Real estate contract negotiation is the process where sellers and buyers discuss the terms of a potential property transaction to come to a mutually agreeable sale and purchase deal.
In almost every real estate transaction, the negotiation strategy happens through real estate agents — also known as realtors or real estate brokers.
As home sales have significantly fallen in the US, with just 4.5 million sold in 2023 as opposed to 5.6 million in 2022, combined with the fact that interest rates continue to rise, the housing market has become as competitive as ever.
These factors force real estate agents to get negotiations done right, and quickly.
And that’s where automation software for real estate can help.
It’s your 24/7 assistant, helping you remove complications due to red tape, parties’ deal-breaking points, or back-office operations.
Key takeaways
- Real estate negotiation involves coming to consensus on the terms and conditions at which the seller sells their property to the buyer. The process is often conducted by real estate agents on behalf of sellers and home buyers.
- Automating real estate contract negotiation workflows is advantageous to all parties involved, and benefits include improved process efficiency, decreased time to close, and utmost accuracy.
- Stages of the real estate contract negotiation include: initial discussions and property showing; a seller accepting an offer via the buyer’s agent; contract creation with clauses (contingencies) that must be satisfied; and document management while conditions are met and the sale pending. To close the sale, notarized e-signatures finalize the purchase agreement.
- Contract management software tailored to the needs of real estate helps all stakeholders save time, eliminate errors, protect personal data, and streamline the negotiation process.
Make an offer
Everything begins with viewing the property and discussing the asking price, if negotiable.
After analyzing comparables (“comps”), relevant market value factors, and budget on behalf of their client, the buyer’s agent presents a formal offer, covering the desired price and terms.
If the amount offered isn’t the seller’s asking price (perhaps the current landscape is considered more “buyer’s market” than “seller’s market,” and therefore some wiggle room toward securing a lower price), the listing agent responds with adjustments or counteroffers on behalf of the seller.
Possible deal breakers can also be negotiated — the goal here is to get a sale price accepted by both sides.
Leverage AI-powered built-in templates
Modern tools streamline this process from the start.
Here, the use of purchase agreement templates can notably reduce the document setup time and minimize errors, and customization can address specific niche needs that come up later, including adding any necessary addenda to the contract.
Collaboration features like redlining, inline comments, and document tracking will facilitate the price negotiation workflow.
For example, parties can comment privately to their agent while discussing the asking price or which negotiation strategies to pursue when the contract is in “draft” or “waiting for approval” mode.
And realtors from both sides can use public comments to keep all stakeholders informed — all while monitoring changes and previous document versions.
Once the buyer’s offer has been accepted, the sale is officially “under contract” and, as contingencies are satisfied, the deal is on its way to the “pending sale” phase.
At this stage, the buyer places an agreed-upon sum of money in an escrow account to show their sincerity in purchasing the new home, the so-called “earnest money deposit.”
This deposit could be a significant factor in real estate negotiations as the deal gets closer to “pending sale,” which we’ll detail next.
Negotiate contingencies in your favor
Contingencies play a considerable role in real estate negotiations, as they are contractual clauses that must be satisfied before the closing date for the deal to go through.
When something unexpected occurs with respect to contingencies and getting those conditions met — either on the homeowner’s end or the potential home buyer’s side — opportunities are created for realtors to flex their negotiation skills.
Here is one example:
Any lender will expect an appraisal, as financing a home loan is contingent upon that lender being able to record the true value of the property in the current real estate market.
If the sale price is X, and the appraised value comes back as X – $10,000, a contingency clause in the purchase agreement may stipulate that the home buyer and their real estate agent have leverage to negotiate down the sale price — or walk away from the deal with their earnest money deposit (instead of forfeiting it to the seller).
The most common contingencies in a real estate purchase are:
- Appraisal
- Home inspection
- Home sale
- Financing
- Short-sale
- Kick-out
Contract management software automates this process with ease.
You can build contracts, customize them, and use integration capabilities to pull customer data from your CRM or any other solution you use to store client info.
For example, PandaDoc easily integrates with Propertyradar, Argus, Salesforce, Sharepoint, Leasehub, Zoho, Tenancy, Property Inspects, Visual Lease, and other enterprise software to meet your specific contract goals.
