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When buying a home, negotiating the asking price is an essential part of the process. Most sellers will price their homes slightly higher than market value in anticipation of negotiations. This tactic means that buyers should prepare to negotiate to get the best deal possible.
Negotiating can be intimidating, especially for first-time buyers needing help knowing what to expect. Researching and understanding the current market conditions is essential before entering into negotiations. The first and most often overlooked aspect of negotiating the best deal when buying a home is positioning yourself as a new buyer in the most attractive way possible to a potential seller.
What does this mean exactly? In the simplest terms, you want to enter the negotiation in the strongest possible position possible in the areas you can control. You want a seller to choose you over other offers because they feel confident you will follow through and buy the home, and your request best meets their needs hitting all their hot buttons.
Here is a list of 20 tips an ideal buyer would come to the table with. This list doesn’t mean you must meet all the below requirements, but for a seller, these are the attributes of a perfect buyer and the more boxes you can check the better.
This lack of concern can mean two things, either a) you are a cash buyer and don’t need a mortgage to buy the home, or b) you had gone through the underwriting process before you made an offer on a home and you have what’s called an underwritten pre approval.
The lender has verified your income and assets, cleared all conditions related to your financing, verified employment, and done all due diligence that is generally done after the property is under contract. In both a & b situations, the most impactful offer will be an offer that waives all financing contingencies. This offer doesn’t mean you have to or should remove all financing contingencies, but for a seller, this is the ideal situation.
If the appraisal comes in low, you’re willing and able to put in more money and still close. In many situations, the seller may be concerned that an appraisal as part of your mortgage financing could kill the deal. Whether it’s a complex property, a few distressed sales in the neighborhood or bad past experiences with appraisers, many sellers and listing agents fear “what if”. If your offer can remove the appraised value as a concern, it may help you negotiate in other areas.
Some sellers need to sell their homes quickly for various reasons; if you have your financing lined up and you’ve already gone through underwriting, a quick closing could be very appealing for a seller.
Conversely, there are situations where a seller wants to delay closing a couple of months or rent the home back from you after you sell. If you are flexible with timing and can accommodate the seller’s needs in this area, this gives you an advantage in negotiating in other regions.
In a hot sellers market, allowing for a contingency that lets you sell your home before closing on the new property could be better. However, even in a balanced market or a buyers-market, going in with a contingency that requires you to sell your existing residence will limit your ability to negotiate in other areas. These other areas could include purchase price and seller credits.
When making an offer on a home, it is essential to make sure that the request is as free of contingencies as possible. Sellers favor offers that leave little to chance, so it is best to refrain from making the purchase conditional on selling your current home or any other complicated contingencies. While it is important to include contingencies for mortgage approval, home inspection, and environmental checks typical in your area, such as radon testing, buyers should keep these to a minimum.
It is also important to remember that if you include contingencies in your offer, they must be realistic and achievable. For example, if you include a contingency for selling your current home, make sure you have already listed it and taken steps toward selling it before submitting your offer. This process will help ensure that the seller accepts your request seriously and does not view it as too risky or uncertain.
Several options are available to both the buyer and seller when negotiating a counteroffer on the house. The most common type of counteroffer is when the seller requests a higher sales price than what was initially offered. In this case, the buyer can accept the new offer or negotiate for a lower price. Another option is to change the closing date, which may benefit both parties depending on their needs.
Additionally, the seller may request that the buyer reduce or reject paying all or any of their closing costs, which the buyer should carefully consider before making a decision.
Finally, suppose the buyer included certain contingencies in the initial offer, such as an inspection or appraisal contingency. In that case, the seller could reject these in their counteroffer, which should also be considered when deciding how to respond.
Ultimately, it is essential to consider all aspects of a counteroffer before deciding so that you can make an informed choice that best meets your needs.
Now, this is only for some, but if the home needs work, the seller may be willing to give you more than a dollar-for-dollar incentive to do the work after closing with your funds instead of requiring the seller to do the job before closing.
Many sellers want to avoid dealing with repairs and may not have the cash before they sell the home to do the work, which could allow you to get a significantly lower purchase price. There are risks in doing this as often seemingly minor repairs can cost much more money than expected, but if you or someone you know has a good contractor that can look at the property ahead of time, this may be worth considering.
A big caveat is if the appraiser calls out issues with the home and the lender is made aware of the problems, they may require the work to be done before closing the loan.
If a property comes on the market, making an offer 10% below the list price and demanding additional seller concessions such as closing cost credits won’t get you very far. If you know what is important to you and what’s important to the seller and focus on negotiating in a way that benefits both of you, you may get a better deal than you expected.
There is no more significant red flag for a seller than a templated preapproval from an online lender, big mega-bank, or push button get mortgage-type lenders. Experience listing agents know the due diligence done during the preapproval process is limited at best and nonexistent in many cases. Many agents that do a lot of business have personally been burned by would-be buyers who have to cancel purchases because their financing fell through with one of these mortgage companies.
If you can go online, fill out a form in 5 minutes and then print a pre approval, you know there wasn’t any genuine review and validation done. You also can bet the agent you’re making an offer to knows how worthless that pre approval is and won’t be nearly as amenable to negotiations as they would be if you used a reputable lender that does things the right way. Having a lender underwrite the file upfront and then call the listing agent and tell them how great of a borrower you are going a long way.
Coupling that with the agent either having personal experience working with your lender or being able to look them up online and see great reviews quickly can mean the difference between you getting the house or not.
We have had many clients that started the home buying process with another lender, made multiple offers, and have yet to make progress. They then come to us and get their first or second offer accepted and notified by the listing agent that we’re the reason they decided to take the offer.
