Buyers and sellers rarely agree on the first offer on a home. In most home negotiations, the seller will reject the offer outright or respond with a counter-offer. If you’ve never seen a counter-offer on a home, it’s usually a one page sheet specifying the precise areas, numbers, or conditions in your offer the seller doesn’t accept. The seller may disagree with your offer based on obtaining “acceptable” financing or with your need to sell your home first. There’s no reason for you to accept the counter-offer terms without making your own revisions to the seller’s revisions. In fact, the counter-offer should indicate the start of the actual home negotiation process.
Home Buying Negotiation Tactics
You have two goals in home buying negotiations and, oddly enough, they are sometimes in conflict with each other:
- To get the best deal you can
- To get the house
To achieve both, you’ll probably have to make a few concessions to the seller. Before negotiations begin, think about your priorities: where you’re willing to give and where you aren’t. You need to identify what’s critical to have, what’s important to have, what would be nice to have, and what you could live without and never miss. By having this list, you will be better prepared than the seller in the negotiations.
General Negotiating Tactics
- Give to get. By holding a hard line early, you can make it seem as if you care about certain terms that don’t really mean that much to you (remember that list?). Then you can let the seller have his or her way on those terms in exchange for other concessions.
- Focus on issues you can solve. If in each round of negotiation you focus on what you can solve rather than what you can’t, you can build up momentum and goodwill and make big issues seem smaller.
- Always ask for a trade off.
- Taper your concessions. Don’t compromise the same amount every time, make your concessions smaller and smaller.
- Never offer to split the difference. Let the seller make that offer. THEN offer to split the difference between what they’ve just conceded to and your original offer.
- Never allow the negotiation to be narrowed down to a single issue. There is always a winner and a loser in a single-issue negotiation. If things have gotten to this point, introduce more issues!
- Don’t assume that price is the only issue. Your seller may be more interested in a specific closing date or in some other issue.
Negotiating Tactics for Specific Home Buying Situations
Some tactics work best in particular circumstances.
In A Buyer’s Market
- Start low. By starting low, you can move the seller down significantly. The risk is that the seller might reject your first offer.
- Move bit by bit. By moving slowly, you may be able to wear the seller down closer to your target price. The risk is that the seller will get impatient and walk away from the negotiations.
In A Seller’s Market
A seller’s market may have multiple bidders on the same home. Don’t enter a bidding war unless you can absolutely afford it. Know your upper limit and stick to it. These are tougher situations than buyer’s markets, but there are some ways to overcome seller’s markets when you’re negotiating for a home.
- Come in hard. By making your best offer first, you may be able to win before a bidding war can start.
- Establish an amicable relationship. Sometimes sellers will accept an offer simply because they like one buyer more than another.
- Make things easy.Though the seller wants a good price, he or she also wants the sale to go smoothly and easily. You can make things easy by:
- Increasing your down payment bid, which increases your chances for mortgage approval)
- Getting preapproved for a mortgage
- Offering to pay for repairs as long as the house passes inspection
Late-Stage Home Negotiations
If your home negotiations hit a snag just as an agreement seemed within reach:
- Go halfway. At this point you’re probably very close. If there’s a number or date that you and the seller can’t agree on, offer to go exactly halfway only if it looks like you’re at an impasse.
- Be bold. If the negotiations have started to inch along, you might be able to restore momentum by giving ground on one point and asking the seller to give on another. But if you’re too bold you may give up more than you need to.
- Know your “walk away” point. Not all negotiations end with a sale, or with you getting exactly what you want. That’s why the best negotiators know what concessions they’re willing to make up front (hint: start with a lower offer). If a seller stalls or asks for too many concessions, you’ll know it’s time to move on.
Home negotiating can be a tenuous process but if you’re prepared well in advance with ideas on how to properly negotiate for a home AND you know your walk away price, you’ll be better prepared than 90% of home buyers in the market.
What tips do you have for negotiating for a home?