For a first-time homebuyer, the thought of purchasing a home by itself can be terrifying. It goes without saying, then, that negotiating the price of a house can be ten times as terrifying. Not to worry, though: If you aren’t familiar with the market, you’ll have someone there to guide you and help you get the best deal – your real estate agent. You can certainly negotiate with your seller yourself to lower the cost of a house, but that’s a bit risky, especially when you have a better alternative (using your agent) available.
Negotiations in the home buying process are largely dependent on the state of the local market, which can vary greatly by neighborhood to neighborhood and even city to city. In a buyer’s market, there are more homes available than there are buyers, which means you’re given most of the power. In a seller’s market, you won’t be so lucky, as there are more buyers than homes available and competition is fierce. In this scenario, the seller has the power. In a balanced market, there are a sufficient – but not abundant – amount of both buyers and sellers.This might seem ideal, but this type of atmosphere means neither side is in any sort of hurry to close a deal.
Fortunately, in whatever market state, there are ways to negotiate your home purchase price. Here are a few ways you can stay ahead of the curve and ensure you’re getting the absolute best possible price for your new home.
Don’t “lowball” your seller
If you’re serious about buying a home, you need to be serious with your offers. Lowballing a seller won’t accomplish anything; not only can it possibly harm your relationship with the seller by insulting both them and their home, but it probably won’t net you the house, either. Research the property and determine if its priced fairly by the seller. If it is, offer just slightly less than the listing price. To make a negotiation work, you have to convince a seller that you’re a serious buyer.
Figure out the seller’s motivation
You can test the waters of a seller’s willingness to negotiate by finding out what their motivation is. Has your seller picked up a new job in a new city and is looking for a quick move, or are they retiring and downsizing their home and in no hurry? If they’re looking to move in the very immediate future, they may be more willing to bargain with you. If they’re unwilling to share this information (especially if their agent has cautioned them against it), you may be able to figure it out by sharing an initial offer. If they refuse to knock some dollars off the purchase price, they probably aren’t in any rush to move.
Know the state of the market
Depending on what the market state is, your negotiation strategy should differ greatly. In a buyer’s market, you’re given all the power. Unless your seller doesn’t have to move immediately, you’re able to get more from them concessions-wise. Bargaining a lower price will be easier on your part because they don’t have a wide range of buyers running each other over to buy their home. If your local market is like this, then ask for anything and everything you want – within reason.
In a seller’s market, things for you won’t be nearly as easy. In this type of market, sellers typically have the pick of the litter when it comes to whom to sell their home to. Don’t stick a bunch of contingencies or extra demands into your offer (no asking for the seller’s stainless steel appliances). Keep it simple. Your agent will also probably advise you to act quickly on a house you want to secure the best price. If you aren’t already pre-approved for a loan, you might be risking letting a good deal slip away.
In a balanced market, a market that doesn’t sway in favor of buyer nor seller, there’s less motivation for either party to close deals quickly. Be warned, though: Taking too long to negotiate the price on your house can result in another buyer stealing it out from under you.
Let your agent handle seller communication
Even with all these tips under your belt, it’s probably best to leave handling the actual negotiations to your real estate agent—that’s what they’re there for. By leaving all the face-to-face communication to your agent, not only will you be able to avoid making critical mistakes, but you’ll also be able to avoid looking enthusiastic about the house.
Looking dispassionate about a potential home is the best thing you can do, especially if there aren’t multiple competing offers from other buyers. Appearing and acting indifferent about a home gives you an advantage in the negotiation process, as it illustrates that you are willing to walk away from a deal if it doesn’t suit your wants and needs. Keeping yourself out of direct contact with the seller will prevent you from possibly breaking this air of detachment.