Negotiating Home Price – How to Give and Take

It’s your house-buying dream scenario: you find the house of your dreams, your agent presents your initial offer to the seller’s agent, the seller accepts the offer without a counteroffer, and the house is yours. Simple! And it sometimes happens just that way.

More often, house-buying is a series of negotiations. Now let’s look at some of the key give and take of negotiating a home price.

Know the market. You can learn much about the real estate conditions of your preferred new neighborhood by doing online research with the public records and real estate listings:

  • Gather the important details about the property and the neighborhood: is the house in foreclosure, is there a divorce proceeding, when was the last time the house was on the market; Google view the street to see what the house and the immediate neighborhood look like.
  • Follow several good real estate blogs on a daily basis to monitor the available properties and the asking/selling prices of properties in your target area.
  • There generally are three types of markets: a highly competitive seller’s market, buyer’s market, or a balanced market in which supply and demand are fairly equal. Know your market! It will affect your negotiating strategy.

Line up your financing before house hunting. Getting pre-qualified/pre-approved for a loan is important (especially in a seller’s market), and it can take months to accomplish. An offer from a pre-qualified buyer carries more influence than one without pre-approval; some agents won’t even show homes to prospective buyers until they have completed the pre-approval process.

Ask questions, reveal little. Try to find out why the seller is moving. Does the seller need a quick turnaround sale? The seller may be motivated to accept a reasonable offer. Does the seller prefer a longer closing period and possibly a rent-back option? This information may give the buyer leverage during negotiations. But be mindful that the seller may choose to divulge very little about the reason(s) for the sale.

It also is prudent to reveal as little about yourself as possible. The seller’s agent could use that knowledge about you as leverage.

Have options. It helps to have other home buying options when you are negotiating on a property. Let the seller’s agent know that you have other homes you are seriously considering and avoid giving the impression of being desperate to by this house. Real estate insiders advise buyers to be dispassionate about a home – or at least appear to be dispassionate.

Be prepared to walk away. When you’ve presented a strong offer but the seller won’t negotiate or compromise, walk away. One of your other house options may be your dream home, after all.

Be prepared to act fast and make a realistic offer. Unless you are in a buyer’s market, be prepared to decide on a house, act quickly, and make a realistic offer. Your offer must be a fair one, based on the value of the property and not the list price. Don’t insult the owner by low balling your offer. You may never have a chance to make a second offer. Note that an initial offer with a price range instead of a fixed number may give you more flexibility, too.

Finally…

It can be easy to get stuck in the negotiating “game” and sometimes lose the property if neither side will give in. If you can’t get the seller to come down in price on all your requests, but the reduced price is favorable to you, you like the house, and you have negotiated well – stop while you’re ahead! Agree to the final terms or walk away.

Choose a skilled agent who will represent your best interests. Expect that the home-buying process will include compromises and being creative with your offer may help move you through the negotiations to a favorable conclusion for both parties. May you be successful in your search, the negotiations, and moving into your dream home.