Negotiating the price of a property is part of the process for most real estate purchases. It’s expected that the buyer will want to get a lower price for the property, so the seller anticipates that there will be some negotiation. They may price their home slightly higher than the value to give them some wiggle room in the negotiations.
If you are going to be purchasing a home, going through the negotiation process can be nerve-wracking. This is because you probably haven’t had to be in the negotiation chair very often. It’s something new. However, when you have a better understanding of pricing and negotiations, it can help you to relax a bit more.
The First Steps
Before you sit down to negotiate, you will want to make sure that you have everything in order. This will give you more confidence.
Make sure that your finances are in order. You need to be sure you can qualify for a mortgage. You do not want to fall in love with a home and make an offer only to realize a few days later that you will not be able to get the loan. Make sure you take the time to square your finances away before you start house shopping, and then get preapproved for a mortgage loan before submitting an offer.
Additionally, you should take some time to learn more about the market in the area where you want to buy. Get a sense of the actual values of homes in the area to see if the homes you are interested in are overpriced or not. Learn whether you are in a buyer’s market or seller’s market, as well.
For example, if this is a seller’s market, there might be quite a few offers coming in for the home, and this will give you less negotiation room. Why would they take a lower offer from you instead of a higher offer from someone else? They wouldn’t. The opposite holds true, as well. If it’s a buyer’s market, it might mean that the home has been on the market for months and they really need a buyer. This would give you more negotiating power.
You will also want to work with a real estate agent. Even though it is easier than ever to find properties for sale today, there’s a lot to consider when buying. An agent does more than just show you available homes. They know the local market, they know which homes are right for you and your budget, and they can work on your behalf in the negotiations. This can make things much easier for you.
Tips for Negotiations
Once you take care of the elements discussed above, you can start to think more about the prices and negotiations that will occur when you are negotiating.
You Need an Inspection
The results of an inspection will often be a major benefit when you are negotiating the purchase price of the home you want to buy. The inspector will go through the property from top to bottom and look for any potential problems that would affect the value of the home. They will look for problems with the roof, issues with the foundation and basement, the heating and AC, plumbing, electrical system, and more.
When they have finished their inspection, they will provide you with a report of their findings. If there are issues with the home that you did not know about, you can use the report in your negotiations. You might request that the seller fix the problems before you buy, or you might ask for a lower price on the home since you will have to be the one who fixes them.
Let the Agent Do the Communication for You
As mentioned earlier, you should work with a real estate agent when you are buying a home. There are many things to consider when buying a home and when negotiating the price. It can also be difficult for you to work directly with the sellers for a host of reasons. For example, the seller might have a sad story about why they need to get the asking price for their home, or they might outright lie about certain things about the property to get you to buy. The agent can act as your go-between for all of these conversations. They have negotiated before and will not fall for those types of tactics from the sellers.
Ask Why the Seller is Moving
You and your agent should get an idea of why the seller is getting rid of the home and moving. This can help with the negotiations. For example, if the seller has to move out of state for work, or if they are getting divorced, they are likely to be more eager to sell. They may be willing to take a lower offer. The same would be true if the property has been on the market for a while.
Get the Closing Costs Covered
When you buy a home, you will have to pay closing costs, which go to the lender for servicing your loan. The closing costs for the home will generally be somewhere between 3% and 6% of the total loan value. You might find that even if the owner is not willing to come down in price, they might still be willing to cover the closing costs to make the sale happen. This still essentially gives you some nice savings.
You Can Walk Away
Sometimes, you will find a seller that will not move on their price at all. They won’t cover closing costs, or maybe they won’t acknowledge problems with the property. In those cases, the best thing to do is to walk away, even if you love the property. It’s in the best interests of your finances. You never know, the seller might continue to have trouble selling the property and will lower their price in a month or so.
Negotiation is a major part of buying and selling real estate. Pricing and negotiations can be difficult, but with the tips here, and with the help of a qualified real estate agent, everything will be easier.