12 ways to negotiate the best price
Negotiating Price on a House or Apartment
by Patricia Wright
7 Terms Every Homebuyer Should Know
The Economics of Buying a Home
How We Saved $34k in Interest on Our Mortgage Before Closing
No matter what condition the economy is in, homes are being sold and people are making deals to purchase them. Knowing how to negotiate the purchase of a home is the first step when dealing with anxious homeowners and aggressive mortgage bankers.
1. Bid quickly on selected properties
The longer a home stays on the market, the more anxious the seller will be. There are some very motivated sellers who have priced their home attractively. Potential buyers should act quickly, as there have been bidding wars even in a buyer's market for homes. When good deals come on the market, homebuyers are bidding on the property quickly in order to maximize the chance of getting a contract.
2. Show enthusiasm for the home
Sometimes a home seller will want to make sure that the place they have lived in for many years is bought by someone who will take care of it. Selling a family home can be an emotional experience, and the buyer who lets the home owner know how much they love the property and are excited about living there may get the best assistance in making a deal. Keeping negotiations pleasant and reasonable can make the difference in getting the best terms like closing assistance or other deals.
3. Research prices of homes sold in the area
Before even thinking about submitting an offer on a home, do the homework of finding out what has been sold in the area at what price. Check comparable styles of home, sales in the neighborhood, square footage, and any other variable that will help in determining if the asking price is a fair value or above or below the market. This important step can save a lot of time and money from bidding too high on a property.
4. Gain a clean understanding of what motivates the seller
Sometimes the seller is anxious to sell a home, and sometimes the seller may want to sell but is not pressed to do so. This can make a big difference in negotiations. If the seller is in no rush to sell the home, they can walk away from offers that are too low and refuse to negotiate.
5. Start with a lower price than listed
It is better to start with a lower offer and let the seller counter-offer. That will provide information on how much the seller is willing to back off the stated price so that real negotiations can begin. Sellers may be expecting a lower than asking price offer, but make it realistic or it could be considered insulting.
6. Research how quickly homes are selling in that neighborhood
If a neighborhood is experiencing strong sales, offering an initial low price may eliminate the buyer from the market, as the seller may not acknowledge the offer other than rejecting it. Know the competition. It is not always smart to just bid low because that is what everyone says to do. Know how strong sales are in the area and the length of time homes are normally on the market.
7. Be realistic about repairs and upgrades
Many deals have been broken from aggressive home inspection reports detailing every little flaw in the home. Home sellers will probably fix things that are broken, but if minor things like light fixtures or old curtains are not to the buyer's liking, the seller may refuse to change them. For the seller who is not in a dire situation, they can refuse to make repairs and leave the deal. Be realistic about what should be expected to be repaired and what can be left on the table. Pick battles carefully.
Calculator: How much mortgage can I afford?
8. Depend on the realtor for communication with seller
People hire realtors to represent them in the purchase of a home. Any communications should be between seller realtor and buyer realtor. The homebuyer should only communicate issues or ask questions through their realtor and should never contact the home seller personally. This keeps negotiations on a purely professional level.
9. Interview several realtors
Because the realtor will be representing the buyer, it is good to make sure that the chosen realtor is well respected in the community and is a true professional. It is important to remember that the seller's realtor will be advising them on what is reasonable or acceptable. Interview three or four realtors before selecting one.
10. Divulge financial information prudently
The seller does not need to know everything about the buyer's financial picture. If the seller can purchase the home for cash or will be putting down a significant portion of the price of the home, they should keep that information to themselves and let the sellers believe the deal will be pending mortgage approval. It is better to use the information as a bargaining tool towards the end of the negotiations and ask for a price reduction for cash.
Compare mortgage rates.
11. Remain calm during the process
Negotiations can be nerve-wracking. It is important to remain calm during the proceedings and not show fear. The realtors can handle the back-and-forth. Remember that they also want the sale to go through since they get paid from the commission on the sale.
12. Be willing to walk away from deal
Sellers should be able to walk away from the table at any time. Emotional ties to a property can end up in bad deals being made by the seller who just has to live in the house. Sometimes the deal is not worth the hassle of constant back and forth, so it is better to just walk away rather than continuing unrealistic negotiations.
The perfect home is waiting for the perfect buyer. Knowing how to make the sale happen with as little stress as possible is an important part of the home-buying process.
Reviewed March 2017
Patricia Wright is the Chief Savings Officer at Rollback and a savvy shopper.
Take the Next Step:
- Looking to buy a new home? Use our simple tool that compares different lenders to see what your monthly mortgage payment could be. It's private, only takes a minute and could show you how to save thousands!
- Get more savvy advice for buying a home by visiting the Dollar Stretcher Library.
- Join those who 'live better...for less' - Subscribe to The Dollar Stretcher newsletter, a weekly look at how to stretch both your day and your dollar! Subscribers get a copy of our ebook Little Luxuries: 130 Ways to Live Better...For Less for FREE!
Share your thoughts about this article with the editor.
More Money-Saving Tips for Your Home
- Should I use a HELOC for home remodeling and repairs?
- Should I refinance my mortgage?
- Compare HELOC rates
- Check for a lower homeowners insurance rate
- 3 ways to use a mortgage calculator
- Mortgage calculator: Calculate your payment and more
- Home equity calculator: HELOC vs. line of credit
- How much can additional payments save me on my mortgage?