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Your agent just called with the good news: A buyer has made an offer on your house! That alone feels like triumph, but you’ll likely go through some back-and-forth in the coming days and weeks. How you handle those negotiations can make or break the sale.
Settling on a price is just the beginning. Buyers can haggle on everything from closing costs to roof repairs to backyard swing sets. Dave Nelson, a top-selling real estate agent in East Idaho, recalls one sale a few years ago when a buyer asked for the Harley parked in the garage. (The seller said no.)
To help you decide where to concede and where to stand firm, we asked experienced real estate investors and agents to share their firsthand experiences and offer tips on how to handle requests you never saw coming. Here are 6 ways you can expect buyers to negotiate with you on a house, with advice on crafting a response to each demand.
1. Offering a lower price
Price is always the top-line negotiating item in any real estate transaction. Much of the price discussion with a buyer will happen before you sign the contract. In essence, the buyer makes an offer, which may be lower than your asking price. You can choose to respond with a counteroffer, and they’ll either accept your deal or counter again. This can go on through a few iterations until eventually you settle on a mutually agreeable price.
In a buyer’s market, or a situation where a property has been on the market for two months or longer, it’s not uncommon for offers to come in at 10% of the asking price or even lower. In a seller’s market — where you have less than six months of inventory and buyers are competing for homes — you’re more likely to get an offer at or above asking.
These days, given the high competition for homes across the country, Nelson isn’t seeing as many price negotiations as he has in the past.
“Right now in Bonneville County, our list-to-sell ratio is hovering right around 100.68%,” he says. “In most scenarios, if the property is priced appropriately and it’s in good marketable condition, we’re seeing negotiation happening around the terms more than pricing.”
Below are some scenarios in which you might consider conceding at least somewhat on price:
- It’s a buyer’s market and there are plenty of other available homes in your area and price point.
- The house has been on the market for a few months and you haven’t received other offers.
- Comparable sales in your neighborhood are in line with the buyer’s offer price.
- You’ve received multiple offers in line with the current buyer’s offer, which could indicate that your asking price is off the mark.
- The house needs significant repairs, such as a new roof, electrical work, or an HVAC upgrade.
Otherwise, you’re probably in a position to hold firm on price. If a buyer is trying to negotiate a price that the seller believes is too far below the home’s value, Nelson usually provides the buyer’s agent with a copy of the valuation he ran on the property prior to listing. “It’s just an extra tool to help educate them on the market and what they should expect to pay,” he says.
2. Asking the seller to cover a portion of closing costs
Both buyers and sellers pay closing costs. A seller’s closing costs alone can amount to 9%-10% of the home’s value. However, some buyers will request that sellers pay for a portion of their closing costs to give them a bit of financial breathing room.
A buyer’s closing costs can include loan and broker fees, loan origination fees, application fees, credit report fees, title and escrow fees, recording fees, and other third-party charges. Altogether, closing costs typically total between 2% and 5% of the full loan amount for a buyer.
In some cases, a buyer may request the seller offer a closing cost credit to reduce the amount of cash they’ll have to bring to the table. These credits can often be applied toward the buyer’s typical escrow closing costs, including appraisals, inspections, and mortgage and settlement fees.
Bill Samuel, an experienced property investor and house flipper in Chicago, Illinois, often sees buyers try to negotiate on closing costs. “If the buyer presents an offer with a closing cost credit, it most likely means that they need that money in order to make the deal happen, so we stay firm on our price and allow the credit before any other concessions,” he says.
If a buyer asks you to cover closing costs, you can respond by:
- Agreeing to cover all closing costs
- Agreeing to cover part of the closing costs
- Denying the request to cover any closing costs
Greg Kurzner, a seasoned property investor in Atlanta, Georgia, generally recommends offering partial closing costs, because it is a finite amount and any costs beyond that will be the buyer’s responsibility.
Keep in mind that depending on what kind of loan the buyer has, and the size of their down payment, there are limits on how much you’re allowed to offer in closing credits.
