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	<title>LandThink &#187; Negotiating</title>
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		<title>How to Blow the Deal – Tips on How NOT to Negotiate</title>
		<link>http://www.landthink.com/how-to-blow-the-deal-tips-on-how-not-to-negotiate/</link>
		<comments>http://www.landthink.com/how-to-blow-the-deal-tips-on-how-not-to-negotiate/#comments</comments>
		<pubDate>Tue, 26 Jul 2011 13:15:18 +0000</pubDate>
		<dc:creator>Robert King</dc:creator>
				<category><![CDATA[Exclusive]]></category>
		<category><![CDATA[Negotiating]]></category>
		<category><![CDATA[Obama-Boehner]]></category>
		<category><![CDATA[Real Estate Negotiation]]></category>
		<category><![CDATA[Seller Disclosure]]></category>

		<guid isPermaLink="false">http://www.landthink.com/?p=1868</guid>
		<description><![CDATA[Over the years in the land industry, I've seen some very peculiar methods of negotiating the deal. I've even tried a few and succeeded, and tried a few and fell flat on my face.]]></description>
			<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-1869" title="How to Blow the Deal – Tips on How NOT to Negotiate" src="http://www.landthink.com/wp-content/uploads/how-not-to-negotiate.jpg" alt="How to Blow the Deal – Tips on How NOT to Negotiate" width="576" height="200" /></p>
<p>Over the years in the land industry, I&#8217;ve seen some very peculiar methods of negotiating the deal. I&#8217;ve even tried a few and succeeded, and tried a few and fell flat on my face. Anyone that has been around this business long will tell you the same thing, if they are honest with you. So I thought I would make a list of some of those things which you should not try when attempting to negotiate a deal.</p>
<p><strong>1. Make a laundry list of everything that is wrong with a property you are trying to buy.</strong> You must like the property, or you would not have spent all that time figuring out everything this is wrong with it&#8230;duh! Plus when you impart your wealth of knowledge of all of the property&#8217;s shortcomings to the other party, you are not likely to make a friend of the Seller. Trust me, you want to become friends with anyone you are negotiating with. The adversarial plan is likely to get you the Obama-Boehner plan of negotiating&#8230;how&#8217;s that working? We can learn a great deal about how NOT to negotiate by looking at how politics plays out in our country today.</p>
<p><strong>2. Create problems that are not there.</strong> I&#8217;ve seen both buyers and sellers do this to try and gain some type of advantage in negotiations. It rarely, if ever, works, and absolutely serves to drive the parties further apart.</p>
<p><strong>3. Go back on something you previously committed to.</strong> Once you have committed yourself to an action, back it up. This one really gets me. This has no place in honest dealings. Your word should be your bond. Now I understand that there are time limits on things you commit to, but if you commit to a price, you should give the other party a reasonable length of time to respond to that prior to “taking it back.” If you want to drive a real estate agent nuts, this is the most effective manner of doing so. Some of us who are more seasoned will probably just kick you to the curb until you come back to your senses.</p>
<p><strong>4. Play musical chairs with the terms of the deal in order to confuse.</strong> Good negotiations follow a logical path. Agree on small terms and move forward to larger aspects of the deal. Agree in principal to the big picture and then work out the details&#8230;either way works. Attaching many “if-then” conditions to negotiations does confuse the other party, but the default action of a confused party is either no action or out-right rejection. You will probably harden their position instead of softening it.</p>
<p><strong>5. Fail to disclose something that should be.</strong> Oh my, this is wrong in so many ways. It&#8217;s illegal in some instances and immoral in all. There are laws that mandate disclosure of some aspects of a property and some aspects of the parties involved in the transaction. Knowing that you are an agent on the front end of the deal is not likely to torpedo the negotiations like finding that out when you are waist-deep. If you know that there is hazardous conditions on a property, tell the other party that up-front. I&#8217;ve had deals nearly fall apart AFTER closing because of issues like these. Those situations are messy ones that no one wants or makes enough to deal with. Disclose, disclose, disclose!</p>
<p><strong>6. Allow the other party to believe something that is not true.</strong> I deal with this with sellers a good bit. Most of the time when I tell them that I will not represent them or participate in further negotiations this problem goes away. However I do know agents out there that just “go with the flow” on these types of issues. If you know that it will take $20,000 to put a septic system on a property, don&#8217;t let the other party think it&#8217;s a normal, garden-variety installation. They eventually find out and end up not trusting you afterwords. True, you might get to closing first&#8230;but you have to live with it.</p>
<p><strong>7. Openly question the integrity of the other party.</strong> If you are done with negotiations and are ready to move on to a different deal&#8230;and possibly engage in a fist-fight, this is a sure bet. There is absolutely nothing to be gained by calling the other party a lying, no-good dog&#8230;no matter if it&#8217;s the truth. I&#8217;ve seen the time when I sure wanted to do this. If it&#8217;s really that bad, just move on to another deal. Tell them you are no longer interested in the deal at this time and leave it at that.</p>
