How to Negotiate a Home Purchase Price - Tips for Buyers
Negotiating With Sellers
Once you’ve finalized your purchase offer, the details are presented to the seller in a contract. By signing off on the contract, you’re legally committing to purchase the home, provided all the conditions are met.
It’s rare for an initial contract to be accepted. Usually your first offer is the starting point for negotiations with the seller. The items up for debate include price, costs to be covered by the seller, repairs to be completed and the closing date, among others.
Each offer can take one of three routes:
- Acceptance: The seller agrees to each item presented in the contract, and the parties move ahead to loan processing, underwriting and closing.
- Counteroffer: When sellers make a counteroffer, they’re usually showing interest but looking to tweak the terms. A seller’s counteroffer will suggest changes to the original offer, such as a higher price or quicker closing date. Once prepared, the counteroffer is sent back to the buyer’s agent. Buyers have the option to accept the counteroffer, counter the counteroffer or simply walk away from the deal.
- Rejection: A seller can reject your initial offer outright. Some sellers take this route when an offer is unnecessarily low or contains unrealistic terms. In this situation, buyers are free to make another offer to the seller or to move on to a new property.
The negotiation process continues until an agreement is made or until one party decides to walk away. If you’re headed into the negotiation process, keep a level head. Real estate negotiations can be tough, even for seasoned real estate agents.
Maintain calm, and try to avoid these missteps during negotiations:
Failing to Understand the Seller’s Motivations
See what your agent can learn about the owner’s reasons for selling. It’s common for owners to want to sell their homes as quickly as possible, but some may be especially anxious to do so. Perhaps the seller has already purchased another home and is struggling to pay both mortgages. Maybe the owner wants to complete the sale prior to a new school year. You may be able to use the seller’s motivation to your advantage when negotiating.
Not Having Options
Even if you fall in love with the first home you tour, it’s in your best interest to continue looking at homes. You don’t want to enter negotiations with the opinion that you simply “must” have a particular home. That philosophy could put you in a weaker position than your seller. Your emotions will probably be running high, but you can keep them in check with a backup plan. If negotiations fall through, you can either resort to your backup or resume your house hunt. Rest assured there’s another home out there that’s a great fit for you.
Trying to “Win”
During the heat of negotiations, it’s easy to see the seller as “the bad guy.” It’s common for a buyer to feel that defeating the seller is more important than getting a good contract in place. Don’t turn negotiations into a battle of egos. Do your best to remember that you’re making an investment, not preparing for a boxing match. A seller often has the same motivations that a buyer does, namely to get the best deal possible. Don’t take it personally if the seller won’t agree to all of your requests. If the home is within your budget, it meets your specifications and you’re excited about being the new owner, you can probably let a few demands slide.
Failing to Show You’re Preapproved
Don’t forget to let your seller know that you are a qualified buyer. Real estate contracts can fall through because a buyer is unable to get financing. For this reason, sellers are often hesitant to work with a buyer who hasn’t been preapproved. Make sure your agent notes your preapproval status in your initial offer. Sellers may be more willing to work with a buyer who looks like a safe bet to close.
Lean on your real estate agent for help when it comes to navigating the negotiating process. Try to be flexible without compromising your budget or your needs, and don’t be afraid to ask for help.