Home buying can be a difficult process if you are not prepared to handle the financial aspect of the deal properly.
While you may think the price for a home is non-negotiable after speaking with a realtor, there are a few negotiation tactics you can use to get the best price. Most buyers avoid haggling because they find it distasteful or even stressful. However, it does not have to be that way. Whether you are a first-time homebuyer, or you have purchased property in the past, learning how to negotiate the best price for a home in a stress-free way could help you save a substantial amount of money.
Negotiating a price you are comfortable with that will be accepted by a seller will take some patience, as the process of negotiation may need to be repeated several times before you get to the “yes”. The strategies outlined within this article will help you to secure a new home for a reasonable price and will allow you to make the most of your home buying experience.
Tip One: Pre-Negotiation Tips
When negotiating the best price for a home, it is important to remember the price you feel comfortable paying should reflect everything you will need to pay to get the home. In other words, you are not only paying for the price of the home itself, but you will also need to cover the cost of additional fees and the closing costs for the property.
Additionally, you may want to consider paying upfront fees to your mortgage lender to lower the interest rate on your mortgage prior to settling the agreement. Before you submit an offer to the seller, calculate how much each of the additional fees and costs will amount to. This will prevent you from exceeding your price point before you even begin the negotiation process.
You will also need to be mindful of how much the house will cost per month prior to submitting an offer for the home in which you are interested. While you might be eager to purchase the home as soon as possible, it is important to spend time determining how much paying for and maintaining the home will cost after you move in. Most experts state that you should estimate at least one percent of the purchase price per year (divided by 12 for the monthly amount) for upkeep on a home.
- For example, a home selling for the asking price of 100,000 will cost you approximately $83 a month in upkeep.
Additionally, if the property needs some work you will want to negotiate for a lower price. For example, if the home needs repairs and the owner does not want to pay for the repairs prior to selling the house, you will need to adjust your price offer accordingly. Often this is called a roofing allowance or a carpeting allowance. Roughly calculating the cost of home improvements prior to negotiation will help you determine what portion of your budget will need to go toward making repairs, and what portion can go toward the purchase of the home.
Also, take the time to see how long the house has been on the market. If the house had been on the market for longer than six months, and the seller has not lowered the price during that six-month window, he or she may be more motivated to sell at a reduced price just to make the sale.
Often the listing sites will say how long a house has been on the market or will list when the home came onto the market. If you are working with a real estate agent then he or she will have this information.
Tip Two: Negotiate Aspects Other Than Price
While your primary focus may be on securing the best overall price for the home you want to purchase, there are other strategies you can use during the negotiation process to ensure your offer is appealing to the seller. Use these tips to do that:
- If you cannot present a high bid close to the asking price or above it, you may want to negotiate the possibility of a higher deposit of earnest money to gain their interest. Earnest money is a security deposit you can offer to the seller to indicate you want to negotiate in good faith, meaning you want to deal with one another honestly and your interest in the property is legitimate. In offering a high deposit of earnest money, you will strengthen your chances of having your offer approved for an amount lower than the asking price.
- Guarantee a specified closing date or timeline as this can persuade the seller to choose your offer over others he or she may be receiving. If a seller indicates he or she is hoping to sell the property as quickly as possible, presenting an offer with the guarantee you will move in within a 30-day period will help the seller to achieve this goal. You may not present the highest priced bid, but the seller could potentially choose your offer over someone with a higher bid but a lengthier timeline.
Tip Three: Understand the Importance of Staying Updated
Another key strategy to utilize when negotiating the best price for a home is to stay updated on offers presented by other potential buyers. If you are working with a broker, he or she will be able to inform you of when the seller has received an offer from another buyer. You should determine what the interest level is in the property and how likely it is for other offers to extend beyond the asking price. Knowing what other buyers are offering can help you to formulate the best strategy to impress the seller and securing the deal.
If someone is outbidding you and you cannot possibly match the bid, you are not necessarily out of the running. You just have to offer something other than increased money. Some ways to do this is to speak directly with the owner and explain your reasons for wanting the home. If your loan allows for it, you could offer to cover all of the closing costs or waive the carpet allowance. To gain the most from this experience, you should refrain from presenting an offer until you have received necessary information pertaining to new updates. You do not want to present an offer before you have all the facts about other offers and potential buyers as you will want to extend the best bid you can the first time you do so.