Negotiation Is an Art When Buying a Home
Before we start talking about the art of negotiation, I want to refer you to our Mortgage corner for an update by Miranda Marquit about what’s going on with Fannie Mae and Freddie Mac. It’s essential that these power houses survive so that buyers can find affordable home loans!
However, for those lucky people who are now in the market to buy a home, negotiating the sales contract can sometimes be just as challenging as finding the right home. Yes, it’s a buyers market. However this doesn’t mean that a buyer automatically gets to buy a home for $10,000 to $60,000 less than the asking price. Perhaps they can from the ORIGINAL list price, but most homes currently for sale are already priced at market value.
When you write a contract, one of the most important things to consider is how a seller will react to your offer. How much money do they owe on the home? Will they have to bring money to the table at closing in order to sell? If it looks like they might net $20,000, have you counted the commission they’ll be paying to the listing agent?
For example, a friend of one of the buyers I’m now working with said it was ridiculous that the buyer even give a thought to the seller. He felt she should ask for the world - go for the throat - to size up the seller and then negotiate the price up from there. His advice was possibly the worst advice I’ve ever heard!! When you insult the seller with a ridiculous amount, you stand a very real chance of being shut out of any further offers. I’ve seen it happen… heck, I’ve told a buyer’s agent to go away (at the direction of my seller) when their offer is so low that it’s offensive.
Similarly, I’ve worked with buyers whose primary goal seems to be to “stick it” to the seller. They are blinded to the ultimate goal of finding a nice place to live - blinded by their own ambition to brag that they “got” the seller for thousands of dollars. I learned long ago to happily refer this kind of buyer to someone else. Don’t be so focused on bragging rights that you lose out on what would be a house of your dreams.
U.S. News & World Report outlines more negotiating tips.
Finally, one of the most important things is to know how much homes are selling for in the neighborhood. Make sure that your agent performs a comparable market analysis to see that you don’t overpay for the area. It’s common to compare prices when an agent lists a home, but it’s just as important to provide this service when buying.
Real Estate ABC.com also offers insight about reasonable market price v. your price.
The key is to figure out what the seller’s bottom line is - especially if it’s a fair price - and making sure this amount isn’t going to break your budget.
