How to Negotiate When Buying a Home
There are certain things you can expect when you start the home-buying process. You can expect to search for your W2 during pre-approval, receive phone calls from your real estate agent about available homes, get emails from your lender asking you to complete various documents, and negotiate your future home’s price when you’re preparing to close.
Negotiating can be a bit of an art, and those who have never experienced a negotiation may not know when, how, or even what they should ask for in the home buying process. If this sounds familiar, read through our well-intentioned list of tips on how to negotiate when buying a home and approach the conversation with confidence.
Do Your Research
The most common negotiation in the home buying process is the home price. Sellers list their homes at a higher price than market value expecting homebuyers to counter their offer with a lower number. The seller then has an opportunity to counter the homebuyer’s offer, and so on, until a price is agreed upon.
Conduct research on what is reasonable to offer below asking price in your area and find out what similar homes sold for. Zillow is a great tool for researching homes and market values. Simply filter the map of your area by your price range or look up a specific address of an available home and see what the estimated sales range is.
Looking at the prices of similar homes in the neighborhood where you wish to move will help you get a better idea of a realistic first offer on a house percentage when you’re ready to reach out to the seller.
Don’t Skip the Home Inspection
The home inspection is another very helpful tool you can use to negotiate. Home inspections may reveal additional costs you’ll take on once you move in. This can include repairs for broken appliances or essential maintenance like weatherproofing.
Make sure not to skip this step as you decide what is reasonable to offer below asking price. The information you gain from your home inspection could help you save money at closing.
Find Out The Reason the Home is For Sale
As you’re waiting for a response to your counteroffer, do some research into the reason the home is for sale. The more you understand about the seller and the home itself, the more you’ll be able to negotiate and build a case for lowering costs where you can. Here are some top reasons why homes go up for sale on the market:
- The home is too small for the current owner
- Changes to the neighborhood
- Deferred maintenance
- Choose to
- Moving for a new job
- Moving closer to family
- Downsizing empty-nesters
There are many reasons why people choose to put a home on the market. Some homeowners may be in a bigger rush to move out than others—this could allow you to quickly negotiate on a price or get a discount by the time the seller comes back with a counteroffer.
Continue to Shop Around
It may seem silly to continue to shop when you’ve found “the one” but keeping your options open can set you up beautifully for a negotiation if something comparable at a lower price comes along.
Visit open houses, take home tours, and continue communication with sellers in your area as you discuss pricing with the seller you’re the most interested in. You’ll get a good idea of the real estate landscape in your area and be able to bring this information to the negotiation table when it’s time to make a first offer.
Buyers should never put all their eggs into one basket. A buyer that is well versed in their local real estate market and prepared to walk away from an offer will have a greater chance of negotiating than the homebuyer that is unaware of what else is out there.
Understand the Market
Just as it’s important to stay up to date on local real estate trends, it’s also important to understand the real estate market. Is it currently a seller’s market or a buyer’s market? Knowing where you stand among qualified buyers can help you determine what is reasonable to offer below asking price.
For instance, if you find yourself buying in a buyer’s market, a first offer on a house percentage could be 20% off the home’s price. For a home costing $350,000 that’s $70,000 off the asking price. In a seller’s market on the other hand, homes for sale are more likely to go off the market or end in a bidding war. That’s why going with a smaller percentage, like 5%, will give you a more competitive advantage.
The buying and selling conditions of your local real estate market will help you determine how to negotiate when buying a home in your area, and whether to be ambitious or conservative with your first offer.
Negotiating the price of a home may seem like the part of the home-buying process with the most grey area, but doing your research and communicating openly with your realtor about what you can afford will help you get the best price on the home you really want.
Find out what kind of home you can afford today with Pecan Square’s Home Buying Guide and check out all of the beautiful, affordable homes available at Pecan Square. We can’t wait to start the home-buying process with you.