Preparing to buy your first home will give you a rush of excitement—and probably a rush of anxiety at the same time. You’ll have the opportunity to buy the home your family will love for years to come, and maybe even make a profit while you’re at it—but just because you’ve found a home that’s aesthetically appealing doesn’t mean you’ll be able to get it at the right price, or that you’ll get it at all.
Instead, you’ll likely make an offer on the house; depending on the level of competition in the market, the pricing, and the house itself, you may be competing with numerous other bids, and you may end up paying far less or far more than the asking price. Still, that initial bid is just the beginning; after that, you’ll enter a period of negotiation with the seller, in the hopes of bartering a deal you both find acceptable.
But what is that negotiation process like, and what’s the best way to navigate it?
Best Negotiation Strategies
These are some of the best negotiation tools you’ll have at your disposal:
- Trust an agent. Unless you’re a professional negotiator and happen to be an expert in real estate, you probably don’t have the skills or the experience to handle a home buying negotiation by yourself. Fortunately, you can delegate most of the core responsibilities and get advice from a professional real estate agent. As a homebuyer, you won’t be responsible for the buying agent’s fees (that’s a part of the seller’s fees), so there’s no downside in enlisting the help of an agent whose only job is to find you a better deal. Look around for an agent with a solid reputation and a history of finding ideal homes for their clients; you can probably get a good recommendation from a friend or family member.
- Know the value of the home. The asking price doesn’t necessarily reflect the true value of the home, so you’ll be in a much better position to negotiate if the “true” value is known to you. You can work with a home appraiser to determine the relative value of the home, or do your own research to calculate it yourself. Look at how much the home was sold for in the past, what upgrades it’s received, and how prices have changed in the neighborhood over the years. If you know the value of the home is lower than the asking price, you can justify a lower bid.
- Use an inspection to your advantages. Before making an offer, you should run a thorough home inspection. It’s going to cost you a few hundred dollars, but it will give you the chance to see if anything’s wrong with the home. Chances are, unless the home is relatively new, there will be some problems to address. You can use these issues to your advantage, citing them as the main reasons for lowering your price (and ultimately getting a better deal). As an alternative, you can request that the homeowner fix the problems before you make an offer, increasing the value of the home and reducing the burden on you.
- Understand the competition. Before you place a bid, you should have an understanding of the current home market in your neighborhood. Are prices high, with lots of people looking for homes? Or are prices low, with little to no activity? In the former case, you’ll probably be competing with lots of other bidders, so you’ll have to make a lucrative offer to match or exceed them. In the latter case, you’ll have more flexibility.
- Learn the seller’s motivations. Like with any negotiation, it pays to know the other party’s motivations. Is the home seller trying to unload the house as quickly as possible? If so, you can probably bid a lower price, so long as you don’t request any additional efforts or conditions. Is the home seller trying to make a profit, no matter how long it takes to move the home? If so, you’ll have a much harder time striking a deal.
- Treat the process like a business transaction. Throughout the process, remain as businesslike as possible. You’ll need to be polite and professional in any face-to-face meetings you have, and you’ll need to be firm, descriptive, and resolute in your offers. Additionally, it pays to set expectations proactively; establishing a deadline for the seller to respond is a must. Working through your agent can resolve this issue almost immediately, putting the burden of professionalism on them, rather than you.
- Be willing to compromise. Finally, be willing to compromise on your offer—and no, that doesn’t necessarily mean yielding to the other party’s demands. Instead, it may mean finding alternative ways to get what you want. For example, if the seller won’t budge on price, you may be able to increase the value of your purchase with other guarantees and conditions, such as further home repairs or the addition of certain existing furniture. Always be on the lookout for non-monetary ways to tip the deal in your favor.
Your First Steps
If you’re uneasy about the negotiation process, try not to get wrapped up in all the details. Instead, focus on the next steps of the home buying process for you. In most cases, that means hiring a buying agent (if you don’t already have one) and looking at houses to get a feel for your wants and needs. If you’re further down the line, that means scrutinizing your top candidates and considering whether to wait or make an offer.
The home buying process is a challenging one, which is why there are so many resources dedicated to helping homebuyers make the right decision. If you’re interested in finding more prospective homes to explore, or getting advice on the home buying process, contact Green Residential today!