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Lincoln Park & negotiations!

What's the best way to negotiate a contract?BY BILL RUMBLER SUN-TIMES REPORTER

Negotiating to buy a home is not what you think. Buyers and sellers don't sit across the table giving each other steely eyed glares. There is no pounding on the table.

Most of the buyers' work is done before the bid is made. If the process is handled correctly, it's an amiable and satisfying experience for both sides.

In fact, a major part of the buyer's job is to put the seller at ease about the seller's concerns and needs, which, of course, include the price. But other factors might be more important, such as a quick or a later closing date, said Sara Benson, head of Benson-Stanley Realty, a buyers broker in Chicago. The better you can satisfy the seller's non-price concerns, the better deal you might get.

"You can't put a price on peace of mind," she said.

If the buyer did things correctly, only he would know that he got what he wanted. A lower price typically is a buyer's goal, but other considerations often weigh heavily. These can include a timely closing date or including some furniture in the deal, said Gary Eldred, an expert on first-time home buying.

In the hot city market, just landing the home after fighting off competing bids might be the primary goal, Benson noted.

Space prevents listing all the approaches the experts use, but here is a general outline of what a buyer should do to get a better deal: Get pre-qualified for a loan and get a letter from a lender saying so. This will show sellers you can afford the home and are ready to buy.

In doing this, buyers will find out if their credit reports contain any black marks. They should be fixed before shopping for a home. Being prepared this way sets you apart from other buyers, showing you as a serious player, said Ray Felson, president and managing broker of Buyers Agent of Chicagoland, an exclusive buyers broker.

Sell your old house. Get your old house under contract with a firm closing date, Felson said. This gets rid of excess baggage that hurts your chances of getting what you want.

In the red hot Lincoln Park market, getting a contract on your old house is an absolute must, he said. This is because the person with the cleanest buy offer, the one with the fewest contingencies, such as selling an old house first, is likely to get the property.

"You're in a better position to negotiate price if you don't have a lot of contingencies," he said.

"Never fall in love with a house until you own it," Felson said. In other words, don't get so emotionally involved that you lose perspective and pay too much.

"Maintain your walk-away power," Eldred explained. One way to do this is to have another house or two in mind in case this deal falls through.

Be likable. Sellers are more likely to make concessions to people they like, so Benson writes, or suggests the buyer write a letter to the seller saying something like, "We love your home and wouldn't do a thing to change it."

Such a letter introduces the buyers, telling about their jobs and their spotless credit histories. This personalizes the buyers and makes them stand out in the seller's mind.

Mum's the word. Never communicate to the seller or his agent that this is the house you really want, or any other piece of vital information that indicates what you're willing to pay or when you need to move, Felson said.

If your broker is not a buyer's broker, don't mention this vital bargaining information to him either, he added, as it can be used by the seller to work against you.

Pump the seller. Your agent can't grill the seller because it's against the agents' code of ethics, but you can be friendly and communicate with him, Felson said.

Listen more than you talk, and try to find out the seller's motivation for selling. Does he have to move by a certain date? Has he already signed to buy another home? Such information can be valuable in determining how far to push.

Informal concessions. "Try to get concessions from sellers before you enter serious negotiations," Eldred said.

In a friendly and offhand manner, you might say something like, "Have you thought about a lower price? Have you thought about including the drapes and washer and dryer?" he said. To your surprise, the seller might say yes, but if not, don't push it at this point.

Don't nitpick. Don't walk through the house pointing out flaws or sneering at paint and rugs. Assure the seller that your building inspector also won't nitpick because sellers, especially those with older homes, are afraid of inspections, Benson said.

This approach puts the seller at ease, but do tell the seller upfront that you're aware of obvious serious flaws--an ancient furnace or a leaky roof--and that these will be reflected in your offer. Sellers will be more willing to accommodate on price at the beginning as opposed to being shocked by an inspector's report later on.

Use a sizeable amount of earnest money to demonstrate financial strength and sincerity, Benson said.

Today, it's $5,000 up to 10 percent of the price. In Lincoln Park, where multiple offers for a property are common, putting up the full 10 percent might put you front and center in the seller's mind.

Do research. Your agent should search the Multiple Listing Service and other records to find out how much the seller paid for the house, how much he owes and whether he took out a home-equity loan.

If it turns out the seller has taken out all equity in the property and is highly leveraged, he's more likely to be strongly motivated to sell, Felson said.

What to offer. A check of what previous homes in that area sold for in the recent past might show that sellers' agents inflate the listing price by 5 percent, Felson said. Since sellers then expect to get 95 percent of list, buyers won't be getting a bargain offering that figure.

Felson said he might start out at 92 percent. But markets vary and different sellers have different needs, so strategies and bids will change from deal to deal.

Don't low ball. Eldred doesn't believe unrealistically low offers are effective, unless price is your only consideration. Low ball offers can alienate sellers.

Additional advice from Eldred: Leave something on the table.

"Never push for the absolutely best deal that you can get," he suggested. No matter how well crafted a contract, problems might develop later and you might need a concession from the seller. But if you've nailed the seller to the wall and created a bad relationship, the deal might fall apart.