deal with property issues.