How to win the offer/counteroffer game
By Julie Sturgeon • Bankrate.com

Not everyone gets as lucky as Ron Kirchgessner. While wandering around
the kitchen of a home he was thinking of buying, a stray piece of
paper hastily shoved into a stack caught his eye. There in black and
white was a previous offer the homeowners had accepted on the
contingency the bidders sell two pieces of property. The dollar figure
was nearly $20,000 under the asking price.

The average Joe sweats a bit more before taking that opening bid leap
of faith. He also wastes emotional energy overthinking this step, says
Paul Purcell, co-founder of braddock + purcell, a residential real
estate referral firm in New York. "The most important thing to
remember is that you're entering into a business proposition. If you
make it personal, you lose sight of the ability to negotiate.

"Sometimes it's more how you prepare for something than how you
actually do it," he adds. On one hand, that means you don't have to
play a poker game, trying to hide the fact you like the property.
Making an offer on something this costly tips off the other side
you're interested, Purcell says.

However, it does mean you need to replace emotion with facts.

Homework time
One of the strongest ways to determine your negotiability factor lies
in those comparable home values you collect. The idea is to pinpoint
the percentage difference between the asking price and the sale price
in that given neighborhood to see what overall wiggle room exists.

The ideal situation, of course, is an easy-going buyer pursuing an
anxious seller. Length of time on the market can give you a clue, but
generally a friendly conversation with your real estate agent or the
homeowners themselves reveals pertinent details, such as a job
transfer, divorce, downsizing or other motivations.

Next, identify a few optional properties and let the seller know
they're waiting in the wings if you intend to hold the power at the
negotiating table, says Roger Dawson, who owns The Power Negotiating
Institute in California and authored "The Weekend Millionaire's
Secrets to Investing in Real Estate." "Negotiations deal with
perception, which is far more important than reality to a negotiator,"
he notes.

Finally, prepare a list of perks to hoist on the bargaining block.
This gives the seller incentive to give in to your price to keep the
deal, but assuages his pride by playing hardball somewhere, advises
Darlene Witter, CRB, the owner/broker of Vermilion River Realty and a
former national vice president for Coldwell Banker. Consider:

* Ask for a 10-day period to take occupancy after the title
transfer
* Pay the homeowner's warranty.
* Offer an earlier or later closing date, whichever is more
beneficial to the homeowner's tax situation.
* Forego the property inspection, although Witter labels this a
"very dangerous" move for the buyer's sake but one definitely designed
to sway a seller.
* Dangle a cash offer, which is what Kirchgessner did to beat his
rivals at that same price point on the house he scarfed up.
* Based on the seller's personality, throw in a comment designed
to win their love. For example, trumpet how much you adore the home
and don't intend to change a thing to an older couple who raised their
children in that home.

Meanwhile, play it meaner with your broker. Dawson tells his
go-betweens that if the seller doesn't accept the offer he extends,
Dawson reserves the right to meet face-to-face with that homeowner to
hash out the details. "Real estate agents hate that," he confides.
"They'll do the very best job they can to get that offer through when
you put it like that."

One warning: Do not give your agent a back-up plan, as in "offer
$200,000, but if they don't bite, I'll go $210,000." Even if she
represents you, the buyer, legally she is considered a sub-agent of
the listing broker who stands squarely on the seller's side. According
to Dawson, that makes your agent legally obligated to reveal the
conversation to the homeowner. So that's for you to know and them to
find out.

Playing the game
If you operate in a buyer's market, your opening bid should begin
within 5 percent to 10 percent of the asking price, says Mike Deasy,
president of Mossford, Deasy and Doe in Beverly Hills.

Real estate professionals say it's pointless to offer generalities
because buying and selling houses is intensely local..

"You have to know your market," Purcell insists. "Right now in South
Carolina, the market tolerates around a 3 percent margin. You can
offer 10 to 20 percent under but no one will respond."

In Witter's market, you'd best not drop more than $5,000 under asking
price as a rule.

Welcome to the crap shoot
Yes, it's true you can insult your way right out of further
negotiations. "I've had a lot of sellers tell me, 'Don't even bother
bringing me a counter-offer from that guy -- I don't want to work with
him,'" Witter says.

Perhaps the safest strategy involves Dawson's bracketing formula. "We
have a tremendous sense of fair play in the United States, so if both
sides give equally we call that even," he notes. So in this game, the
buyer uses the comparables to determine the price he believes fair,
then throws down an opening number that puts his real price in the
middle. Suppose the property lists for $200,000 and you want to pay
$190,000 -- offer $180,000 saying, "based on all the research I've
done, that seems closer to the right price."

"The homeowner is thinking 'That's ridiculous, no way am I taking
that,' but you left the impression there's some flexibility here," he
explains.

When the counter-offer arrives, instruct your agent to flinch, defined
in Dawson's book as showing shock and surprise they'd have the nerve
to ask you that. Psychologically, it keeps the other side from
thinking their terms are doable, a dangerous hope to let grow when
you're trying to bring the price still lower.

If you're in a buyer's market, don't shy away from waiting a day or
two before responding with another counter-offer. Real estate agents
talk about the seller's acceptance time -- that wait while the
homeowners realize they won't get the emotional value from their
abode. This can be particularly true with the for-sale-by-owner crowd,
in Dawson's experience.

But don't piddle to the point you lose momentum, Purcell warns. If
you've done your homework, you needn't fret whether the next step is
within your scope. That's crucial in a seller's market.

If the seller comes down only $1,000 from the listed price in response
to your bid, he's signaling there's not much room to play. A full 5
percent knock-off, however, indicates a wider field.

But in both cases, it's perfectly acceptable to cut to the chase with
your final proposal. Although good negotiators always have the means
to walk away from the deal, Deasy preaches, you also can't take
yourself too seriously. If you want the house and you can afford the
terms, it's not numbers you now wrestle. Only values and your
tolerance for the game stand in your way -- and that's strictly your
call.

The coup de grace
Don't undo your hard work by nickel and diming the last few
handshakes. Again, depending on the market, dollars could be the big
bone of contention. In Deasy's corner of the country, squabbling over
a half a percentage point (that's $10,000 in Beverly Hills) will
guarantee other potential buyers storm the field and crowd you out.

Witter once witnessed a deal for a $350,000 home fall through over a
used side-by-side refrigerator worth no more than $500. Others have
quarreled over cheap chandeliers. "It really offends sellers when you
ask for personal things," she advises. So nix trying to get your mitts
on the dining room table, the riding lawn mower or the comforter that
matches the bedroom drapes.

"Sometimes one of the stupidest things is our desire to win," says
Purcell. "Ask yourself 'Is this an appropriate counter, something I
could live with? Or do I simply need to conquer?'

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