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How to Negotiate the Best Price When Buying a Home

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Negotiate the Best Price When Buying a Home

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Have you found the home you want to buy? If so, you may be ready to bid full asking price or even more to ensure you beat out any potential buying competitors out there. This is where emotions can sometimes outweigh logic, so before you jump in with an offer waaay above asking price, it’s good to take a moment to consider if the house is also a wise investment.

Here are some things to consider plus some price negotiation strategies that can help ensure you’re getting a great home for the right price.

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    Why Is Home Price Negotiation So Important?

    Even in today’s hot real estate market (in most parts of the country) it’s not often that a seller isn’t willing to negotiate — if not on the price, then on other matters such as the closing date, or including certain items like the barbecue grill, the washer and dryer, etc.

    On the off chance that you’re in a market that isn’t boiling right now, you could end up being the only buyer making an offer. If that’s your case, there’s a good chance you could end up buying lower than the listing price. Your Realtor should understand your market well enough to help guide your initial offer, but here are some things you’ll want to consider…

    How Motivated Is Your Seller?

    It’s not often that a seller puts his or her house on the market just to see what kind of offers come in, though it does happen. In large part, sellers want to sell. But some sellers are more under the gun — they’ve already made an offer on another home, they’re moving for a job, or their personal situation has changed. That’s why it’s a good idea to ask their agent why they’re selling. You may not get a direct answer, especially if their agent has urged them not to divulge this information, but it doesn’t hurt to ask.

    Be Realistic With Your Offer

    Nothing is accomplished by going in with a low-ball offer (except sometimes, in the cases of foreclosures or when a home is significantly overpriced and has been on the market a long time). If you go in too low, you’re going to insult the seller. If your research shows that the property is fairly priced, or your trusted agent is telling you it is, make an offer you feel comfortable with and that your agent believes is reasonable.

    If your offer does not elicit a meaningful counter-offer from the seller, you know you went in too low. So, try again. Once the seller believes you’re capable of arriving at a price that is agreeable to them, they’ll be willing to negotiate.

    Be Ready to Move On

    If you can’t put together a deal on the first property you like, don’t worry. There will be many more homes for sale. It is VERY common to lose out to another buyer in today’s market. But it’s just as common to end up finding a home a week or even a month later that you like even more than the first. Not getting that first home might be a blessing in disguise.

    Show Some Enthusiasm

    Today’s real estate market is really moving in a lot of areas, so the days of being coy about whether you like the house or not are over for now. In fact, in some markets, sellers are looking for offer letters along with your bid. They want to know your personal story to help them decide between multiple offers.

    This is your chance to sell yourself and convince the seller that you will be brokenhearted if you don’t get this, your dream home. Have a baby on the way? Talk about how you can see your baby taking their first steps in this hallway. Newly married? Describe how it will be starting your life together here. Have family nearby? Make a point of describing joyous family gatherings in their beautiful backyard.

    Still, Don’t Get Carried Away

    Yes, you want the buyer to know how much you love their home, but you don’t want to be overcome by emotions. You’ve done your homework. You know what the home values are in the area you’re searching, and you know how much home you can afford, so don’t allow yourself to get boxed into a price that is above your comfort zone. If you have chosen your agent well, this won’t happen. Nevertheless, bad agents have been known to urge clients to accept counter-offers simply so they can stop working on the negotiation. Be firm.

    Set Your Expiration Date

    When you make your offer, there will be a space for putting a time limit on how long it’s valid. Make this a very short period, for example, 24 hours. Having a longer period just invites competing offers, which is exactly what you do not want.

    Get Creative

    If the seller seems emotionally tied to a certain price on his or her home, instead of asking the seller to lower their asking price, ask for certain concessions, such as repairs, that the owner contribute to the closing costs, or that they leave the washer and dryer, the riding lawn mower, etc.

    Negotiate After Inspection

    While it’s not uncommon for prospective buyers to believe the deal is sealed at the offer signing, in many cases the negotiations begin afterward. If you’ve conducted a home inspection, you can ask the sellers for a cash-back credit at the close of escrow, which can help you complete the project yourself. You can also ask the seller for a credit to fix certain issues in the interest of offsetting closing costs.

    About That Purchase Offer

    If you’re a first-time homebuyer, here’s a little primer on all that paperwork that goes into making an offer. Your purchase offer is a written contract that you sign and submit to the seller. It is accompanied by a certain amount of “earnest money” (a small good faith deposit to show you are serious about buying the home). The written purchase offer indicates the amount you are willing to give the seller for his or her property. If you are working with an experienced real estate agent, he or she will typically provide a standard purchase offer form which you can complete, sign and then hand over to the seller to sign. If you are not working with a realtor, be sure you are aware of state laws regarding the information the offer should include.

    Since your written offer forms the basis of a legal contract with the seller, be thorough. There are some important details you should be sure to talk through with your agent and make sure are accurately included on your purchase offer, such as:

    • The amount you are offering for the home and how you will pay the seller (cash, check, etc.)
    • Contingencies to protect you if your financing falls through, or if the inspection unearths major problems with the home (inspection happens after you make an offer)
    • Conveyances, such as whether the home will come furnished or unfurnished
    • An expiration date, by which the seller must respond before your offer expires
    • Concessions, such as any closing costs or other costs which you would like the seller to pay
    • The amount of earnest money you are offering
    • The size of your down payment
    • The “earnest money” deposit can range from about $500 to 5% of the value of the home, depending on where you are interested in buying, and the state of the market. Your earnest money is typically put towards your closing costs; however, if you enter into a contract with the seller and then breach that contract, you could stand to lose this money.

    Once you make a purchase offer, sign it and submit it to the seller along with your earnest money (usually done through your agent). The seller has the right to either sign your offer as is, make a counteroffer or reject your offer outright.

