Sellers want to sell and buyers want to buy, but both parties might disagree on the right price.
Negotiating is an important part of the home buying process because it is one of the largest assets you will buy. If negotiation isn’t a regular part of your life, there are a few fundamentals to keep in mind when it is time to place an offer when you are hoping to purchase your favorite home.
1. Know the market
Are you looking at a buyer’s or seller’s market? Your answer will ultimately determine how you plan to negotiate your home price. In a seller’s market, you have to come to the table with a strong offer. In contrast, in a buyer’s market, you have flexibility to offer below the listed price.
Research the area to determine how long average homes are on the market. The longer it takes for a seller to find a buyer, the more negotiation room you will have to pick the right price. If houses are jumping on and off the market like hotcakes, be ready for a bidding war or at least prepared to offer more than the asking price.
Also, how many homes are on the market? Can you take your pick from hundreds of homes or just a few dozen? Fewer homes on the market generally means less negotiation power.
2. Determine your budget
The best way to not go over your budget is to know there is more than one home in the world you could love.
If you are trapped in finding the home of your dreams, and there is one and only one to fill the void, then you should be ready to lay down some serious cash if a bidding war begins. Try to avoid severe disappointment or buyer’s remorse by going over budget. You might find one home you love, but just keep in mind there are many more.
Knowing your budget limitations also gives you the confidence to walk away from a property if it doesn’t make financial sense for your family to purchase it.
3. Get pre-approved for a loan
Nothing says you’re serious like house hunting with the means to buy. Even if you are confident in your credit score and steady income, it doesn’t mean a seller will be without proof you can purchase the property.
Generally, pre-approval is good for 90-days, so you really need to have these step completed in the perfect time window. This is a crucial step for a seller’s market because you want to have the ability to put an offer on a house on the day you like in a quick market.
Otherwise, by the time you jump through the paper hoops at your bank, someone else could sweep in and take you home. Furthermore, a pre-approved loan will help you know your budget.
4. Find a place you love and place the offer
Finally, you completed your research, toured the home and determined you like the neighborhood and nearby schools. Now, it is time to place your offer.
Your approach should be different depending on the market. In a seller’s market, you shouldn’t start with an offer much lower than the asking price. If you do, it is likely someone else will put in a much higher offer and you won’t have a chance to purchase the property.
Your realtor should run a comparative market analysis to make sure the offer is reasonable. Even in a buyer’s market, a low ball offer could offend the seller. In a buyer’s market, you could put in an offer 10 percent below the listed price and still provide a competitive bid.
5. It isn’t always about the money
In a home purchase, everything is negotiable. Sometimes a seller can’t budge when it comes to price, but what else is negotiable? Maybe you love the appliances or a unique table in the kitchen. Ask for those items to be included in the price.
Is the home in need of a roof repair, a bathroom renovation or possibly a new driveway? Determine what the home seller would be willing to upgrade to sell the home to you at the higher price.
Time is also negotiable. It is possible to change the timeline on inspections, final walk-through and move-in dates. Negotiate sharing some of the closing fees such as appraisals, origination fees, bank fees or pre-paid insurance fees.
6. Negotiate after the inspections
Never assume negotiations will occur after inspections, but be prepared. It's best not to use an inspection as a negotiation tactic, but it is okay to add new terms to the agreement if the inspection reveals significant unknown issues.
The best way to negotiate is to be reasonable through the process. If the inspector mentions problems you knew about before the offer, then it isn’t the best opportunity to renegotiate. You can ask the seller to complete the repairs, or simply a credit or cash value reduction on the price for the repairs the inspector deems necessary.
7. Be ready to walk away
The best way to keep some power in the negotiation process is to always be willing to walk away. If you love a home too much, then it's possible you won’t be able to say no when the final cost doesn’t fit your budget.
8. Tell a story with your purchase
When you put in an offer for a home, send a photo and a letter explaining why you want their home to be yours. Sometimes adding a face to the process makes the seller view you as a human and not just an offer. If your story makes them want to join your team and cheer for a victory, then you are both negotiating with a similar end goal in mind.
9. Choose the right expert
Having a knowledgeable real estate agent makes all the difference in buying a home at the best price. You want someone who is familiar with the market and who can tell you if what you are finding is truly a good deal or not. You need a seasoned negotiator on your team, and you can count on us at Rieger Realty. Call us for a free consultation at 405.310.2796.