Negotiate Your Best House Buy
Keep your emotions in check and your eyes on the goal, and you’ll pay less when purchasing a home.
Ready To Negotiate?
Buying a home can be emotional, but negotiating the price shouldn’t be. The key to saving money when purchasing a home is sticking to a plan during the turbulence of high-stakes negotiations. A real estate agent who represents you can guide you and offer you advice (that’s where I come in!) In the end, you are the one who must make the final decision during each round of offers and counter offers.
Get your finances in order before you start looking for a house. Your offer is much less persuasive if it doesn’t include a mortgage preapproval. Make sure it is a REAL Preapproval…(We have our eye on your fancy pre-qual, we see you!)
Do the math before getting too hung up on small price differences. At an interest rate of 4.3 percent, the difference between $195,000 and $199,000 is $20 a month. Don’t get stubborn and lose the right house because you had to win. Simple rule of thumb; the difference in 10K in buying power is about $50 a month. TAXES play a huge role in the future PITI (monthly) payment of a home. Understand Purchase Price vs Cost. Always shop based on the future monthly payment, not the purchase price of the home. I understand math can be hard. I'll walk you through the calculations and teach you how to see houses in terms of monthly payment and NOT purchase price.
Base your offer on the home value and condition, not the list price. The recent sales in the neighborhood give you ammunition and information. If a home is priced at or below market value, you’re unlikely to get it for less. Most often there will be multiple offers…and it will sell for over asking. If it is priced above market value and has been on the market for a while, a lower offer accompanied by a market analysis may get you the home. This is where a good agent can be invaluable. ( I happen to know one, would you like her number?)
If you see a home you like, be prepared to move fast. When properly priced properties in good condition go on the market, they go very quickly. If you’re in a competitive market (and we ARE), make your first offer your best offer. Highest priced does not always mean the best offer. Some sellers will accept a little less on the home from a cash buyer, or a buyer with a large down payment. If there are multiple offers, the seller may choose to ask all offers to send “one more offer” or they may only negotiate with the highest offer, leaving you without another chance to make an impression and get your offer accepted (remember every 10K in buying power is only $50 a month). There will always be people who want to make a lower offer. When those people miss out on the first or the second or the third property, they learn their lessons. The caution is the market will continue to increase in value and rates may continue to creep up. In the end you could be costing yourself more money trying to "get a deal".
Don’t assume that the inspection will allow you to reopen negotiations. It’s certainly acceptable to ask for a credit if the inspection reveals major problems. But in a tight market, you may not get it. These days, it’s unlikely that a seller will make significant repairs, and you’re better off asking for a credit at closing (NOT a reduction in purchase price...ask me why!)so you can hire your own contractors.
Having been through over 200 home inspections and as your Agent, I know what to look for UPFRONT and before making an offer. Examples: What are things we need to ask the Seller about? What are things we may want to write into our offer to be repaired PRIOR to closing? What could impact ability to finance or get home owners insurance?
The first time we see a home together it is going to take approximately and hour. Why? I am going to walk you through the home. What is a fascia board? What is flashing? What is a cement cap? What are the structural elements in the basement? What is the difference in 100 amps of electric with gas vs oil heat? Property condition is important to you (AND YOUR MORTGAGE HOLDER!) Price of the home is also a function of the current condition. You don’t know the current condition? How can we establish a price? You’re not working with me to just write contracts. I am here to walk you through the process… walking takes time! In this market we need to move quickly & efficiently.
If you don’t ask, you don’t get. Even if the market is tight, feel free to ask for repairs or other concessions, but understand that you won’t get it all. My job is to advise you on what is common and typical. What is a concern and what will probably be OK with the sellers and what may not. Don’t be “ticky-tac”! What does that mean? Don’t negotiate $5 items in a $300K Real Estate transaction….sellers will walk away!
Expect to compromise. No matter your price range, you won’t find a perfect house. (I always tell my buyers make a list of 10 things you want in a home. When you find a home with 7 of them, BUY IT! This is also how a picked my 2nd husband!) You’re likely to have to compromise on features and probably even on the big three: price, size or location. Enter your negotiations prepared to compromise, and you’ll be a step ahead.
Don’t get hung up on decor. There are a lot of things about a house that can be easily changed, including appliances, counter tops, carpeting and dated window treatments. Let the little things go. CONDITION is most important in home shopping, to you and your lender!
Remember that terms can be as important as price. That could mean making a bigger down payment, accepting the contents with an estate sale or changing the closing date to accommodate the seller. The fewer contingencies you have … the more likely you are to get the house.