Sometimes a buyer will offer a higher sale price in exchange for closing cost credits. On paper, this will net the same amount of money for you, but there are some caveats. Kurzner often agrees to this scenario, but he always adds a stipulation that the real estate agents’ commissions are based on the net purchase price less closing costs concessions, so he doesn’t end up paying commissions on money he isn’t getting.
Also, if the buyer includes an appraisal contingency in their offer and he agrees to pay some of their closing costs, he adds a stipulation that if the house won’t appraise at purchase price, he can reduce the seller-paid closing costs if that will bring the purchase price in line with the appraisal.
3. Requesting that you leave certain interior or exterior items with the home
When a buyer makes an offer on a house, it’s for the physical structure, not the items inside (unless you’re selling the home furnished). But in some cases, the buyer may try to negotiate to include certain items with the sale.
Stays with the house
“Legally, anything that is permanently attached to the property is considered a fixture and is generally included in a home sale,” says David Reischer, a New York attorney specializing in real estate, mortgages, taxes, and estate planning. “However, state laws can vary as to what is — and what is not — included in the sale, so be sure to be explicit.”
When Samuel sells properties in his area, he generally expects to sell everything attached to the house as part of the deal. Items that are built-in and immovable are considered part of the “real property” and should remain after the seller vacates. Some examples include custom window treatments, built-in hot tubs, cabinets, and curtain rods.
Non-fixed items, such as movable furniture, regular curtains, lamps, and wall art, are considered personal property and generally don’t remain.
Semi-attached items, such as swingsets, light fixtures, outdoor fountains, wall-mounted decor, and above-ground pools, aren’t so clear-cut and should be spelled out in the contract.
Appliances like the fridge, oven, dishwasher, and washer and dryer usually stay because they’re a hassle to move, but the buyer may request them in the contract to be sure.
“I always recommend a seller not simply give away an appliance, even if they don’t want to move it when they leave,” says Kurzner. “If a buyer asks for appliances to stay, that means they see value in them and need them. The seller can often get some or reasonable value by countering such a request with a price.”
If a buyer asks to include an item in the contract, you generally have three choices:
- Grant the request
- Refuse the request
- Grant the request, but raise the house price
- Refuse the request, but offer some sort of credit or price concession to make up for it
The value an item holds for you (financially or sentimentally) should drive the decision of whether to include it in the sale. If an item is oversized and cumbersome, such as a swing set or trampoline, Nelson’s clients usually concede to including it with the sale — it’s a way of letting the buyer have a small “win” while avoiding the expense and hassle of moving it.
And in some cases, the law will dictate how you respond: “A seller should find out whether the law views something as a fixture or not to determine whether the item needs to be included or possibly negotiated into the larger transaction for a higher price,” says Reischer. Check with your real estate agent or a local real estate attorney to clarify the rules in your area.
4. Asking for a price reduction or credit for repairs
The inspection period is another big opportunity for buyers to negotiate with you. Even in a hot seller’s market, this stage of the game often sparks negotiations — and if the buyer was generous with the offer price, this is an opportunity for them to recoup some money. If the inspection brings to light water damage in the basement or a faulty HVAC system, for example, they may ask for some concessions to cover those costs.
“In the market right now, there is such high demand that buyers are writing offers purely based on emotion, sometimes even before going through the property,” says Nelson.
“Maybe they’ve paid list price, or even higher than list price, and they feel like they want to get a win during the inspection process, whether that’s by asking for a price reduction, several repairs, or a closing credit to cover those repairs.”
Kurzner is seeing this happen a lot in his area, too — particularly because it’s a seller’s market, where buyers can’t negotiate as much on price. “Because many markets are very tight on inventory and homes are having multiple offers presented within hours of listing, buyers are offering top dollar to get under contract, and then trying to negotiate some more after they complete an inspection,” he says.
If the buyer is requesting concessions on costly, major items — such as the roof, HVAC, furnace, or other mechanicals — and it’s clear that those items are nearing the end of their life, it would be difficult to refuse those. “If the seller refuses a concession and the deal falls through, it’s very likely the next buyer will ask for the same thing,” says Eric Hughes, a rental property investor with a portfolio of 25 properties, mostly in the Memphis area.
