Price Negotiation on a Home

Before you place an offer on a home, your real estate agent will probably discuss how to go about creating a strategy for you to get the best possible price through negotiation for your new home. Having an experienced and knowledgeable Realtor guide you on your choices will help answer those worrisome questions. When bidding, do you start low, knowing the seller will then talk you up in price? Do you ask for extras like keeping the appliances? Do you hold your ground or bend slightly on what you will accept? Is there a way to guarantee that you don’t lose this house?

First, when negotiating, there are no guarantees. Every seller is different, has different priorities and their own unique temperament. Even agents who are excellent negotiators can get outmaneuvered or surprised with the unexpected. Keep in mind that you may be able to get a really good price on a home, but it will still probably fall within the typical property values for the area. If you are trying to buy a foreclosed home there may be more opportunity for getting a low offer accepted, but sometimes the bank owned home is not the greatest bargain you may think it may be. The best advice is to expect the unexpected.

There are however, ways to improve your chances when you find just the right home for sale and are ready to place your offer.

Should you lowball?

A lowball offer by definition is one that is dramatically less than the seller's asking price. Some sellers would consider anything 10 percent below what they listed the home at to be a “lowball”. Some buyers consider a lowball offer to be half of the listing price.

Your Realtor can let you know any general knowledge she has about the sellers, like if they are relocating because of a job and need to sell quickly. If they are older or have no mortgage to pay off, therefore they may have more wiggle room on the price they can accept. A lowball may be an option for you but keep in mind that they can (and often do) backfire on the buyer, resulting in total rejection by the seller without any counter offer in return.

Why rejection happens:

1. Keep in mind that though they are moving, this home is part of the seller’s life and family. They may be very insulted by the lowball offer.
2. The sellers may not think you have strong financial backing. If you can only offer half the listing price perhaps you do not qualify for more.
3. Their listing agent will probably advise against it: Remember, the listing agent’s job is to advise their clients to get them the most money as well as sell the home in a reasonable amount of time. But the agent makes more when the home sells for more. A lowball offer is not good for the listing agent or the seller.
4. The sellers may have a mortgage to pay off and can’t even consider your offer: For example, if the sellers still owe $200,000 on the mortgage, your $140,000 offer is not going to cover their needs.

First impressions (offers) DO make a difference:

Even if you plan to make a reasonable offer that stands a good chance of acceptance, know that the seller is forming an impression of who you are and what you are like. This can affect a seller who is emotion-driven about their home and who ends up living in it after they leave. Some tips to make a good first impression:

1. Make a connection: Your Realtor will do most of the communicating with the seller's agent, but sometimes a short, sincere letter to the seller, introducing yourself and explaining how much you love their home can make a big difference in the negotiation process.
2. It is important that you have your pre-approval for a loan done and ready to include with your offer to demonstrate that you are a serious buyer and can get the loan required.
3. Include earnest money with your offer and make certain the check has all the funds ready and available for when it is cashed.
4. Be flexible with details like when you will close on the house. If the seller wants to close a little faster than normal or wants some flexibility on when they must be out, accommodate their needs as much as you can. This creates a feeling of good will and can improve any negotiations later on in your favor.

More Negotiation: After the home inspection

In some cases, the results of your home inspection will give you a little leverage with the seller for further price negotiations. The report from your inspector will list at least a few repairs or replacement items needed in the home. You and your real estate agent will then discuss if you should try to negotiate a lower price or credits toward the costs of the repairs. It is best to get a price reduction or credits and handle the repairs yourself to insure they are done according to your standards of quality. But asking for this price reduction does not mean the seller will agree. If they do not agree, you have two choices: Continue with the purchase as previously agreed upon or walk away from the deal on the grounds that you don’t accept the home’s repair issues.

If you have a Realtor working on your behalf, the actual back and forth work of negotiations is being handled for you. If you chose your agent wisely, you can trust in the fact that you have an experienced processional working to get you the best deal possible.