12 Negotiating Tips Every Homebuyer Should Know
To get the best deal, you need to be familiar with the finer points of the homebuying game.
Real estate agents bring knowledge and experience, which can be the deciding factor in a bid for your dream home.(Getty Images)
The old saying is that in real estate, everything is negotiable. But is it really?
When you go to buy a house, you’re certainly hoping to get the best price and terms. To do that, you need to know when to start negotiating and when to stop. That begins with being familiar with the market, down to the neighborhood and maybe even the street.
If there are more homes for sale than people who want them, there is usually more room for negotiation than if there’s a shortage of inventory, as is the case in many desirable neighborhoods throughout the country.
“All those deals of the century are gone,” says Sheila Rugege Dantzler, a broker with Related Realty in Chicago. “The deal of the century is ‘I got a good property that meets my needs.’ If you get it, then you win.”
The pace of home sales has slowed since last year in many cities, and buyers are gaining a little more leverage. Plus, many buyers are dealing with sellers who don’t realize that home prices are not rising as fast as last year. That creates opportunities for negotiation on some homes – but not all.
“It’s definitely a seller’s market,” says Jordan Clarke, an agent with Redfin in San Diego. “Buyers have a little more breathing room, but they’re still not in the driver’s seat.” But some neighborhoods and price ranges are still hot, he says. In San Diego, for example, “If there’s anything under $700,000, it’s off the market right away.”
With home listings so accessible online, some would-be buyers may think they don’t need a real estate agent. It’s easy to find a house online, but it’s harder than it appears to get from offer to closing. A good agent, with knowledge of the market and negotiation experience, can make the difference between a successful purchase and a deal that falls apart. In most cases, buyers pay nothing to use an agent because real estate commissions are covered by the seller.
“This will probably be the single largest purchase that you’ll ever make,” Dantzler says. “You need a trusted party negotiating on your behalf.”
Why You Should Take a First-Time Homebuyer Education Course
Here are 12 tips for homebuyers to get the best deal.
Get your finances in order before you start looking for a house. Your offer is much less persuasive if it doesn’t include a mortgage preapproval. Dantzler won’t show homes to buyers until they are preapproved, and sometimes that process can take several months.
Do the math before getting too hung up on small price differences. At an interest rate of 4.3 percent, the difference between $195,000 and $199,000 is $19 a month. Don’t get stubborn and lose the right house because you had to win.
Base your offer on the home value, not the list price. The recent sales in the neighborhood give you and your agent ammunition and information. If a home is priced at or below market value, you’re unlikely to get it for less. If it is priced above market value and has been on the market for a while, a lower offer accompanied by a market analysis may get you the home. This is where a good agent can be invaluable.
[Read: 7 Homebuying Mistakes to Avoid.]
If you see a home you like, be prepared to move fast. “When properties go on the market, they go very quickly,” Dantzler says. If you’re in a competitive market, make your first offer your best offer, advises Brendon DeSimone, a real estate broker in New York and author of “Next Generation Real Estate: New Rules for Smarter Home Buying & Faster Selling.” And if you take too many chances, you might strike out. “There will always be people who want to make a lower offer,” Dantzler adds. “When they miss out on the first or the second or the third property, they learn their lessons.”
Don’t assume that the inspection will allow you to reopen negotiations. It’s certainly acceptable to ask for a credit if the inspection reveals major problems. But in a tight market, you may not get it. These days, it’s unlikely that a seller will make significant repairs, and you’re better off asking for a credit at closing so you can hire your own contractors. In some hot markets, prospective buyers do an inspection before making the offer so they can submit an offer with fewer contingencies.
If you don’t ask, you don’t get. Even if the market is tight, feel free to ask for repairs or other concessions, but understand that you won’t get it all. “Once you’re in escrow, you have the power,” Clarke says. He advises waiting until the end of the inspection period to make your requests. “The more you ask for, the better your result is going to be,” he says. “One-fourth of 100 is more than one-fourth of 50.”
Find out why the seller is moving. The more you know about the seller, the more you can tailor your offer. Does the seller already have a new place and want a quick closing? Is there a divorce involved? Does the seller not have a new place and therefore would prefer a longer closing or even a rent-back agreement? “You have to ask a lot of questions of the listing agent and the seller,” DeSimone says. “The more you know about the seller, the better strategy you can put together.”
Use public records and online real estate listings to do research. Focus on gathering information about the seller, the property and the neighborhood. You can find out if the house is in foreclosure, whether the seller is party to a divorce proceeding, see the Google street view and determine whether the house has been on the market before and at what price.
Redfin, Zillow, Trulia and Realtor.com offer different tools, so look at the property and the neighborhood on all of them. “The more information you have as a buyer, the more confident you’re going to be,” Clarke says.
Expect to compromise. No matter your price range, you won’t find a perfect house. You’re likely to have to compromise on features and probably even on the big three: price, size or location. Enter your negotiations prepared to compromise, and you’ll be a step ahead.
Don’t get hung up on decor. There are a lot of things about a house that can be easily changed, including appliances, countertops, carpeting and dated window treatments. Let the little things go.
Remember that terms can be as important as price. That could mean removing inspection contingencies, making a bigger down payment, accepting the contents with an estate sale or changing the closing date to accommodate the seller. “The fewer contingencies you have … the more likely you are to get the house,” Dantzler says.
Consider writing a personal letter with your offer. Clarke includes letters and photos of the prospective buyers with most offers. “It puts a face and a picture and a story,” he says. “It’s not just another offer the sellers are looking at. It’s a person. It’s a family. … People want someone like them to enjoy the property as much as they did.”