7 Tips When Negotiating a House Price
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Buyers who learn how to negotiate house prices lay the foundation for a mutually acceptable deal.
Whether you’re a first-time homebuyer or not, these strategies to negotiate home prices may help you score a property at the best possible price.
Why You Should Be Negotiating House Prices
While negotiating the price of a home can seem intimidating, the benefits can often outweigh the fear. For starters, negotiating lets the seller know you’re serious about the home.
It also gives you the opportunity to create a concise offer that you’re happy with and helps you stay within your budget so you don’t break the bank to get the house you want.
Finally, if the asking price is over what you feel comfortable with, negotiating can help you see if there is any wiggle room in the price. That way you aren’t putting yourself in a stressful financial situation.
Things to Know Before Negotiating Home Prices
Know Your Market
The market will dictate how much leverage you have to negotiate a home price. Determining whether it’s a hot seller’s market or a buyer’s market will help you navigate your negotiations.
The power is typically in your hands if the property you want is in a buyer’s market when the number of homes for sale exceeds the number of willing buyers. In this case, you could offer 10% under the asking price and ask the seller to pay closing costs.
But you don’t want to offend sellers by lowballing them. There is a happy medium between a fair offer and getting the biggest bang for your buck. If you do decide to lowball, make sure you’re willing to walk away.
Markets can vary from city to city and neighborhood to neighborhood. So check with your real estate professional to be certain what type of market you’re working with. After all, you don’t want to lose the home of your dreams just because you were unaware of the market conditions in your area.
Recommended: Tips for Buying in a Hot House Market
Know the Value of an Agent
Can you buy a house without a real estate agent? Sure, but it’s not a decision to make lightly.
Besides the fact that Realtors® and other agents know the markets around your desired community, they have valuable experience that can help you make offers and handle counteroffers.
They know what’s reasonable for the current market conditions. Because they aren’t emotionally attached to the outcome, they are better set up to get the best deal without making excessive concessions.
But you don’t want to work with just any agent. You want to work with someone who is a buying and selling expert, has connections with other agents in the area, and is knowledgeable about the community you’re interested in.
Got your eye on a house for sale by owner? You can use an agent or go it alone.
Recommended: How to Find a Real Estate Agent
How to Negotiate Home Prices
Here are several tips to help seal the deal on a home.
1. Do Your Homework
One of the best ways to get an idea of how much to offer is to research the prices of “comps,” recently sold homes in your target area that are similar to the property you’re trying to buy.
A real estate agent will have access to market trends in your area. But fortunately for us 21st-century dwellers, this information is readily available on sites like Zillow, Realtor.com, Redfin, and Trulia.
Zillow also lists how long for-sale properties have been on the market, which can give you some insight into how negotiable a list price may be.
2. Get an Inspection
While your mortgage lender might not require a home inspection — and while forgoing one may make your offer more appealing to the seller — it’s probably in your best interests to have one.
Without a home inspection, the only information you have about the house comes from what the seller is able (or willing) to disclose and what you perceive with your senses. Home inspections can reveal hidden issues like cracks in the foundation or plumbing problems.
Along with helping you plan for unforeseen repair costs ahead of time, the inspection can also give you leverage to ask the sellers to knock down their price a bit, offer you a credit for closing costs, or fix the problem themselves.
3. Have Your Finances in Order Ahead of Time
Sellers are apt to be most enthusiastic about buyers who have been preapproved, as opposed to prequalified.
While both involve a lender taking a peek at your financial information, such as income, credit history, debts, and assets, preapproval involves an in-depth application and verification process, and thus carries more weight than prequalification.
TL;DR: Having a preapproval letter is a great way to send your offer to the front of the pile.
Also, if you’re a homeowner looking for an upgrade (or lateral move), selling your old home ahead of time could be a mark in your favor from the seller’s perspective: It means you won’t have to wait until your home is sold to go forward with the buying process.
This “chain-free” approach requires careful timing and possibly setting up a temporary living space. So while it’s not feasible for everyone, it is an option to keep in mind if you’re hoping to increase your odds of success in a competitive market.
Recommended: How Long Does a Mortgage Preapproval Last?
4. Don’t Negotiate House Prices Too Hard
You don’t want to insult sellers by pitching a price that’s too low, particularly if you’re negotiating in a seller’s market or purchasing a beloved property that’s been in the family for years.
While you may be able to get as much as 10% off the list price, depending on the local housing temperature, you could knock yourself out of the running if you lowball too hard.
In a hot housing market, you may even end up bidding more than the list price on a house.
5. … But Do Try to Negotiate Home Prices
On the other hand, you don’t want to shortchange yourself by failing to negotiate at all. So, starting from the first time you walk through the home, it’s a good idea not to show all your cards by appearing overeager, even if you’re totally in love with the place.
If you come across as desperate for the house, sellers may feel they can expect a higher offer from you.
Don’t be afraid to point out the drawbacks that give you pause, and be sure you give yourself time to shop around before you get serious about putting money on the table.
When it comes time to make an offer, consider not only the list price but closing costs and any repair or renovation expenses.
6. Put Your Offer in Writing and Be Detailed
Rather than make a verbal offer on a home, many experts recommend putting your offer in writing and adding as much detail as possible. That way you avoid any disagreements on what was said and can negotiate on factors beyond price.
When competing against multiple offers on a house, buyers may waive one or all contingencies to sweeten their offer. Contingencies are simply conditions that must be met in order to close the deal.
An appraisal contingency can be an opportunity to negotiate the home price or back out if the property does not appraise at the price in the purchase contract.
A clear title contingency also gives the buyer a way out if liens or disputes are associated with the property.
And it can’t hurt to ask for help with closing costs.
You might also consider adding a personalized letter to your offer, which might sound cheesy, but selling a home can be just as emotionally fraught as buying one. Describing why you love the house or how you imagine your family growing with the property can help your offer stand out from others, even if you aren’t the highest bidder.
7. Include an Expiration Date
Although you’ll generally hear back on (realistic) offers within a few business days, sellers aren’t legally obligated to respond to your offer at all.
By including the expiration date, you’ll have a firm calendar date on which you’ll know for a fact you didn’t get the home, which means you’ll be able to redirect your efforts.
Purchasing a home can take a long time. There’s no reason to waste your energy when it’s a moot point.
Recommended: First-Time Home Buyer’s Guide
Negotiation goes on in love and war, in a salary decision, with parents and toddlers, and in real estate. If you’re a buyer, the more you know about negotiating home prices, the better.
As important as it is to shop around for the right home — and negotiate for the right price — it’s also important to find the right mortgage.
SoFi offers competitive fixed-rate home loans, and qualified buyers can put down as little as 5%.
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