So at last, you’ve found a house you want to buy. Now the negotiation game begins.
Should you offer near the asking price? Make a lowball offer? Will the sellers counter? Tell you to take a hike? As you wait for your cell phone to ring with news, seconds tick by as loudly as the telltale heart.
Despite the agony of negotiating a home purchase, plenty of folks made deals this spring. Sales of existing homes surged in March, up 7 percent, according to the National Association of Realtors April report. It’s a buyer’s market in much of the country, putting you in a great bargaining position.
But many still stress out when making an offer. Their biggest mistake? “They react too quickly,” says Chad Hughes, a realtor with ERA Colonial in San Antonio, Texas, and a participating firm in the USAA MoversAdvantagenetwork. “Buyers have the best advantage if they take their time. The longer they wait, the more anxious the seller will be,” Hughes says.
We asked several real estate and negotiation experts for advice on getting the best deal—from initial offer through the closing date. Turns out, the “best deal” is a relative term. Some value the lowest price. Others pay more for a home they love. Whatever your priority, stand tough in negotiations.
Sure, there’s give and take, but, ultimately, it’s about getting the right home for you. These twelve tips can help you negotiate a deal—by yourself or through your real estate agent—on your new home.
1. Patience is a virtue when buying a home.
Hughes’ advice to take it slow, even in making an initial offer, can mean sellers make concessions later. And you’d be following negotiation consultant Michael Schatzki’s first law of negotiation: Don’t just do something. Sit there. “If you are in a rush, don’t let them see that. If the other side is in a hurry, slow down,” says Schatzki, author of Negotiation Speak.
But inaction means the house could also go to a rival bidder. “Waiting assumes you would be willing to walk away,” notes Roy J. Lewicki, a business professor at Ohio State University and author of Mastering Business Negotiation. “What’s more important to you—your money or your time?” he asks.
2. Walk through the home before you make an offer.
Realtors in the USAA MoversAdvantage network say one of the most common deal breakers buyers make is putting an offer on a house sight unseen, or making an offer on a house that one spouse has seen and the other has not. It happens a lot with military families who are moving from one part of the country to another and increases the chances that a contract will fall through, making the whole process more nerve-racking for all parties.
3. Use online resources with caution.
YouTube videos of houses for sale, online tax records, real estate sites, such as Zillow.com—all are helpful, but some buyers misinterpret information or trust inaccurate information. “True market value versus the online tax assessor’s figures and Zillow reports can be different numbers,” warns realtor Bill Kuhl, with Coldwell Banker United in Fort Walton Beach, Florida, also a MoversAdvantage participant.
4. Aim below the seller’s bottom line.
“Talk to your broker and ferret out why they’re selling to help guess their ultimate bottom line,” Schatzki says. Make the initial offer below that number, saving room to negotiate up. Other ways to generate an initial number? Hughes recommends offering 10 percent less than market value. Lewicki says to consider offering 90 percent of the asking price for a fairly priced home. But be aware that 90 percent might be low if the house is priced fairly. It’s ideal to find out how many offers the seller has received, how long the house has been on the market, and how fast a closing is desired.
5. Know the home’s true value.
Researching recent neighborhood sales and getting home appraisals are a given, says Lewicki. But he cautions that the appraisals are still an expert’s subjective opinion. In Kuhl’s region, still considered a slightly declining market, he’s seen appraisers be ultraconservative of late.
6. Read price concessions right.
If the seller counters just $1,000 or $2,000 below asking price, they’re not likely to budge. If you lowball and they meet you half way, they’re desperate. In general, Lewicki recommends not making big concessions on price after your initial offer, coming up in increments of no more than a couple thousand dollars at a time.
7. Ask for the right kind of concessions.
Don’t get hung up on nail holes in the walls, Kuhl says. “If we’re talking about a $200,000 purchase, $75 worth of this or $100 of that is minutia,” he says. But if a carpet allowance is a must for you, hold your ground. “In today’s market, most sellers will give concessions if you fight long and are patient,” Hughes says.
8. Trade higher sales price for closing costs.
“Try to get the sellers to pay as much of the closing costs as you can because with interest rates like they are, you will end up with more money in hand up front,” Kuhl says. Plus, you may move before you ever pay the extra amount you financed on the home price.
9. Leave nothing open to interpretation.
“In the written offer, clearly define who’s doing what and paying what, with a closing costs addendum that has an itemized list,” recommends Kuhl. “A disinterested third party should be able to read that offer and understand the intent.”
10. Follow up on contract specifications.
Make sure the things you’ve agreed to are happening—repairs are being made, your financing is coming through—before you show up at the closing.
11. Have options.
“Don’t fall desperately in love the minute you walk into a house,” Lewicki says. “It’s better to negotiate when you have an alternative property in mind.”
12. Know when to walk away.
Lewicki offers two definite scenarios in which you should walk: if the mortgage will cost more than you know you can afford, or if you feel the seller is trying to fool you in some way.
Originally published on USAA