How to Negotiate the Price on a Home
Before you place an offer on a home, your real estate agent will probably discuss how to go about creating a negotiation strategy for you to get the best possible price for your new home. When bidding, do you start low, knowing the seller will then talk you up in price? Do you ask for extras like keeping the appliances? Do you hold your ground or bend slightly on what you will accept? Is there a way to guarantee that you don't lose this house? Having an experienced and knowledgeable agent guide you on your choices will help answer those worrisome questions.
The Basics of Negotiation
When negotiating, there are no guarantees. The best advice is to expect the unexpected. Every seller has different priorities and their own unique temperament. Even agents who are excellent negotiators can get outmaneuvered or surprised.
Keep in mind that you may be able to get a really good price on a home, but it will still probably fall within the typical property values for the area. If you are trying to buy a foreclosed home there may be more opportunity for getting a low offer accepted, but sometimes a bank-owned home is not the bargain you thought it may be.
However, there are ways to improve your chances when you find just the right home for sale and are ready to place your offer.
First Offers Do Make a Difference
Even if you plan to make a reasonable offer that stands a good chance of acceptance, know that the seller is forming an impression of who you are and what you are like. This can affect a seller. The seller may care about who ends up living in it after they leave. Some tips to make a good first impression:
- Make a connection. Your real estate agent will do most of the communicating with the seller's agent, but sometimes a short, sincere letter to the seller, introducing yourself, and explaining how much you love their home can make a big difference in the negotiation process.
- It is important that you have your pre-approval for a loan done and ready to include with your offer to demonstrate that you are a serious buyer and can get the loan required.
- Include earnest money with your offer and make certain the check has all the funds ready and available for when it is cashed.
- Be flexible with details like when you will close on the house. If the seller wants to close a little faster than normal or wants some flexibility on when they must be out, accommodate their needs as much as you can. This creates a feeling of good will and can improve any negotiations later on in your favor.
Should you lowball?
A lowball offer, by definition, is one that is dramatically less than the seller's asking price. Some sellers would consider anything 10 percent below what they listed the home at to be a "lowball".
Your real estate agent can let you know any general knowledge about the property, but be aware that a low offer may be considered offensive by the sellers. A lowball may be an option for you, but keep in mind that they may (and often do) backfire on the buyer, resulting in total rejection by the seller without any counter offer in return.
Potential Reasons for Rejection:
- Keep in mind that though they are moving, this home is part of the seller's life and family. They may be very insulted by a lowball offer.
- The sellers may not think you have strong financial backing. If you can only offer less than the listing price, perhaps you do not qualify for more.
- Their listing agent will probably advise against it: Remember, the listing agent's job is to advise their clients to get them the most money, as well as sell the home in a reasonable amount of time. The agent also makes more when the home sells for more. A lowball offer is not good for the listing agent or the seller.
- The sellers may have a mortgage to pay off and can't even consider your offer: For example, if the sellers still owe $200,000 on the mortgage, your $140,000 offer is not going to cover their needs.
Negotiating after the home inspection
In some cases, the results of your home inspection may give you a little leverage with the seller for further price negotiations if there were undisclosed items that were discovered. The report from your inspector will list at least a few repairs or replacement items needed in the home. You and your real estate agent will then discuss if you should try to negotiate a lower price or credits toward the costs of the repairs. It is best to get a price reduction or credits and handle the repairs yourself to insure they are done according to your standards of quality. But asking for this price reduction does not mean the seller will agree. If they do not agree, you have two choices: continue with the purchase as previously agreed upon, or walk away from the deal on the grounds that you don't accept the home's repair issues.
If you have a real estate agent working on your behalf, the actual back and forth work of negotiations is being handled for you. If you choose your agent wisely, you can trust in the fact that you have an experienced processional working to get you the best deal possible.