Buying a home can be emotional, but negotiating the price does not have to be.
The key to saving money when purchasing a home is creating and sticking to a plan during the turbulence of high-stakes negotiations. Your REALTOR® should guide you and offer you the best advice possible, but you are the one who must ultimately make the final decision during offers and counter offers.
Here are six tips to ensure you and your agent negotiate the best price on your possible new property:
1. Get your financing in order.
When you need financing to purchase a property, getting pre-approved for a mortgage shows sellers that you're serious about buying and able to immediately move forward with the purchase of their home. Sellers choose buyers who are a sure financial bet, not those whose financing could flop, so they have to know you have started the loan process - if you need a loan before selecting your offer and taking their property off of the market.
2. Ask questions!
Do not be afraid to ask your agent questions for information to help you understand the sellers' financial position and motivation. Are they facing foreclosure or a short sale? Have they already purchased a home or relocated (which may make them eager to accept a lower price to avoid paying two mortgages)? Has the home been on the market for a long time, or was it just listed? Have previous offers been accepted? If so, why did they fall through? The more signs that sellers are eager to sell, the lower your offer can reasonably go.
3. Work back from a final price to determine your initial offer.
Before writing up your offer, know the most you are willing to pay for a property. Your agent should carefully review the comparable properties in the area which have recently sold with you so you have a clear understanding of the property's market value and how much you are willing to pay for it. With your agent, work backwards from that number to determine your initial offer. This can set the tone for the entire negotiation. A too-low bid may offend sellers emotionally invested in the sales price; a too-high bid may lead you to spend more than necessary to close the sale.
4. Avoid complicated contingencies.
Sellers favor offers that leave little to chance. If at all possible, keep your offer free of complicated contingencies, such as making the purchase conditional on the sale of your current home. Keep contingencies for mortgage approval, property inspections, and environmental checks typical in your area, whenever achievable.
5. Remain unemotional.
This is easily one of the toughest negotiation tips - especially when you have fallen in love with a property and envision yourself living there in the years to come. BUT, buying a home is a business transaction, and treating it that way helps you save money. Consider any forward movement by the sellers, however slight, a sign of interest - and keep negotiating.
Each time you make a concession, ask for one in return. If the sellers ask you to boost your price, ask them to contribute to closing costs or pay for a home warranty. If sellers won't budge, make it clear you're willing to walk away; they may get nervous and accept your offer.
6. Don't let competition change your plan.
Great homes and those competitively priced can draw multiple offers in any market. Don't let competition propel you to go beyond your predetermined price or agree to concessions - like waiving a property inspection - which are not in your best interest. When stakes are high, and a lot of money is at stake, going back to your well thought-out plan and strategy will be a steadfast ideal to which you can hold, and will make you more grounded as opposed to getting caught up in an auction mentality from other interested buyers.
If you need a negotiation expert and agent extraordinaire, contact me via email or (619) 209-9953: I'll talk great care of you.
krista bell, REALTOR®
Many thanks to G.M. Filisko for this article.