<p><strong>8. Attempt to completely box in the other party while leaving yourself free as a bird.</strong> I&#8217;m guessing I deal with this ineffective tactic as much as any. Many times buyers want to completely restrict a seller in negotiations without any type of firm commitment from them. What sense does this make? Why would a seller accept such a deal? Why would their agent let them? The old adage that you have to give up something in order to get something else certainly applies to land transactions.</p>
<p>I have presented some sure non-starters in negotiations. I know there are many, many more and I would like to encourage you to submit those in the comments section for this article. We will not be offended if you offer up some successful, honest negotiating procedures as well!</p>
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		<title>Closing Costs: Who Pays What?</title>
		<link>http://www.landthink.com/closing-costs-who-pays-what/</link>
		<comments>http://www.landthink.com/closing-costs-who-pays-what/#comments</comments>
		<pubDate>Tue, 30 Nov 2010 13:31:34 +0000</pubDate>
		<dc:creator>Robert King</dc:creator>
				<category><![CDATA[Exclusive]]></category>
		<category><![CDATA[Negotiating]]></category>
		<category><![CDATA[Appraisal]]></category>
		<category><![CDATA[Deed Preparation]]></category>
		<category><![CDATA[Home Inspector]]></category>
		<category><![CDATA[Real Estate Attorney]]></category>
		<category><![CDATA[Title Insurance]]></category>
		<category><![CDATA[Title Search]]></category>

		<guid isPermaLink="false">http://www.landthink.com/?p=1712</guid>
		<description><![CDATA[You are negotiating a real estate transaction and are trying to figure out how much it will cost to do the necessary work to close the transaction.]]></description>
			<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-1715" title="Closing Costs: Who Pays What?" src="http://www.landthink.com/wp-content/uploads/negotiate-closing-costs.jpg" alt="Closing Costs: Who Pays What?" width="576" height="200" /></p>
<p>You are negotiating a real estate transaction and are trying to figure out how much it will cost to do the necessary work to close the transaction. You are trying to figure out who will pay for the necessary services and fees, and when these amounts will need to be paid. Not all costs associated with closing a transaction are always paid at closing. Sometimes service providers like inspectors and surveyors want to be paid upfront for their services. When you are trying to figure out what, who, when, and how much, there is one thing you should remember&#8230;It&#8217;s all negotiable.</p>
<p>That said, sometimes it makes more sense for one party to pay for a fee or service than it does for the other party. For example, most home inspectors investigate a property from the buyer&#8217;s perspective. They look for what is wrong in a property. They look for the hidden surprises that buyers may not have the skill to locate themselves. If the inspector is being paid by the seller, or the seller&#8217;s agent he has an incentive to overlook things that he might not otherwise. For this reason, in my opinion it is better for the buyer to pay for property inspections. The buyer is the one benefiting from the information obtained in the inspector&#8217;s report. The seller already owns the problems that the inspections may bring to light. Please don&#8217;t take this the wrong way, I do not know a reputable home inspector that I believe to be anything less than forthright. I am just stating that the temptation is there if the seller is signing his paycheck. Most of the time they want their fee paid upfront, before the actual closing.</p>
<p>In my time selling real estate, I have seen some very creative negotiations. I have seen sellers pay all conceivable costs and have seen buyers do the same. Most often though, both parties pay some. I have seen some people who could not get past feeling like the other party gained a ten dollar advantage on them somehow. When negotiating, it&#8217;s usually better to stand back and look at the big picture&#8230;the bottom line. Don&#8217;t get so bogged down in who pays what that you loose sight of the ultimate goal.</p>
<p>Below, I am going to detail some of the more common costs associated with a LAND transaction. Not in terms of dollars and cents, but in terms of category of cost and rationale behind who typically pays what. This list is by no means exhaustive. Talk with your agent or attorney for information on your specific transaction. Again most of these fees can be paid by any party to a transaction&#8230;It&#8217;s negotiable.</p>
<ol>
<li><strong>Attorney&#8217;s or Closing Agent&#8217;s Fees</strong> – This is the fee charged for performing the closing. These fees vary greatly from state to state and area to area. If the closing agent or attorney is representing one party in the transaction, then the represented party should pay the fee. Sometimes both seller and buyer will have representation for the closing process. Again, the represented party should pay. I complete many transactions where neither party is represented and this cost is split evenly between buyer and seller. Usually this fee is paid at the closing.</li>
<li><strong>Costs associated with financing- </strong>There are many fees that are associated with borrowing funds to complete a transaction. Typically these fees are buyer costs. There are some rules and regulations that dictate who can pay some of these costs. Your lender can help you understand these fees and if a certain party must pay the fees in a given transaction. Sometimes sellers help pay these costs to leave more funds available to the buyer for down payment. Usually these fees are paid at the closing.</li>
