Close the Deal

Many people can make great sales presentations, but have never learned how to “close the sale” and “ask for the business.” Let's cover some of the key aspects of closing the deal.

In selling there is a term called the “trial close.” This is a technique designed to determine if a potential buyer has understood and accepted what's been presented up to a specific point. It is used as a test to determine if the buyer is ready to move ahead to the “close.”

Sometimes it is used to obtain a quick commitment to purchase something, but it is also used to reveal objections a buyer may not have expressed during the sales presentation.

We can apply the trial close technique to selling a home just as we could use it to sell other products or services. A typical trial close statement for home sales might be,

So, from our discussion, you require three bedrooms in a home in our price range, is that correct?”

“It appears that you like this home and the neighborhood works for you, would you like to discuss the price?”

The answers to questions such as these will tell you if the potential buyer likes your home or if he or she has other objections that you will have to deal with. Here is where you will find out if the potential buyer is concerned that the roof might need to be replaced, or if he or she doesn't like the front sidewalk, or if you have too many trees around the house and it is too shady, or if the kitchen is too outdated. Your trial close will force the potential buyer to tell you what is really on his or her mind, and once you have that information, you can then attempt to deal with the objection. In the alternative, the potential buyer will give you a green light to move to the close.

Selling a very expensive product such as a home requires that you be more careful with techniques such as the trial close than you would be if you were selling lower priced goods or services. Think about a car salesman. We have all heard the stories about “slick” car salesmen. Many got this reputation because they pushed too hard.

When selling a home you have to be sensitive to the fact that your potential buyer is making one of the biggest financial and emotional decisions in his or her life. Very few purchases are of the magnitude of a home purchase, and the very last thing a potential buyer needs to feel is pressure. A potential buyer would rather walk away from a great home opportunity than buy something from someone who is exerting pressure to buy. There is just too much at stake. So, be sensitive and subtle with your trial close, and even more so with the close.

Your trial close may not come into play on every visit. Some potential buyers will be reluctant to share their true impressions, or they will be difficult to read or just not that interested in your home.

But do give every visitor your Sales Flyer and a Home Visit Feedback form available in the Home Selling System with a postage-paid return envelope. You never know…though they may seem uninterested in your home when they leave, when they see other homes in the area they may decide yours is really the better value.

If your trial close goes well, be sure to give the potential buyer a Buyer Information Packet and CD tour of the home if you have one. When they leave, you want them to have all the information they'll need as they continue to consider purchasing your home.

The "close" is the key element in your presentation. Listing your home on ur website is important. Having your photos displayed is great. Making a flyer and advertising to find potential buyers is also necessary. Fixing up your home so it is Ready to SELL is vital. Working with the Home Sales Hotline and getting potential buyers to make appointments is also critical.

However, if you can't close the sale, all of your hard work is for nothing. So, it is important that you get the "close" right.

One key to the close is that you should not try to make it until the potential buyer indicates his or her acceptance of your presentation. In other words, unless your potential buyer starts asking you very specific questions about terms and closing dates, you need to keep probing and asking questions that will draw out objections that you can deal with and then move to a trial close that will then lead you to attempt to close. Some typical examples of statements that might be made by a potential buyer that could let you know it is time for you to attempt a close are, “My wife and I really like this property ,” or “We have looked at several homes in this neighborhood, and we think you have this priced correctly,” or “If we can reach an agreement on an allowance for the kitchen renovation, I think this home might work for us,” or even “When do you have to move to your new home?” There's an expression, “When the timing is right, you'll know it.” At the end of the day, no matter how much training you have, go with your instincts. Once you are sure that the potential buyer is ready, move forward to close the deal.

Simply ask your buyer if they'd like to buy your house. Getting to the close is that simple and there is no need to make it more complicated. If the buyer is ready, move to negotiating the final price. If not, go back to asking questions to uncover their objections, but do so in a way that they won't feel pressured.

Negotiating Final Price

WAIT for the buyer to state the price they'll pay. DON'T offer a lower price unless you've already agreed with them that an objection of theirs justifies an adjustment to your price. You had good reasons for setting your price originally; now you need to decide if there are good reasons for adjusting it. Examples of reasons for price adjustments may be the results of an inspection report done by a buyer's inspector that call for repairs, or a change in your local real estate market conditions. Or, you may simply have decided that you are ready to move and you want to make some concessions in order to be able to do so quickly. You might want to consider lowering your price for one or more of these reasons or raising it to allow for household furnishings the buyer is interested in purchasing from you. Once these negotiating points have been ironed out you will typically proceed to the Offer, and usually a Counteroffer.