On the other hand, he notes, some buyers may try to “nickel and dime” the seller by requesting concessions for smaller cosmetic repairs, such as paint, small carpentry fixes, gutter-cleaning, patching nail holes, and other items that don’t impact the value of the home. For those types of requests, you can usually stand firm.
“Buyers will sometimes request that a seller patch holes and marks caused by pictures, paintings and wall art,” notes Kurzner. “This is on the surface no big deal, but rarely ever can you effectively patch and paint these holes without having to repaint the whole wall. I recommend never agreeing to touch up holes in walls.”
Samuel agrees: “When negotiating repairs or upgrades, we will agree to make any legitimate defect found that is a safety issue, but will not perform additional cosmetic upgrades or improvements without re-negotiating the price.”
If you don’t want to spend upfront money on making home repairs, another option would be to offer a home warranty to give some measure of protection to the buyer after closing, or offer to reduce the price instead of waiting for a lengthy repair to be completed.
5. Negotiating a sooner possession date
In some cases, the buyer will want to gain occupancy of their new house as soon as possible, particularly if they need to vacate their current home by a certain date or they’re transferring into a new area for a job. The closing date is one area where you may be able to give a little without making any financial concessions.
Quick closings have historically been a good thing for both the buyer and seller, Nelson notes, but lately he’s been seeing the opposite. In today’s tight market, sellers often don’t have anywhere to go when their house sells because inventory is so low.
“We’ve been negotiating on not just longer escrow periods, but also delayed vacancies, where we close on the property and then the seller rents back from the buyer for a month or two until we can find suitable housing for them,” says Nelson.
Ultimately, your individual situation and needs will drive your decision of whether to concede on negotiations for a certain closing and occupancy date. If the buyer wants to move in by a certain date and you are able to accommodate that request without too much expense or hassle, it might be an opportunity to score some points by accommodating the request. On the other hand, if the buyer can’t take occupancy for an extended period, you’ll have to determine whether it makes financial sense to hold onto the property until they’re ready to close, or if you should move onto a buyer without those delays.
In some cases, Kurzner has seen the buyer ask for partial possession prior to closing, such as asking to store some furnishings in the seller’s garage. He strongly advises against making this type of concession.
“The most obvious reason is that once someone else’s stuff is in your house, if they then don’t ultimately close on the purchase, you have to evict their stuff to get rid of it,” he explains. “There is also liability and risk of damage or theft that no seller needs to take upon themselves.”
6. Requesting coverage through a home warranty
To provide peace of mind, many buyers will ask for a home warranty to be included with the sale. This is sort of like an insurance policy to cover the cost of repairing or replacing major components like the HVAC, electrical, and plumbing systems. Sometimes these warranties can also cover appliances, roofing, and other items.
Nelson sees buyers request that sellers cover home warranties on almost every offer he receives on his listings. The average cost of a home warranty ranges from $300-$600 per year, so if you offer to cover a three-year home warranty, it would cost you between $900 and $1,800.
If the home inspection flagged some potential issues but you don’t want the repair process to delay the sale, it might make sense to offer a home warranty instead. That way, the buyer can make any necessary fixes on their own timetable.
Nelson estimates that around half of the sellers he works with are willing to offer a home warranty, particularly if the buyer is paying the full asking price.
Negotiating for the best deal as the seller
While there will always be some give and take in a home sale, how much you can negotiate on a house depends largely on the current market conditions. If it’s a buyer’s market where inventory is high and properties are moving slower, the buyer will generally have more room to negotiate. But if it’s a seller’s market where housing is limited and buyers are competing for contracts, they may be less inclined to make unreasonable requests or contingent offers.
When it comes to negotiating, your real estate agent is your most valuable tool. He or she can help you decide when to concede and when to stick to your guns, so that the deal is fair and beneficial for both you and the buyer. In extreme cases, they’ll know when it makes sense to walk away from the deal.
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