<li><strong>Brokerage Commissions</strong> – In the typical land transaction, the seller pays this fee. I have been paid by the buyer when working on their behalf dealing with unlisted property. Generally the seller is represented by an agent. Most of the time that agent offers other agents a co-brokerage fee that is a portion of the total fee that the listing agent and seller negotiated for when the property was listed. There is no law that requires this co-brokerage arrangement and sometimes you will find listing agents who are unwilling to share their commission with a selling agent. In this case, unless the buyer expects his agent to work for free, then both seller and buyer may pay a brokerage fee. This fee is almost always paid at closing, except on some owner-financed deals. In instances where the seller was financing a property with a low down-payment, I have agreed to accept my commission at a later date. This would need to be negotiated with your agent.</li>
<li><strong>Surveys</strong> – Sometimes surveys are required and sometimes not. Sometimes a buyer or seller may want one completed when it is not required. It is always my position to recommend having a survey completed, unless there is a very recent survey that corresponds with the physical boundary lines that are evident on the property. Sometimes even then, it&#8217;s not a bad idea. However, surveys tend to be expensive and I have a great many elect not to have one done. From personal experience, I have had more buyers pay for surveys than sellers. However, having a current, clear survey is one of the best sales tools a seller can have. This is one that you just work out by negotiation. Care should be taken as to what type of survey you are negotiating. At it&#8217;s most basic form, a survey is having the corners marked, and a legal description derived from the information gathered in the field and previous deeds. This is the least expensive and most often used option. At the other end of the spectrum, you have fences, roads, and structures located on the plat of the property, boundary lines blazed and marked, plus those most basic things described above. Some find it necessary to have a topographical survey completed as well. Just be clear in what your expectations of the survey are. Generally, surveyors want to be paid when the work is completed, and may require some upfront deposit. However, when opting for a simple boundary survey where only the corners are marked, you might negotiate with the surveyor to be paid at closing.</li>
<li><strong>Environmental Audits and Inspections</strong> – In my experience, I have only had a few buyer&#8217;s request that these be completed. Each time the cost was borne by the buyer. Each time the inspector required his fee up-front. The seller really has no interest in providing this for a buyer, unless there is a known problem that the seller wants to quantify in the sales process. Generally speaking, I would say that the requesting party should pay for this service.</li>
<li><strong>Home and Structural Inspections</strong> – Most of the home inspections I have been involved with are at buyer&#8217;s cost. The inspector, as stated above, is generally inspecting on the buyer&#8217;s behalf. The seller may elect to have this done prior to marketing a property in order to make it more marketable. Again, home inspectors usually want to be paid up-front.</li>
<li><strong>Appraisals</strong> – Usually appraisals are associated with financing the purchase. This cost is most often borne by the buyer. I have had sellers have an appraisal completed in the listing process for marketing purposes. On a few occasions, I have known of appraisal fees being paid at closing, but for the most part, this is a service that is paid for upfront.</li>
<li><strong>Title Search/Abstracts </strong>– If you are not sure what this is, read my article on the topic, <a href="http://www.landthink.com/title-searches-abstracts-and-insurance/">Title Searches, Abstracts and Insurance</a>. These are generally performed by the closing agent or attorney, or someone that they contract with for the service. It is usually paid for at closing, and most often, by the buyer. This is something that is negotiable and can usually be paid by either party.</li>
<li><strong>Title Insurance</strong> – Again, read this article to learn more about title insurance: <a href="http://www.landthink.com/title-searches-abstracts-and-insurance/">Title Searches, Abstracts and Insurance</a>. Title insurance is for the benefit of the buyer or the buyer&#8217;s lender. Mortgage title insurance is a cost associated with financing. Owner&#8217;s Title Insurance is for the sole benefit of the buyer. Mortgage title insurance is always paid for at the time of closing. Owner&#8217;s title insurance can sometimes be purchased after closing, but is usually taken care of then.</li>
<li><strong>Taxes and Property Insurance</strong> – These are generally prorated at closing, meaning that the seller pays for these for the amount of time that they own the property in the tax or insurance period and the buyer pays for the amount of time they will own the property in the period. These fees are funded by debits or credits to the buyer or seller. Custom on how these are handled will vary a great deal. Each county has it&#8217;s own way of dealing with property taxes. It will even vary from attorney to attorney in a given area. Generally speaking, if the seller has already paid for an insurance policy that will cover a property during a time when the buyer will own the property, then the seller will get a credit at closing. If there are taxes due from the seller, then generally the buyer will get a credit at closing and the seller will be debited. All of this too, is negotiable. However, you will find that the standard language in most contracts will be for these items to be prorated as of the date of closing.</li>
