Getting More Bang for Your Buck: Negotiation 101 for Home Buyers and Sellers
Getting the Best Possible Price for a Home Sale
Buying a home is a big deal. It’s a decision that will shape the rest of your life, and perhaps the biggest investment you’ll ever make. Being a shrewd negotiator during the purchasing process can help you save thousands of dollars, both in the near future and over the long haul.
On the other side of the equation, selling your home is an equally momentous occasion. You’ve likely invested a great deal into your home, and you certainly want to get the best possible price when it comes time to sell.
Whether you’re buying or selling, here are some negotiating tips to help you get the most bang for your buck.
Negotiating for Buyers
First things first: get your finances in order and get pre-approved. In many particularly desirable markets, real estate agents won’t even show homes to prospective buyers who don’t have the financial wherewithal to make a purchase. And, unless you’re independently wealthy, that generally means acquiring financing from a mortgage lender.
Being pre-approved for a mortgage shows sellers that you’re serious about buying a home, and that you have the financial clout to put your money where your mouth is. And having the means to complete the transaction should encourage potential sellers to take you seriously when it’s time to negotiate.
Can you negotiate a better sale price on a home? Well, that depends. If you’re buying a hot market and the price is commensurate with comparable recent sales, then you may not have much wiggle room. On the other hand, if you like a certain home but feel it’s overpriced and have the market analysis to back it up, then you may be able to get the seller to make concessions.
Inspection Issues and Closing Costs
If your inspection reveals issues with the home, those can give you leverage as well. Rather than trying to get the seller to make the repairs, try for a credit against the total sale price. That way, you can hire the work done by a contractor of your choosing, and make sure it’s up to your standards.
If you’re dealing with a particularly motivated seller, then you may be able to get them to cover some of your closing costs. Check with your lender to learn about any limits they may have on seller assistance before you start negotiating for these types of concessions.
Don’t Push Too Hard
In today’s market, it’s important not to push too hard when negotiating the overall price. Also, do the math – if the price difference you’re trying for will only change your monthly payment by $30, then you may be better off looking for other ways to sweeten the deal.
For example, let’s say the seller has left some high-end appliances in place for staging purposes. You might be able to get them to part with those as part of the transaction. They won’t have to deal with the logistics of moving them, and you’ll save thousands of dollars.
When negotiating a home purchase, it’s a good idea to have a professional real estate agent to guide you. A professional buyer’s agent can give you the inside track on the local market, negotiate on your behalf, and help you set your expectations accordingly.
Finally, know your seller. Find out why they’re selling, where they’re going next, and what their ideal timeframe is for getting the deal done. Do they have a new home loan already lined up, or is their new mortgage contingent on selling this home? Would they rather sell right away, or would they prefer a longer closing period so they can get their affairs in order?
If you can tailor your offer to fit the seller’s needs, then they may more be amenable to negotiations.
Negotiating for Sellers
If you’re in the process of selling, then you’ll need to close the deal before you can use our tips for buyers. Don’t worry – we have some pointers for you, too.
First, know your market. Find out what comparable homes have been selling for in your neighborhood. Some real estate markets are relatively steady, but others have been appreciating rapidly, and your home’s market value may even surprise you.
Second, price your home fairly. It may be tempting to go for a pie-in-the-sky price, but that will only hurt your chances of selling, and the longer your home sits on the market, the less interesting it becomes to potential buyers.
Third, don’t immediately capitulate to an initial offer. The first offer is likely to be well below the buyer’s actual price limit, and some buyers may lowball in an attempt to drive your asking price down.
Countering or Rejecting an Offer
If you’ve priced your home fairly and you’re in a seller’s market, counter with your original list price, or reject the offer entirely and invite potential buyers to resubmit. They’ll get the idea that you’re pretty firm on price, and if they’re serious about buying your home, they’ll come back with a better bid, allowing you to begin the real negotiations from a more favorable position.
If you do make a counteroffer, make it time-sensitive. That way, you won’t get caught up in a never-ending (and legally binding) negotiation, and you’ll still be free to entertain better offers, should they arise.
As you probably recall, buying a home is an expensive process. Your potential buyers may request that you cover part of their closing costs. Depending on your options, you might want to consider doing so. But if you’re going to make that concession, try to work those closing costs into the overall price of the home.
For example, you might stipulate that you’ll cover closing costs at the time of the sale, but only if the buyers are willing to compensate you with a higher purchase price. The buyers get to conserve cash flow when they need it most, and you’re not losing any money. It’s a win-win.
Here’s to Your Success!
Whether you’re moving in or moving on, we hope these negotiation tips help you get the best possible deal, and we wish you the best of luck on this new phase in your life. Happy hunting, and bon voyage!
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