In most cases, a buyer will make an initial offer that will be below your asking price. Typically, a good rule of thumb is to respond with a counteroffer to drop your price by half the difference. (For instance, if your asking price is $200,000, the buyer may offer $180,000. A typical counter offer would be $190,000.) Only you can determine how much you are willing to negotiate on price. You may only want to drop your asking price by a small amount to see how the buyer might respond. It all depends on how quickly you want to sell your home and how much the buyer wants to purchase your home. Once you and your buyer have settled on a final price, you'll proceed to the Binder and Contract for Sale.

Once you and your buyer agree on a price, you will be ready to write up a “Binder,” also known as an “Offer to Purchase” agreement.

We strongly recommend that you hire a competent real estate attorney to assist you with all legal documents. 

When you represent yourself as your own attorney, you run the risk that your buyer will have a subconscious feeling that the transaction may not be as sound as it could be. For instance, without an attorney, you will be holding the buyer's deposit rather than having it in an attorney's escrow account.

However, in the event you wish to move ahead on your own, we have provided a link on our website where you can obtain the necessary legal documents for your particular state. You may obtain a complete package of all real estate transaction legal forms for every state on the our website.

Once you and a buyer have agreed to a final purchase price, you will typically execute a Binder or Offer to Purchase agreement accompanied by a check from the buyer for “earnest money” or 1% of the purchase price. This is a preliminary agreement, secured by the payment of the earnest money, between a buyer and seller as an offer to purchase your home; and it secures the right to purchase your home upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase your home, the earnest money is forfeited unless the binder expressly provides that it is to be refunded.

This document is non-binding but shows good faith on the part of the buyer. The signed document and the check establish the binder. The check for 1% is non-refundable and becomes part of the down payment if the offer is accepted. This earnest money will be deposited into your attorney's escrow account. This is also where you discuss closing terms, times, dates, and what goes with the property or what is excluded. You will also address “contingencies” at this point. Contingencies are terms to which the buyer would like you to agree, which could permit the buyer to withdraw his offer to you as well as require you to refund the earnest money. They are discussed below.

After the binder is executed (signed by both parties with the earnest money), you will have your attorney call the buyer or their attorney to draw up a formal real estate “contract of sale.”

At present, over 30 states require some form of seller disclosure. Many times a disclosure form is completed and provided to a prospective buyer before an agreement to purchase is made. The form provides prospective purchasers with information to assist them in making a decision to purchase. Generally, the form must be provided before the contract of sale is signed by the purchaser and is not considered part of the contract between the seller and buyer.

The seller is generally under a duty to disclose only “known” problems. This duty is often described as the duty to disclose all material facts pertaining to adverse physical conditions in the property of which the seller is aware that could “adversely and significantly affect the buyer's use and enjoyment of the property.” It should be noted, however, that the seller is under no duty to disclose hidden defects that could be detected only by an expert. Your attorney or our partner, U.S. Legal Forms, Inc., can provide you with the required disclosure for your state.

The Real Estate Sales Contract is an important document. Once it is signed by both the seller and the buyer, you will remove your home from the market during the contract period and up to the closing. This means that you will be legally unable to sell your home to any other buyer under the terms of the Sales Contract. However, you may still show your home to other potential buyers and may still accept binders but these additional binders will be deemed “back-up” offers and cannot be confirmed as binding until the primary buyer (who has paid a non-refundable deposit) has either withdrawn and forfeited his deposit or voided the agreement due to previously agreed upon contingencies which were not met for one reason or another.

If the buyer anticipates getting an FHA-insured mortgage, you should be aware at this point of the FHA Amendatory clause, which has to do with the appraised value of the property. Section 226 of the National Housing Act requires that the purchaser of property be provided a written statement of the appraised value of the property. The statement must be provided before the sale of the property. As this requires an appraisal at a time out of the normal sequence of the mortgage origination process, HUD has implemented Section 226 by permitting the buyer and seller to sign a sales contract before the statement of appraised value is delivered if the contract contains, or is later amended to contain, a provision permitting the purchaser to escape the purchase obligation without loss if the appraised value is less than the contract sales price. This provision is generally implemented using the FHA “amendatory clause.”

In most real estate sales, there will be things that the buyer would like to do before having his or her contract become binding and the deposit deemed non-refundable. For example, the buyer may want to have an inspection done before the contract becomes binding. Or he may want to make the sale contingent on selling his current home.