<li><strong>Deed Preparation </strong>– This fee is for drafting the document that conveys the property from the seller to the buyer and states the warranties and rights that the seller is granting the buyer. In most closings, I find that the seller pays this fee, at closing. It is not entirely uncommon to have a situation where the buyer pays all the fees originated by the closing agent or attorney.</li>
<li><strong>Mortgage Preparation </strong>– This fee is for drafting a mortgage and is most common to sales that are owner-financed. Usually on lender-financed sales, the lender supplies a mortgage with the language that they want in the document. This fee is usually paid by the buyer at closing.</li>
<li><strong>Recording Fees</strong> – These are the fees that the county charges for recording your documents into the public record. These fees are based on the sales price of the property, the number of pages, number of documents, and when recording mortgages, the value of the mortgage. These are sometimes referred to as Deed or Mortgage taxes. In financed transactions these fees are usually collected at closing. Sometimes in cash transactions, it is left up to the buyer to physically carry the deed to the recording authority after the closing. This is a negotiable cost, but realize the seller has no interest in whether or not a buyer&#8217;s documents get recorded.</li>
<li><strong>Courier Fees</strong> – At times, documents will need to be shipped to other places. This can be for the benefit of the buyer or the seller and is paid for by the benefiting party. Your closing agent or attorney will collect these at closing. Not commonly negotiated in the formal contract for sale.</li>
<li><strong>Funds Transfer Fees</strong> – In some transactions, a buyer may not bring funds to closing but may elect to have them transferred electronically to the closing agent&#8217;s account. Sometimes a seller would rather have his funds transferred to him electronically. There are fees associated with these transfers at the bank level for the closing agent. Usually they pass this fee on to the party benefited, with a little padding, at closing. Not commonly negotiated in the formal contract for sale.</li>
<li><strong>Affidavits, Power of Attorney,and Other Documents – </strong>From time to time in transactions the need arises for the closing agent to draft and have executed other documents. This usually arises from the need to clear up defects in the chain of title or when some party to the transaction cannot attend the closing and wants someone to sign in their stead. If there are issues in the chain of title that need to be cleared, the fees associated with that are most commonly paid by seller. Otherwise these fees will be collected from the benefiting party at closing. Not commonly negotiated in the formal contract for sale.</li>
</ol>
<p>Again, this list is certainly not all the possible closing costs. However, I have attempted to cover the ones that I see as most common in transactions that I deal with in land sales. There are no absolutes in who pays what. Not all of these costs listed above apply to every transaction. However, with a little investigation into the purpose served by whatever generates the fee, there is usually a logical choice&#8230;It&#8217;s negotiable.</p>
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		<item>
		<title>Buyers need to look at themselves as sellers do</title>
		<link>http://www.landthink.com/buyers-need-to-look-at-themselves-as-sellers-do/</link>
		<comments>http://www.landthink.com/buyers-need-to-look-at-themselves-as-sellers-do/#comments</comments>
		<pubDate>Wed, 07 Jul 2010 12:46:17 +0000</pubDate>
		<dc:creator>Curtis Seltzer</dc:creator>
				<category><![CDATA[Exclusive]]></category>
		<category><![CDATA[Negotiating]]></category>

		<guid isPermaLink="false">http://www.landthink.com/?p=1475</guid>
		<description><![CDATA[Land buyers should think about the first impression they make on sellers. It can determine whether a deal is reached and at what price. Here are two examples that illustrate the point.

Some years ago, I was ready to buy 200 acres of mostly pasture for $125,000.]]></description>
			<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-1492" title="Buyers need to look at themselves as sellers do" src="http://www.landthink.com/wp-content/uploads/truck_mirror.jpg" alt="Buyers need to look at themselves as sellers do" width="576" height="250" /></p>
<p>Land buyers should think about the first impression they make on sellers. It can determine whether a deal is reached and at what price. Here are two examples that illustrate the point.</p>
<p>Some years ago, I was ready to buy 200 acres of mostly pasture for $125,000. Everything about this farm was a wreck. It hadn’t been maintained for 50 years, though the house had been occupied. Most of the buildings could not be economically repaired, and they weren’t good enough to begin with to give them new life. Every piece of fence had to be replaced. The ground, however, was good, and its views and setting were wonderful.</p>
<p>The sellers &#8212; heirs who were unloading the farm &#8212; were asking $200,000, but would settle for $150,000. A brother of the deceased owner was talking with potential buyers. He was in his 70s, a fellow who had spent his life as a small farmer. I knew him, but not very well. I figured the $25,000 difference between what he wanted and what I was willing to pay would be quickly spent in fixing fence, roadwork and demolition.</p>