If you’re competing for a property that is likely to have multiple bidders consider utilizing an escalation clause to avoid going too high over the asking price but still giving yourself a chance if the price gets bid up by other potential buyers. If you go this route, be prepared to have the seller counter, as a savvy listing agent will often come back to a buyer, throw out the escalation clause, and request their final and best offer.
Whether the seller underpriced the home or overpriced the home is irrelevant to the actual market value. Your baseline needs to be tied to the correct number when making decisions. Suppose you paid $100k over the list price but $50k under the market value; who cares. If you are buying this property as a primary residence, try to remove emotion from the situation as much as possible; however, don’t discount how well this specific property works for you and your family. If everything is perfect, that’s worth a premium, and how much is up to you.
Figuring out the maximum amount you’re willing to pay before negotiating can be helpful; make sure you are honest with yourself ahead of time and not overly optimistic, or it’s a wasted exercise.
Buying a home is an emotional experience, but it’s important to remain unemotional when negotiating. Treating the transaction as a business decision can help you save money and get the best deal possible. When negotiating, look for any sign of interest from the sellers and ask for something in return each time you make a concession. If they ask you to increase your offer, try asking them to contribute to closing costs or pay for a home warranty instead. If they still don’t budge, make it clear that you’re willing to walk away; this may cause them to become nervous and accept your offer.
Not letting emotions cloud your judgment when buying a home is essential. Take your time and patience during negotiations; consider your options first. Be prepared with counter offers if necessary, and remember that it’s ok to walk away if the sellers don’t meet your terms. Keeping an unemotional approach throughout the process will help ensure that you get the best deal possible on your new home.
Saying no to a counteroffer and walking away can sometimes be what the negotiation needs to get a deal done. Just be cautious using this if you don’t mean it and aren’t prepared to walk.
If you, the seller, have gone as far as they’re willing to go, but you need something else to make it work for you, don’t be afraid to get creative. Think furniture, BBQs, and appliances. It may help you save more money furnishing the home than it costs them.
When it comes to getting the best price on a property, having an experienced Realtor who has negotiated hundreds of agreements and is intimately familiar with the market is quite helpful.
A good Realtor knows how to get information about the seller and can help you figure out what’s important to them and put together a strategy when making an offer. Ideally, your Realtor and lender work together and can implement a buying strategy that focuses on structuring an offer that gets you the most bang for your buck and aligns with your short and long-term financial goals.
We have worked with thousands of Realtors over the years and can easily guide you to a great Realtor in your area.
Leverage issues with the home inspection to negotiate additional reductions in the purchase price or a seller credit which you can use towards your closing costs. Unless you are purchasing a home that is specifically being sold As Is, you can expect some back-and-forth negotiations to happen after an inspection report is received.
Be transparent with the report’s findings and don’t go overboard, but if issues arise, it is reasonable to either request that they are fixed before closing or get compensation for the fact that they’ll have to be set up after closing. Remember that the seller must fix issues before a lender closes your loan. If there are major foundation issues, roof problems, or mold, it’s usually wise to ensure these are taken care of before buying the home.
Request repairs – request a drop in sales price – request a seller credit towards closing costs – Walk away.
Often sellers who have owned a home for a long time have a deep connection to the property and want to see their home go to someone who will take care of it for years. Including a personal letter with your offer and explaining why you like the property and how it will fit perfectly with your family can make a big difference if the seller chooses between multiple offers. The last thing many sellers want to see is their home demolished after closing and replaced with a new McMansion.
You have options if the value comes in low, and it’s up to you how hard you want to push if this happens. You can request the total amount to drop the purchase price to the appraised value. You can ask the seller to meet you halfway, pay the difference, or dispute the appraisal. Buyers may use this dispute tactic to get a higher value; however, this is difficult due to appraiser independence laws and usually only works if the appraiser made errors or missed a legitimate comparable sale.
No matter what happens in the negotiation process, try to leave the door open for future possibilities if the seller cannot sell the home at their desired price. Often a seller needs time to face the reality of the market and test the waters. A price they were unwilling to consider at the beginning of the process may be a price they’d happily accept two months after the property has been on the market. Stay cordial and let them know you’re still interested; they would be happy to revisit if they change their mind.
Nothing is worse than someone beating around the bush regarding negotiations. No one wants to be dragged along and kept out of the loop, so it’s essential to be direct and mention what you desire during talks. Some negotiations can feel like a tug of war, with offers constantly going back and forth, rejection after rejection. This back-and-forth can be very stressful and irritating to both parties involved, so it’s essential to keep in mind that being direct will help speed up the process, and you may get to acceptance and close much faster.
When negotiating, it’s essential to ensure that your intentions are clear. Don’t waste time by making vague statements or trying to hint at what you want; instead, be straightforward about what you need from the other party for an agreement to be reached. Being direct will also help ensure that both parties understand each other’s needs and expectations, which can lead to a more successful negotiation overall. Additionally, being direct will help save time since there will be no misunderstandings or miscommunications between the two parties.
In conclusion, offer a large earnest money deposit, make a more significant down payment, be flexible on your closing date, add a personal letter, limit contingencies, and don’t appear desperate.
However, knowing when to leave a deal is essential in any negotiation. It can be challenging to make this decision, especially if you have become emotionally invested in the outcome. For example, when buying a house, it can be easy to fall in love with the perfect home and feel pressured into accepting an offer that may not be in your best interest. On the other hand, from the seller’s point of view, they may feel desperate for an offer after months of no interest and be tempted to accept something that is not ideal.
In either case, it is essential to remember that both parties should take their time before making any decisions. Rushing into a deal without considering all aspects could end up costing you more money or leaving you with a property that does not meet your needs. It is essential to weigh all options carefully and ensure that the agreement benefits both sides equally before signing on the dotted line. If either party feels like they are getting a raw deal, it might be best to walk away and look for another opportunity.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.