When conditions are met (or waived), the contractual contingencies are reviewed one by one, and the real estate agents forward any status updates or revised agreements to their respective stakeholders and legal representatives for checking all the details.
Realtors are empowered with the audit trail feature to be in the loop of all the changes made to the contract.
Online commenting is set to specify priorities, objectives, and deal-breaking points, as well as propose amendments to key aspects, including:
- Default clauses
- Easements
- Renovations and/or warranties
- Closing costs
- Closing date (transfer of ownership) and expected date of possession
Close the deal
The “pending sale” stage in real estate transactions indicates a stage where all contract contingencies — like the home inspection, appraisal, and financing mentioned above — are either met or waived, leading up to the deal’s closing.
At this point, final preparations and documents are made, with involvement from lenders, escrow agents, and title companies. While the sale could still fail, typically due to financing issues, the likelihood is significantly reduced.
And — keeping true to the theme of this article — this stage can also be completely revamped through automation solutions.
Finalize the sale in person or via a remote online notary
Legally binding e-signature software not only accelerates the process, but also ensures an extra layer of security through document tracking — including instant notifications about any last-minute changes that may be required.
Contract notarization can also be executed online within a single platform.
This way, you boost efficiency by reducing back-and-forth emails, speeding up document version approval, and eliminating constant transfers among different systems.
The fact that electronic signatures can notably accelerate the approval process is proven by the stats: In 2023, over 8.4 million documents were signed faster with PandaDoc’s e-sign functionality.
Real-world examples of accelerated real estate transactions
Whether you are a home buyer, a homeowner, a realtor, or a property manager, automated workflows around contract negotiation benefit all parties involved.
Enhance efficiencies
By automating key manual tasks around customer information management and communication, you get more things done in less time, without sacrificing quality. And that means better productivity and increased efficiency.
eXp Realty, the largest independent real estate company in the world, uses HubSpot to communicate seamlessly with over 90,000 agents to consolidate contacts, track KPIs, improve customer communications, and organize marketing assets.
This has led to the firm’s expansive growth in the real estate market.
Slash time-to-close
Automation technologies are key to shortening the time needed for negotiation. To wit, Azizi Development, an award-winning property developer, implemented Salesforce Sales Cloud along with Tableau CRM, Marketing Cloud and Service Cloud to reduce their sales cycle time by 70%.
Such integration enhanced lead scoring and quality and decreased the email bounce rate from 30% to 8%, improving deal close from a week to just a day and a half.
Improve accuracy
Data management software for real estate ensures utmost accuracy at every stage of the negotiation process, from client search (for home seller’s agents) and contract creation to signing and notarization.
One example:
Cresa, a company that provides strategic real estate advisory services and assists clients with incentive negotiations and project management, leveraged AscendixRE and Ascendix Search to revamp their data management and search capabilities.
The result? Important property and lease data were imported with 95% accuracy, which saved the firm about three hours a week on data searches within Salesforce.
Increase security and compliance
The use of document automation and electronic signatures can significantly improve workflow and data security.
For example, PandaDoc is legally binding, ESIGN and UETA compliant, and provides electronic certification with every signed document.
Sensitive information is protected with enterprise-grade security through AICPA SOC, GDPR, and Privacy Shield Framework, as well as 256 BIT SSL encryption.
Streamline all real estate negotiations with PandaDoc
PandaDoc provides an overarching solution to automate every stage of your real estate workflows and help you deliver on behalf of your clients when it comes to accelerating contract negotiations.
From creating initial offer agreements to helping buyers navigate conditional approvals to document management while contingencies are resolved to online notarization and electronic signatures for finalizing the sale — we’ve got your back!
Book a 15-minute demo to learn more about how the platform can help you simplify all your real estate negotiations.
Disclaimer
PandaDoc is not a law firm, or a substitute for an attorney or law firm. This page is not intended to and does not provide legal advice. Should you have legal questions on the validity of e-signatures or digital signatures and the enforceability thereof, please consult with an attorney or law firm. Use of PandaDoc services are governed by our Terms of Use and Privacy Policy.