<p>I wrote up a contract and arrived at the appointed hour at his house. His wife had made coffee. We sat at the kitchen table. I came in with an old hand-made leather briefcase that had once been classy and was still beaten-up classy. I put the briefcase on the table. Their eyes grew wide, as I drew out the contract. I don’t think they had ever seen a briefcase in their house before, and if they had, they did not have fond memories of it.</p>
<p>I realized that my briefcase had sent the wrong message. I should have taken the contract out of my back pocket. I was dressed right, nothing fancy, just jeans. But the briefcase didn’t “smell” right to these sellers. I considered taking it off their table and putting it on the floor, but that would have appeared like I was hiding it. So it sat there for 30 minutes like a 1,000-pound gorilla.</p>
<p>What looked like a deal, evaporated before my eyes…because the seller saw my briefcase as representing a “me” he didn’t know…and did not trust.</p>
<p>Here’s the second example.</p>
<p>A year or so later, I bought a new, fire-engine-red Toyota T-100 pickup truck. A consulting forester and I drove to a 2,200-acre property the day after I had driven it home. The truck was very new, very shiny, very clean and very red.</p>
<p>The acreage was a beautiful farm that had been state-of-the-art for beef cattle in the 1940s. It had dozens of white-painted, wooden buildings—all high-maintenance. The main house was new, built by a fellow who had made a lot of money in the coal business. It had an indoor pool, a projection room and all the other features you might imagine.</p>
<p>I was interested in about 100 to 300 acres of woods. I had about $2,000 in cash in the bank at the time. But I did have a friend in Boston who could buy the whole thing at the right price and work me into the deal for what I wanted. The seller had not exactly put a price on it, but had introduced it at about $4.5 million.</p>
<p>My forester and I were dressed for woods walking. I wore a ballcap. I left my briefcase in the truck.</p>
<p>As we rolled slowly to a stop in the courtyard, all eyes turned toward the big, shiny, as new-as-could-be, red truck. The farm manager who was representing the widow and his assistants followed my braking to a stop like it was the President rolling up in Air Force One. I watched them watching me.</p>
<p>As I got out, I heard the farm manager mumble to one of his boys, “Big Money From Virginia.”</p>
<p>My new truck had killed all negotiations. Once the seller’s representatives had categorized me as Big Money From Virginia, I could not get a firm asking price out of them for weeks and when I did it was higher than what I had been told initially.</p>
<p>Sometimes a briefcase is just a briefcase. But at other times, it is a symbol in the sellers’ eyes. And sometimes it’s best to look at land in a new truck only if it is adequately mucked up with fresh mud.</p>
<p>My friend and I still laugh over BMFV. We both knew how mistaken that first impression was.</p>
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		<item>
		<title>Seller contingencies? What’s that about?</title>
		<link>http://www.landthink.com/seller-contingencies-whats-that-about/</link>
		<comments>http://www.landthink.com/seller-contingencies-whats-that-about/#comments</comments>
		<pubDate>Wed, 04 Mar 2009 14:04:27 +0000</pubDate>
		<dc:creator>Curtis Seltzer</dc:creator>
				<category><![CDATA[Exclusive]]></category>
		<category><![CDATA[Negotiating]]></category>
		<category><![CDATA[Contingencies]]></category>
		<category><![CDATA[Sellers]]></category>

		<guid isPermaLink="false">http://www.landthink.com/?p=1096</guid>
		<description><![CDATA[Real-estate buyers and sellers are familiar with buyer-demanded contingencies, such as a home inspection or financing, which make the purchase depend on the buyer arranging or learning something to his satisfaction...]]></description>
			<content:encoded><![CDATA[<p><img class="size-full wp-image-1098 alignright" title="Seller contingencies? What’s that about?" src="http://www.landthink.com/wp-content/uploads/question2.jpg" alt="Seller contingencies? What’s that about?" width="230" height="200" />Real-estate buyers and sellers are familiar with buyer-demanded contingencies, such as a home inspection or financing, which make the purchase depend on the buyer arranging or learning something to his satisfaction, or having the seller do something to make the deal work.</p>
<p>In working with land and other rural property, particularly larger tracts, I’ve occasionally encountered sellers inserting contingencies into the buyer’s purchase contract. As long as the agreement reflects a meeting of the minds between buyer and seller, a seller contingency is no different than a buyer’s—satisfactory results bring the parties to a sale and unsatisfactory results void the offer without penalty.</p>
<p>One seller contingency in larger deals I’ve found is the demand for proof that the buyer has the financial resources to make the purchase. I’ve seen sellers ask for net-worth statements, other financials and letters from lenders indicating a willingness to go forward with the buyer.</p>
<p>Some sellers ask for this information as a condition of showing the property to a buyer. When a broker or seller asks a buyer to provide proof of his ability to make the purchase, I advise against complying with the request. It has always felt to me that these requests are a ploy to scope the buyer’s ability to pay full asking price rather than a genuine concern over capability. I don’t object to a contingency of this sort, since the parties have agreed on a contract price and the ploy angle has disappeared..</p>