Obviously, you will want to have as few contingencies as possible so that the deposit you receive from the buyer becomes non-refundable quickly and the contract is binding. Therefore, you should set a time limit on all contingencies. For example, it normally takes about two weeks for a buyer to secure financing, from start to finish. Inspections can take a week. Try to avoid long contingencies. Be especially cautious about granting a contingency for the buyer to sell his current home, since you will have no control over that. Even if his home is under deposit, the sale could fall through, and you could miss the opportunity to market your home to other buyers as a result.

One of the most significant factors preventing homes from being sold is a lack of financing available to buyers. Many buyers will ask for a time contingency in the sale contract while they line up their financing. Usually, the time period is no more than a few weeks.

If you accept this contingency, you will be required to take your property off the market while the buyer gets financing. You can try to get a back-up buyer in line while you're waiting, but that will be difficult to do once your home is not on the market. The buyer may want you to agree to wait for as long as 30 to 45 days while they try to arrange financing.

If your buyer can't get financing because he or she has a less than perfect credit score, you have lost the sale and a lot of time. More than likely, the buyer would want to add this contingency into the “Binder” agreement, and therefore you would not be able to keep the earnest money deposit if the buyer could not obtain the necessary financing. To avoid having to allow a potential buyer a lot of valuable time to secure a mortgage, ask about the status of your buyer's mortgage application and whether they have been pre-approved for a loan. Their answer will let you know if they have started the process and if they should be approved for the mortgage necessary to buy your home.

If you know that the buyer will be able to obtain a mortgage, you may choose to allow a mortgage contingency in your Contract For Sale. Conversely, if there are indications that your buyer will be unable to obtain a mortgage, then you may not want to agree to a mortgage contingency because you'll want to keep your home on the market and be able to attract other buyers.

Finally, once you have “gone to contract,” your buyer may ask to move personal items or some furniture into your garage or other storage area a day or two before the closing because he has sold his home. If you agree to such an arrangement, be sure to have your insurance agent issue the buyer a policy to protect his belongings. Since you are the owner of the property until the closing, you are responsible for these belongings should anything happen to cause damage to them before the closing.

In many cases, a buyer may love your home but may not have the cash to cover the down payment the mortgage company requires in order to issue a loan commitment. Based on the buyer's credit score, the mortgage company may insist on the buyer putting up as much as 20% of the purchase price in cash to qualify for a loan. A buyer may have difficulty coming up with this much cash up front.

Sellers can consider another financing tool option called The Purchase Money Mortgage (also known as the “PM”) to help the buyer with the sale. What is a “PM”? It is actually a second mortgage provided by the seller to the buyer that will cover some of or all of the down payment. It allows a buyer with limited cash to buy a home he would not be able to buy otherwise. It is used by sellers who really need to sell their home or who do not need all the cash from the sale of their home.

It also provides the seller an opportunity for interest income from the purchase money mortgage that usually is at a higher interest rate than he or she could earn from a bank. Clearly, its most important feature is that it is a vehicle or financial instrument that can dramatically assist you in closing a transaction when your buyer has insufficient cash and the bank limits the amount of money it will give for a first mortgage.

For the most part, sellers give PM's on a short-term basis with reasonably high interest and a final “balloon” payment in three or four years. The PM is usually collateralized by a lien on the home. In some cases, it is further supported by other assets of the buyer, such as autos, other real estate or art.

The PM follows traditional bank financing, or, in other words, it takes a second position behind the bank. The risk to the seller is that the buyer will default on his primary bank mortgage at some time and the bank will then foreclose to get their money back.

If the property sells at foreclosure for just enough to pay off the bank, the holder of the PM (or second mortgage) could lose his investment. However, if the home sells for enough to cover the bank and the PM, the seller will be OK. In that case, the purchase money mortgage would be without risk to the seller.

Seller financing is not something you should consider without consulting both your accountant and your attorney, as a transaction of this nature carries both legal and tax consequences. Your attorney can assist you in the preparation of the documents as well as the filing of the mortgage in your local town or city records to protect you from having a sale of the property in the future without satisfaction of your obligation by the mortgagee. Any title company will discover your lien on the property and prevent any future sale from taking place without your PM being paid off first.

In most cases, the costs of a second mortgage (legal fees, filing fees, etc.) will be nominal and usually are borne by the buyer of your home. Further, you must approach such a transaction exactly as a lender would.

So, though you should proceed with caution, giving a second mortgage or a purchase money mortgage could be a very strong sales incentive for a seller who does not need all the cash at closing, as it allows many more potential buyers who might not ordinarily consider buying the home to do so. Review each aspect of the Sales Presentation in detail before your first Home Visit and then again briefly before each subsequent visit, and your home will be SOLD before you know it!