Published March 07, 2012
A home is the biggest purchase most Americans will make in their lifetime, so getting a good deal matters.
While playing hardball to get what you want at the price you want, you risk over negotiating and being left empty handed. Here are five tips to secure the home of your dreams without breaking the bank.
Keep Emotion Out. Experts advise treating a home purchase as a business transaction, and avoid getting emotionally attached to a home which eliminates any leverage during negotiations.
“You have to treat the transaction as a business decision,” says Michael Corbett, Trulia's real estate expert and author. “The minute you get too emotionally attached to this house, you are dead in the water.”
Be Realistic. Yes it’s a buyer’s market, but sellers are still looking for reasonable offers.
According to Brendon DeSimone, a Zillow blog contributor, the final sale price of a home always boils down to the motivation of the buyer and the seller. “If the seller really needs to sell the home, they’ll be more likely to negotiate on price. Likewise, if the buyer absolutely loves the home, they’ll be willing to make an offer close to, or at list price,” says DeSimone.
Making an unrealistic offer could result in a seller refusing to deal with a buyer.
Know the Market. Understanding the current state of the real estate market in the desired area will aid a buyer’s negotiations.
DeSimone recommends buyers know how long the house has been on the market, how much the price has dropped and how many times, how many deals have fallen apart and how many similar homes are for sale in the vicinity.
Corbett says the agreed to selling price doesn’t matter if the comparables in the area are lower. For instance, the final price may be $400,000, but if comparable houses in the neighborhood are going for $380,000, there’s little chance the buyer will get a mortgage for $400,000.
“Often times one of the big issues even if the price is negotiated is they can’t get the bank to agree,” he says.
Find the Seller’s Motivations. Corbett says knowing the seller is just as important as knowing the market and the house when trying to lower a home’s asking price.
To glean a seller’s motivation, Corbett suggests checking out the home’s selling history.
For instance, if there have been previous offers in escrow that have fallen through, a seller might be more willing to accept a lower price than someone who put their house up for sale last week.
Offer Non-Price Perks. To make a lower price more attractive, buyers can offer other perks like a quick inspection process, or paying in cash. Cash offers mean the seller doesn’t have to wait for a mortgage to get approved. A quick inspection/due diligence period is also an enhanced negotiating tool.
“Instead of the usual two weeks, try to get [the inspection] done in one week,” says DeSimone. “If you have a contingency to get a loan, have your loan broker fully document your file and send a letter along with your offer stating so. Having your file fully documented up front saves time during escrow.” Even offering a quick close may be enough to get the seller to accept your offer.
On the flip side, buyers willing to meet the asking price but are low on cash, can ask the seller to pay the closing costs or throw in all the appliances. Last-minute perks could mean the difference between a deal closing and falling apart.