<p>I once ran into a seller of some 9,000 acres who insisted that the buyer agree to a contingency allowing the seller to commission an appraisal at his expense and choice of appraiser. If the appraisal came in at or below the contract price, the deal would go through. If, however, the appraisal number was five percent more than the contract price, the seller reserved the right to void the agreement without penalty or allow the buyer to pay the appraisal price. My opinion was that this was simply a ruse to get more money out of the buyer—and said so. I urged the buyer to walk away.</p>
<p>As might be expected, the appraisal came in above the five percent number, and the buyer paid the higher price—to his ultimate chagrin. The seller had owned the property for more than a decade and could have easily gotten an appraisal prior to signing a purchase contract with this buyer. Buyers, in my opinion, should not agree to this type of seller contingency.</p>
<p>Several sellers have used contingencies related to getting something to work out on their side of the deal. One wanted to make the buyer’s purchase contingent on being able to arrange a 1031 exchange. Another wanted the buyer’s contract to depend on being able to get a contract signed for another property at a specific price, or less.</p>
<p>It’s fair for a seller of  large acreage to ask for buyer financials, especially when an unknown buyer wants a long study-period contingency, say three months or more. Sellers don’t want to be strung out by a buyer who’s looking to put the seller in a jam and then get the property at a discount.</p>
<p>Sellers, like buyers, can also use unneeded contingencies as bargaining chips with the other side, though I think this is a high-risk bargaining strategy that is likely to blow up a contract.</p>
<p>A seller might also use a contingency for one or more of the following reasons:</p>
<p>1.  To give himself time to clean up some problem that he does not want to pass along to the buyer, e.g., a fence line off the surveyed boundary line, or a prescriptive-use claim by a third party. Issues of this type can produce post-sale litigation that ensnares the seller.</p>
<p>2. To give both parties time to work out something between them that has some importance, but both sides recognize can be resolved once a contract is in place, e.g., the value of personal property the seller has agreed to convey.</p>
<p>3.  To demand something of the buyer, such as an increase in deposit by the end of the fourteenth calendar day of escrow.</p>
<p>4.  To demand that the buyer perform or complete a task by a certain date.</p>
<p>Sellers, like buyers, should not use contingencies willy-nilly, because they’re red flags to the other side. I’ve always found that a letter explaining the purpose of my contingencies helps smooth the reception of a contract with contingencies included.</p>
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		<title>Negotiating with contingencies</title>
		<link>http://www.landthink.com/negotiating-with-contingencies/</link>
		<comments>http://www.landthink.com/negotiating-with-contingencies/#comments</comments>
		<pubDate>Wed, 25 Feb 2009 13:33:45 +0000</pubDate>
		<dc:creator>Curtis Seltzer</dc:creator>
				<category><![CDATA[Exclusive]]></category>
		<category><![CDATA[Negotiating]]></category>
		<category><![CDATA[Contingencies]]></category>
		<category><![CDATA[Contracts]]></category>

		<guid isPermaLink="false">http://www.landthink.com/?p=1074</guid>
		<description><![CDATA[In earlier columns, I discussed how a buyer might use a contingency to get a seller to disclose information, and provide a warranty about some aspect of the property.]]></description>
			<content:encoded><![CDATA[<p><img class="size-full wp-image-1089 alignright" title="Negotiating with contingencies" src="http://www.landthink.com/wp-content/uploads/negotiate.jpg" alt="Negotiating with contingencies" width="230" height="200" />In earlier columns, I discussed how a buyer might use a contingency to get a seller to disclose information, and provide a warranty about some aspect of the property. In this column, I’ll discuss several ways for a buyer to use contingencies as part of his approach to negotiating a purchase.</p>
<p>Most sellers and agents representing sellers encourage buyers to submit “clean” contracts. Generally speaking, this means the fewer contingencies the better—none being best; a large deposit; no language that requires the seller to do anything; a very short escrow, full-price offer and all cash. From the seller’s perspective, contingencies are potential deal-breakers.</p>
<p>From the buyer’s perspective, contingencies can have intrinsic worth as well as negotiating worth. The former are genuine questions and issues that the buyer must address and resolve satisfactorily during escrow before buying. A vanilla financing contingency &#8212; making the sale depend on the buyer arranging financing at acceptable terms &#8212; is commonly used to protect the buyer’s offer; it has intrinsic worth.</p>
<p>Contingencies can also be bargaining chips for buyers who have scoped the property sufficiently prior to submitting an offer and are, therefore, confident that they know enough to buy.</p>
<p>Take, for example, an investor who wants to buy 400 acres of undeveloped land &#8212; part open, part woods &#8212; that’s within a two-hour drive of Charlotte. Before submitting his contract, this investor has performed the following due-diligence investigations related to his idea of dividing the property into eight 50-acre parcels:</p>
<ol>