    If the seller accepts your purchase offer, the offer becomes a contract, and you are on your way to owning the home. If the seller counters your offer, you may choose to reject his or her offer or walk away. Note: If, for some reason, you forget to specify contingencies in your offer, there are sometimes legal steps you can take to back out of the deal. Asking your agent what recourse you have can also help.

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      • WF

        NEVER disclose what you are “really” willing to pay to the real estate agent. He/she actually works for the seller most of the time and will disclose that to the seller putting you at a BIG BIG disadvantage. Keep that information to yourself all the time is the best way to handle that issue. Always remember that the real estate agent is NOT your friend – it’s all about business and how to close the deal. Treat them as a business relationship and you will be better off in the long run. I realize that there are buyer’s agents, but do you really want to risk thousands on that concept? Better not to. Treat it as business and you’ll never go wrong. NEVER be anxious, it will cost you in the long run. Patience and you win.

      • Sunny

        What does a 1 year home warranty usually cover?

        • Credit Experts

          You would have to read the warranty. Different levels of protection are available, and it would depend on which one you have.

      • Credit Experts

        That really depends on whether the home is priced reasonably or overpriced, and the local real estate market. A lowball offer is one that is so low the seller is insulted and doesn’t counteroffer . . . so it is subjective.

        • saberron

          >> “depends on whether the home is priced reasonably or overpriced”<<
          In todays market they're all overpriced thanks to flipping. One buyer flips to the next to the next etc raising prices far beyond worth. Does anyone really believe these quarter of a million dollar homes and half a million dollar home are any where near worth their price? Let them sit till the prices come down to their TRUE value, even if it means forcing the flippers to accept their loss.

          • jesskazen

            Lots of houses are overvalued but the flippers do a lot of rehab to homes, sometimes complete renovations with structural fixes and it’s cheaper to put that cost into a loan for most people than to buy a house and fix it up themselves.

          • janon

            Good luck with that. If the house sells it wasnt overvalued regardless of your personal belief.

            Agents generally wont let a seller be insanely over the local comps. It wastes their time.

            Youre the kind of “buyer” the article is warning against it seems. Not really serious about buying anything, just making a political statement with an “offer” and raging against the machine.

            I bet when you sell you’re non negotiable though.

      • jason

        I say that every offer is different. A home is priced based on perception, so evaluating what you offered is also based on perception. For example, if they listed their home for 300k knowing that they would probably only get 265, then 255 is not bad. But if you were to just show those numbers, yes…I would say it’s a low ball, unless the situation calls for such (IE: all cash offer, no contingencies etc etc). Again, based on perception. Hope this helps,

      • Karin

        What about negotiating a price on a new build?

        • Gerri Detweiler

          Similar principles apply.

      • Karin

        How would you go about negotiating on the price of a new constuction?

      • Eva Philly

        Can anyone answer this question please? I have the same issue with the house I like.

        • Gerri Detweiler

          Is this a for sale by owner situation? Normally the real estate professionals would be involved, but if they aren’t you can feel free to explain your offer. Whether or not they will take it depends on how eager they are to sell!

      • xeriscapelady

        On an offer you have to just walk away if you don;t get your price. Like the article says there are more out there. Don’t be like my idiot sister who let the realtor know she was desperate for a home in No. Carolina after being screwed here in Florida by selling too fast by a rip off realtor. She bought the first house she was shown and now they regret it big time. They also went to the same name brand as they thought they got a high price by all the emotional hype these crooks are taught to do. They sold their Florida home at least $ 20,000 to low. Then paid not much less for a home that was 400 sq. ft. smaller and everything has to be redone when their Florida home was just done over with top of the line within 2 yrs. She could have sold the home by themselves and come out thousands ahead.
        And when they went to No. Car. did the same thing. They were renting an apt they had 3 months left on but she got itchy. Now it will take thousands more to make the home they was sucked in emotionally with azaleas to be decent and with a small home she is in a cheaper neighborhood which she thought would be better only because of an HOA. NO…

        And their daughter, who she was chasing down because of a baby they just had; did NOT use the rip off realtor but found the home themselves and it is over 2400 sq ft larger and much newer and in excellent move in condition for $50,000 more. They did well, even got way more than they need, but they can sell for a killing if they want./ It was an empty house and the people were desperate. They could see everything unlike my sister that so much was hidden and even an inspector missed plenty. My nieces’ home appraises by the county for $40,000 more than they paid which is always lower than value. And to top it off , her husbands parents gave them $100,000 between the divorced parents, and my sister and brother in law gave them $25,000, so they are really sitting pretty with no income worries with 2 jobs.

        My sisters husband is miserable in No. Car and wants to come back to Florida and it has not been 8 months yet. if they come back they will be able to buy a shake now in comparison to what they sold which is now $40,000 less than they should have.

      • kj

        I have a similiar situation and i noticed the house has been in the market for over a yr. So you have a good question. Wondering how this worked out for you.

      • jesskazen

        depending on the age you may have to put A LOT of work into the home. I would remind the seller of that. Seems like people think their houses are worth their weight in gold when the furnace is about to go and the roof needs to be redone.

      • Newlywed

        My husband & I are interested in a home that is 89,900 but the other homes in the area are only going for 70k – 80k. Put an offer down and they didnt accept cause they believe they can get that price for the home. It has been on the market only 2 months. We are doing the Va Loan. Also we have waited a few weeks and my husband wants to offer again but we want to be able to get a far price. Any advice?

        • Gerri Detweiler

          The best you can do is make an offer you feel is reasonable and hope they will decide to sell. If your offer does get accepted at a price substantially higher than other comparable homes, the appraisal could kill the loan. It’s possible they are holding out hope for a cash offer. Not sure what else to suggest!

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