Even in a seller’s market it’s important to understand how to negotiate. You don’t want to overbid, skip negotiation, and end up unsatisfied with the deal. Despite what you might think, everything is negotiable when buying a house. How much you grab for yourself and how much the seller grabs depends on how well you negotiate. Of course, that’s the rub. Many of us feel at a loss as negotiators. For many people, in the back of their minds, they know they’re going to come out second best. So they just don’t bother. This is why it’s vital to go into the process with confidence. These are a few strategies you can use to make sure that you come out a winner in the negotiating process.
Lead with Your Strengths
The seller is competing against many others like him in the marketplace, whereas you have a world of housing options to choose from. Strengthen your bargaining position by first looking at comparable homes in the market and using the information garnered when negotiating. Was another home in the next neighborhood a little newer and larger, yet priced a little lower? Mention it to the seller or the seller’s real estate agent and decide if a lower offer is warranted. Try your best to keep emotions out of the process and treat it like a business negotiation. Savvy sellers know when their homes have struck a chord in a potential buyer, and they’ll use that information to their advantage. Make your initial offer lower than you think you should. This gives the seller some room to negotiate, without putting you at a disadvantage for the remainder of the negotiation. It also lowers the seller’s expectations and could set the tone for the rest of the negotiating process. At worst, you can always come back later with a higher, more reasonable offer, but keep in mind that in a hot seller’s market you may not get the chance. If your original offer is answered by a counteroffer, consider it carefully and decide which of the various concessions you can live with.
Don’t Worry About Offending the Seller
Most house hunters, particularly house hunters who don’t regularly invest in real estate, are worried about hurting the seller’s feelings, about insulting the agent by offering a price far lower than the asking price, and most important, about doing anything that would appear foolish. If that’s the way you feel when you open negotiations for the purchase of your next home, you are a dead in the water.
While you may not end up best buddies with the seller, remember that when negotiating for real estate you are participating in the age-old ritual of bargaining. You are relying on your own cleverness and personal will power. If you are weak and susceptible to the influence of the seller (or the seller’s agent), you could be talked into paying a higher price, getting less favorable terms, or (worst of all) accepting a house that you really don’t want.
Sometimes you can Negotiate New Builds
A few exceptions are in order here. Sometimes you’re buying a brand new home instead of a resale. The builder/developer has a set price written in ink on the brochure. Either you pay that price, you are told, or you don’t get the home. Right? It depends. If the market is hot and new homes are selling as fast as they can be put up, yes, you’ll have to pay the set price. In fact, when the market is very hot people will sometimes camp out in front of builder/developers’ offices for days just for the privilege of paying full price for a new home! On the other hand, if the market is slow, there’s no reason you can’t offer a builder/developer a lower price—and get it. Just remember that builder/developers often have a relatively small profit margin and they may not be able to accept a severely reduced price.
Make Up for the Price in other Areas
Remember that while price is important, you can make up some lost ground on the price side by asking for and agreeing to other trade-offs and concessions, such as seller financing, home warranties, seller-paid closing items, and various other seller concessions. Also keep in mind that the longer the negotiation process takes, the more likely it is that the outcome will be successful.
Here are a few more key points to consider when negotiating:
❑ Include time limits in all offers and counteroffers, preferably a day or two.
❑ Find out how long the home has been on the market.
❑ Use closing costs as a bargaining chip.
❑ Try to learn whether the seller has any deadlines, such as job relocation, divorce, or purchase of a replacement home.
❑ Keep your cool and try not to appear too anxious.
❑ Try lowballing on your initial offer, but realize that if you’re in a hot market such offers may be ineffective.
While some people are born negotiators, others go through life accepting the prices put before them and never asking for a lower price. Then there’s the rest of us: the people who will negotiate in certain circumstances, such as when buying a home. As you’ve already learned, the ‘‘asking price’’ of a home is nearly always set higher than what the seller expects to get from the home. It’s a two-way street: You can ask for anything you want, and the seller can turn you down. If you know what you’re doing and are confident in your ability to negotiate, you will almost always get a better deal. After all, you won’t get what you don’t ask for.