<li>Researched the current market value of the property through one or more means, including appraisal, tax-assessed value, Competitive Market Analysis and asking around;</li>
<li>Researched division potential, costs, regulatory (zoning) guidelines, building codes, etc.;</li>
<li>Hired a consulting forester to do a walk-through to get an approximate idea of the immediate sale value of the timber. The investor has decided that he might do a “residential cut,” which takes out only the highest-value trees, and chip the tops to minimize the aesthetic downside of a freshly logged property.</li>
<li>Researched the deed enough to know that no defects are obvious. The investor has also had a surveyor run the deed’s calls through a deed-mapper program and walked the boundaries to make sure the calls in the deed match the boundaries in the field.</li>
<li>Looked into the environmental issues that might limit the investor’s plans, such as the presence of endangered species, wetlands, floodplain, sub-surface minerals, archeological sites and so on;</li>
<li>Discussed financing with three lenders, provided each with his financials and gotten informal green lights to go forward.</li>
</ol>
<p>In discussions with the seller, the buyer indicates that he is considering using a number of separate contingencies, including ones related to seller disclosure, rezoning for division,  buyer-paid appraisal, timber evaluation, surveyor inspection, environmental study and financing. The buyer’s offer is strong for the market, but the seller is afraid that one or more of the buyer’s contingencies will turn up a deal-breaker. He objects to all the contingencies, except for financing..</p>
<p>So the buyer negotiates away those contingencies that he doesn’t need, because he has already done the due-diligence necessary to allow him to waive further investigation.</p>
<p>In return, of course, the buyer asks the seller to give up something for something given.</p>
<p>In this example, the buyer should not give up a contingency that makes the sale rest on the seller obtaining the rezoning necessary for an eight-parcel division, because that is essential to the buyer’s plans and the one issue that can’t be resolved through pre-offer buyer research.</p>
<p>A quid pro quo might be a price reduction given the buyer’s argument that he is assuming greater risk by waiving the protection of one or more contingencies. Or the buyer might insist that the seller fix something, do something or include something the seller would not have done otherwise. If the buyer has not been thorough in his pre-offer research, he is, in fact, taking on risk that might bite him after the sale by foregoing contingencies.</p>
<p>If a seller agrees to all the proposed contingencies save one, the buyer should refocus his attention on the sticking point. Maybe the buyer knows what the problem is, but maybe he doesn’t know what the seller fears he will find out. If the buyer knows the problem and can manage it, he should get something significant for giving up the contingency the seller objects to. More opportunities for negotiation arise when the buyer knows the extent of a problem beforehand.</p>
<p>Buyers should not bargain away intrinsically valuable contingencies that they need to protect their interests.</p>
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		<title>Real estate is all about negotiation: here’s help</title>
		<link>http://www.landthink.com/real-estate-is-all-about-negotiation/</link>
		<comments>http://www.landthink.com/real-estate-is-all-about-negotiation/#comments</comments>
		<pubDate>Thu, 14 Aug 2008 15:15:32 +0000</pubDate>
		<dc:creator>Curtis Seltzer</dc:creator>
				<category><![CDATA[Negotiating]]></category>
		<category><![CDATA[Real Estate Negotiating]]></category>

		<guid isPermaLink="false">http://www.landthink.com/?p=86</guid>
		<description><![CDATA[A few individuals love negotiating over property. Others prefer it to back pain but not by much. Most consider it another one of the endless, necessary miseries of adulthood.]]></description>
			<content:encoded><![CDATA[<p>A few individuals love negotiating over property. Others prefer it to back pain but not by much. Most consider it another one of the endless, necessary miseries of adulthood.</p>
<p>I’ve found that negotiating is easier when I can figure out which one of four buyer-seller bargaining relationships I’m in. The four are: 1) both sides are motivated to make a deal; 2) both sides are not highly motivated, but willing; 3) buyer is motivated, seller is not; and 4) seller is motivated, buyer is not.</p>
<p>Price changes motivation. A better offer will move an indifferent seller, just as a lowered price will help a kick-the-tires-type buyer.</p>
<p>I’ve found that non-price factors &#8212; terms, seller-financing, upfront financing costs, irremediable negatives, sweeteners and so on &#8212; can be as important as price. Lack of physical or legal access, for instance, will stop a land deal, no matter how cheap the price.</p>
<p>A seller stuck on a price can sometimes be jiggled off it by making a point lightly: “I’ll meet your price, if you meet my terms.”</p>
<p>In a buyer’s market where credit is tight and sales are slow, desperate sellers may find themselves in such a bad bind that it’s better for them to accept the pain of continuing to hold out rather than accept a low-ball offer that is predictably ruinous. Low-ball buyers cannot assume that pressured sellers are without options that feel slightly better, even though they’re pretty bad.</p>
<p>I’ve seen back-to-the-wall sellers reject insultingly low offers out of pride.</p>
<p>If you hate to haggle, you’re probably not much good at it. Doing a good job for yourself is partly about the attitude and confidence you bring to the table.</p>
