So you have found the house of your dreams. Now you have to negotiate an offer to purchase and the thought of it is conjuring up images of used car salesmen. Today, home buyers, sellers and Realtors have become much more sophisticated due largely to the instant information available on the internet. If you do a little research, you will find that negotiating a good price for your new house is really not that scary!
Once you have found a house that you want to buy, make sure that you are aware of the prices of homes that have sold recently in the neighborhood. You can ask your Realtor for comparables. You can also check some real estate websites to see what other houses in the area are on the market for now. A couple of good sites are (www.remax.com).
If the listing price of the home is set close to market value, you may want to consider putting in an offer close to the asking price. No one expects you to start with your highest and best offer, but if you want the home owner to take your offer seriously, low-balling it may not be the best way to start.
Even if a home is overpriced, try to start your offer close to the market value of other houses in the neighborhood. The home owner may be motivated to hear serious offers, even if they are not close to his or her asking price. Problems usually start when homeowners are dramatically overpriced or when buyers offer way under market value. This usually indicates that neither party is serious.
Knowledge is power. If you are buying a home, don’t be in a hurry, but be ready to purchase. You may find the perfect home at the first weekend open house, or it might take you six months to buy a home. If you have been checking prices of other homes in the area and if you have a pre-approval for a mortgage, you will find that you are in a powerful position to negotiate. When in doubt, ask your Realtor for some comparables which have sold in the area. This is the way that sellers usually determine their asking prices. When you have knowledge of the value of other house in the area, you will find yourself much more comfortable about making the offer.
If the asking price of the house you want to buy is in line with the value of other homes in the area, try not to make your offer too low. You may find that this will alienate the seller and that even if you up your offer, that he or she will not negotiate with you at all. Leave yourself a little room to counter offer and expect that negotiation may go back and forth for a few rounds. Often, the first counter offer from the seller will indicate how much “wiggle room” there is in the asking price. Consult with your Realtor and use your knowledge of the local market to guide the negotiations.
Try to get the timing right. If you are the buyer, you can ask why the seller is selling. A new purchase, job transfer, or other motivating factor might be influencing the seller. Conversely, if you learn that the homeowners are waiting to get their price, regardless of local market value, they probably won’t accept a lower offer. Sometimes, the ability of a buyer to move quickly may carry a little more weight than price.
Know when to stop negotiating. Sometimes buyers use the strategy of non-stop negotiating. They make a fair offer to purchase a house, but never stop bargaining. They will use any excuse to try to get a better price. They may try to use small defects mentioned by a home inspector to try to get the seller to make huge concessions. They may also come back to the house repeatedly to try to find things wrong and use this as an excuse to reduce the price. B ad-faith negotiating can lead to a disastrous and stressful transaction. More important, it can lead to loss of a down-payment, law suit or loss of your dream house. If an issue arises which truly calls for a repair-credit or something similar, consult your Realtor or attorney for the best way to handle it.
Don’t negotiate yourself out of your dream house. Occasionally, buyers or sellers can get so hung up on getting the best deal that they lose sight of the big picture. If you have found a house that you love, at a fair price, be prepared to make a few minor concessions. Most transactions go smoothest when both buyer and seller negotiate with good faith and target a fair market value for the house.