One important aspect to negotiations is knowing who has the leverage. Because a good real estate agent follows the market and understands the standard purchase agreement inside and out, 9 times out of 10 we can advise correctly on what your next negotiating move should be.  Here’s how it works:

In a seller’s market, sellers have the initial leverage if they own good property. We have to understand what the seller wants and give that to her, as long as we’re not giving much more than any other buyer. That’s why a good buyer’s agent will call the listing agent to get the scoop.

If we’re lucky enough to get into escrow, the leverage shifts. The seller chose our offer over 4-10 others, and wants to close. Going through escrow a second time is the last thing either the seller or her listing agent wants. Now we have the leverage, within reason. Remember, our leverage is to cancel escrow, and while that’s a pain in the butt, it’s not financial life or death to the seller.

Seller’s obligations need to be fulfilled for the seller to regain some leverage. They need to turn in Estoppels, rent statements, disclosures, etc, or else their property is tied up indefinitely. Once their obligations are completed, we have our limited time frame to either perform or cancel escrow, or they can cancel escrow and potentially keep our earnest money deposit, which is bad news.

Finally, when escrow has the grant deed and all of the seller’s paperwork, nothing can stop us from closing if we want to. Recently, I got a request to extend escrow so that the seller could complete his 1031 exchange. Extending escrow would mean loss of rental income for my buyer. So I asked escrow if the grant deed and all of the paperwork was in, and since it was, I demanded that she close escrow before we helped them with their 1031. This saved my clients at least $500 and the potential to have escrow continue indefinitely.

As you can see, understanding leverage is what negotiations are all about. A good agent will know when to press and when to accommodate, while always staying in the (relatively) good graces of those with whom we’re working.

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