<p>You can build confidence through preparation and research. Buyers need to know as much as possible about the property, their sellers and their own objectives and resources.</p>
<p>Successful bargaining is also about civility. Gloating, belittling and end-zone dancing are what little kids and professional athletes of the same age do. Issues in negotiations are problems to be solved, not platforms to show that you’re smarter than the other side. It’s much easier to concede a point to someone you’re okay with than to someone you loathe.</p>
<p>And then there’s fair play. I know an FSBO seller who rejected three full-price offers from a buyer, each $100,000 higher than its predecessor, because he knew the buyer would go higher. Some think that’s admirable negotiating; I don’t.</p>
<p>Where brokers are orchestrating a sale, a buyer can request face-to-face negotiation with the seller during which the buyer can directly present an offer.  Large real-estate deals are often handled this way.</p>
<p>Certain buyers will do better for themselves by allowing the broker to present an offer; others will be disadvantaged. The rule is: it depends on the personalities.</p>
<p>I’ve generally found that it helps both sides to negotiate directly, face to face. It’s the best way to get a sense of the other side.</p>
<p>If you feel uncomfortable negotiating for yourself, negotiation helpers are available to provide counsel.</p>
<p>Whether buyer or seller, you’re looking for a helper who is experienced in negotiating, knowledgeable about the issues that will be raised and, ideally, is not invested in your sale, either emotionally or financially.</p>
<p><strong>Your local lawyer.</strong> Good real-estate lawyers help their clients enormously. Nitwits and the obnoxious don’t. Negotiating is a different skill than advocacy; not all lawyers understand the difference.</p>
<p>If you’re an out-of-town buyer, you may help yourself by letting your local lawyer negotiate with a local seller. Ask whether this is ethically or socially awkward for your lawyer; if so, don’t make the request.</p>
<p><strong>A mediator-consultant.</strong> Trained mediators are skilled in getting parties to reach compromise agreements. A mediator-consultant who is hired by one side can be invaluable in finding common ground.</p>
<p><strong>Brokers or agents acting as outside consultants.</strong> All brokers and agents who are involved in a deal are financially invested in getting an agreement. While agents are expected to represent the best interests of their clients in negotiations, it’s not unknown for deals to be encouraged because of self-interested commission hunger.</p>
<p>A buyer could consider hiring a broker or an agent as a negotiating consultant, paid by the hour. The broker/agent-consultant is not part of the deal and would not share in the commission split. As an outside and independent consultant, the broker/agent would provide advice unrelated to having his reward be contingent on a purchase.</p>
<p><strong>Brokers and agents.</strong> Where buyers and sellers are represented by brokers and agents who always put their clients’ interests above their own, buyers and sellers can place faith in their advice. Where buyers and sellers do not have that feeling about those who represent them, their advice is always a little suspect.</p>
<p>Good brokers and agents have figured out how to keep their own pocketbooks out of negotiations; bad ones don’t even try.</p>
<p><strong>Professional negotiator.</strong> If you’re in face-to-face negotiations, you might consider hiring a pro.</p>
<p>Steven Cohen, author of Negotiating Skills for Managers, is president of The Negotiation Skills Company near Boston (www.negotiationskills.com). His staff of professional negotiators is available to buyers or sellers for coaching and handholding in person or by phone. “Real estate,” he told me, “is all about negotiation,” which he describes as a “live tool for collaboratively solving problems.”</p>
<p>Another negotiator provider is www.consensusgroup.com. Michael Rosenthal, president, said his negotiators can train clients in strategy and preparation through online materials and role playing. The fee for email and/or phone consultations is $400 to $500 per hour.</p>
<p><strong>Professors.</strong> A local college or university may have a knowledgeable faculty member. Avoid the theoreticians and the games-strategists—they’re overkill for real-estate deals. You’re looking for practical help, down in the trenches. Check references.</p>
<p>With the exception of lawyers, negotiator consultants must not negotiate on behalf of their clients as their agents. State laws governing the practice of real estate prohibit non-agents from doing so. A buyer can, of course, purchase whatever advice and information from a consultant that is desired outside of the commission framework.</p>
<p><strong>Spouses.</strong> Some couples can take different roles in a negotiation and carry it off without marital meltdowns. Tag-team spousal negotiating is freer of consequences when the couple wins. Losses tend to beget statements like, “How could you be so stupid!”</p>
<p>I’ve seen spousal tag teams adopt different models: accelerator-brake; acceptable price-higher price (seller side); acceptable price-lower price (buyer side); and Mr. Reasonable with Designated Dingbat. Ms. Dingbat’s role was to crazy up the negotiations just enough to unsettle the sellers and have them focus on dealing with her “irrational” demands and Joan Rivers personality. She was brilliant.</p>
<p>The negotiating advice that always applies is to act reasonably and don’t personalize negotiations.</p>
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