It’s definitely a seller’s market. Buyers have a little more breathing room, but they’re still not in the driver’s seat. It’s easy to find a house online, but it’s harder than it appears to get from offer to closing. A good agent, with knowledge of the market and negotiation experience, can make the difference between a successful purchase and a deal that falls apart. In most cases, buyers pay nothing to use an agent because real estate commissions are covered by the seller.
Here’s the pitch for hiring an agent. They write real estate contracts and negotiate sales all the time. The best agents have tremendous expertise when it comes to market value in the areas where they work. In addition to their own expertise, they know and work with other agents and speak the same language. They have the knowledge and experience to help guide you through the process. They know how to negotiate a home price. If you don’t have your own Agent and choose to use the sellers Agent, they will be paid for handling both sides of the transaction(and you will NOT have anyone negotiating in your best interest!). You are not saving yourself any money...the seller pays the real estate commission for both sides of the deal. One or two Agents, commission doesn’t change!
Our Current Situation:
This isn’t going to be easy. You won’t have much leverage as sellers generally have their pick of buyers to sell their home to. If your offer is low or complicated by contingencies, the seller won’t even bother negotiating. In a sellers market, you want to make a clean offer that isn’t muddied by too many contingencies or demands for extras tossed in. Stick to the basic contingencies: financing, appraisal and inspection. Additionally, unless the house is overpriced, you aren’t going to want to make an offer for much under asking.
In addition, you’ve got to be quick. If you find a home you want, a good agent will urge you to decide quickly, possibly writing up the offer the same day you tour the property. If you aren’t pre-approved for a loan, you can probably kiss a well-priced house goodbye in a hot market. Pre-approval letters are often good for up to 90 days, so it’s a good idea to get pre-approved early in your home search so you can act fast when you find a home you love.
Caution: Even with a full-price offer you may be in competition with other buyers offering as much or more. Consider including an “escalation clause” to prevent someone from swooping in and taking it for some paltry amount more than your offer, writing a letter or some other means of “sweetening your offer.”
The truth is, you probably can’t do it. After all, a home is a pretty big purchase both financially and emotionally. That’s why you should let your agent and the seller’s agent handle all the face-to-face stuff. NEVER visit the seller or call their agent to check up on what they are thinking. Your Agent should be communicating with you daily!
Likewise, when touring homes, if the seller or their agent is present (usually just in an open house situation) do not gush about the home in their presence. In fact, keep your enthusiasm at bay regardless of who is there. Neighbors make pretty good scouts and if they catch you taking a selfie in front of the home, it’s a good bet the seller will soon learn that you are smitten with it. It’s tough maintaining an air of indifference once the seller knows that!
In a balanced market, there are enough buyers and enough homes but not too many of either. This might seem to be an easier market to negotiate in, but expect the back-and-forth counteroffer phase to take longer than in buyers or sellers markets. There’s less urgency from the market and neither side feels pressured to close the deal quickly. Go ahead and offer less than the asking price and ask for whatever additional property or terms you might want. But be prepared to split the difference with the seller.
Caution: Even in a balanced market, you can have someone swoop in with a better offer, so you don’t want to drag negotiations on forever. A difference of $5,000 on a $250,000 probably isn’t worth losing a great house over. You and the seller will both get and give things in the process, but both should end up happy with the final contract.
Congratulations! When you are buying in a buyers market, you have the power. This means there are more homes for sale than there are buyers to purchase them. For sellers, especially “motivated” sellers who have to move, this is tough. If you show interest, they won’t want to let you off the hook. You are likely to get more from them in terms of concessions and price reductions than they really want to give – because they have no choice.
Your strategy: Ask for the moon. You will probably make an initial offer under the price you want to pay. Ask for the seller to pay closing costs and set a closing time that works for you.
Like the appliances? Ask for them. Like the ping-pong table or the kids’ swing set out back? Ask for that too. All they can say is “no” but more likely they will come back with some sort of counter offer. Be sure to include the phrase “with zero value given” on all personal property. Your Bank is not interested in buying you gifts inside of a Real Estate transaction.
Caution: A true “lowball” offer can insult the sellers. In that case they will probably reply with a simple “no” , not even a counter offer. Chances are they will then adjust their asking price down a bit and the next buyer will reap the benefits of your opening gambit. If you really are willing to walk away and continue your search, a lowball offer may be worth it to you. Sometimes they pay off. But if you truly are ambivalent about the house, maybe you shouldn’t be making an offer at all. There are probably other houses that will make you happier.
Thinking of making a move? Keep us in mind. For all your Real Estate Decisions...think RED! AskForRed.com
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