{"id":14634,"date":"2020-02-28T08:12:28","date_gmt":"2020-02-28T16:12:28","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=14634"},"modified":"2020-02-28T08:12:28","modified_gmt":"2020-02-28T16:12:28","slug":"buyer-how-to-negotiate-a-house","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-how-to-negotiate-a-house\/","title":{"rendered":"How to Negotiate on a House You Love and Still Get the Best Deal"},"content":{"rendered":"

Tempted to throw caution (and your budget) to the wind if it means buying your dream home<\/a>? Cool your jets. An analysis from CoreLogic found that as many as one-third of buyers spend more than expected on their home<\/a>, and one-third cop to putting down more for their down payment than originally planned.<\/p>\n

If you\u2019ve ever stood in a house for sale and imagined yourself living there, it\u2019s not hard to imagine how this loosening of the purse strings happens, so to speak. But pass up the opportunity to negotiate, and you could face some long-term regrets over this purchase and whether you missed out on getting a better deal.<\/p>\n

Put on your poker face and follow this set of proven negotiation tactics top agents use to help their buyer clients \u2014 even those who are quite love-stricken.<\/p>\n

\"A<\/a>
Source: (Johan Bos \/ Pexels)<\/figcaption><\/figure>\n

Do your homework on the house, owners, and neighborhood<\/h2>\n

Sellers rarely reveal information that would weaken their own position of power on purpose. But look for clues that indicate whether you have any points of leverage as a buyer with the following steps:<\/p>\n

Observe the state of the house<\/b>
\n<\/b>If the house is empty, the seller may have moved already. That often means they\u2019re juggling two sets of housing payments, indicating that they\u2019re motivated to sell and willing to make more concessions to move the deal along.<\/p>\n

On the flip side, if you\u2019re looking at a house packed to the brim with possessions, it could mean that the sellers would appreciate some extra time to pack up. This gives you the opportunity to ask for a little help with closing costs or perhaps a home warranty in exchange for a longer closing timeline.<\/p>\n

Knock on some neighbors\u2019 doors<\/b>
\n<\/b>This negotiation tip comes from Carl Medford<\/a>, a top agent in Fremont, California,<\/a> writing for Inman<\/a>, who offers the following advice: \u201cPotential buyers should talk to as many neighbors as possible. Ask what locals like about the neighborhood. Inquire about any potential problems.\u201d Knocking on doors can be awkward if you\u2019re on the shy side, but it\u2019s an easy way to get the lay of the land, and dig up any info that could aid you in negotiations.<\/p>\n

Look up crime stats for the area<\/b>
\n<\/b>AreaVibes<\/a> and NeighborhoodScout<\/a> are two online resources where you can look up information about neighborhood crime statistics. Family Watchdog<\/a> is a free service that locates any registered sex offenders in the area. Knowing any undesirable neighborhood characteristics will be critical for your decision in whether to move forward with home purchase and give you negotiation leverage in the event you find something that would affect property values or an area\u2019s overall livability.<\/p>\n

Find out the motivation of the seller<\/b>
\n<\/b>Easier said than done, but if you or your agent inquires about why the seller is selling, it can reveal where they\u2019re willing to negotiate and how motivated they are to sell. Todd Auslander<\/a>, a top agent with 19 years experience, says the easiest way is to simply ask, \u201cWhy are you selling?\u201d Keep in mind, it may be challenging to get to the truth (in some cases, even the listing agent may not know the real reason the seller has decided to move on).<\/p>\n

\"Hands<\/a>
Source: (Oleg Magni \/ Pexels)<\/figcaption><\/figure>\n

Bring your own comps analysis to the table<\/h2>\n

As you go to make a bid on a house, your agent will advise you on whether to bid above, below, or right at asking price. They\u2019ll come to you with insights like, \u201cThey\u2019re shooting a little high\u201d or \u201cThis property\u2019s going to go fast.\u201d<\/p>\n

Agents base these insights on their knowledge of the market and what are called comparable sales<\/a>, or the pool of recently sold homes that are similar in location, size, and condition to the house that\u2019s up for sale.<\/p>\n

Through your agent you can access MLS (multiple listing service)<\/a> property data to do some DIY comps analysis<\/a> that will help you get an idea of what the fair market value<\/a> for a house is. You can also look at online listing sites<\/a>, but the MLS is your most up-to-date and comprehensive source of property data.<\/p>\n

Let\u2019s say you identify a few comparable properties that sold for significantly less than the seller is asking for. Bingo! That information can be invaluable in supporting your price negotiations, from the position of: What makes your house better than this one? What justifies me paying you more for it? <\/i><\/i><\/p>\n

In addition, check for how long the house has been on the market. If the listing\u2019s days on market<\/a> number is 30 days or above, then the seller may be more receptive to a lower offer or negotiating in general on price. On the flip side, if the listing is fresh and you hear it\u2019s generating a lot of interest, then you likely have less power and should put your best foot forward with a strong offer.<\/p>\n

Be firm but reasonable about the inspection results<\/h2>\n

The home inspection reopens the door for some back and forth<\/a>, saving buyers on average $14,000 on their home purchase<\/a>, according to a study from Porch.com of nearly 1,000 homeowners.<\/p>\n

Your professional inspection results will act as a roadmap for what to address before this house becomes yours. However, negotiations will be more effective if you\u2019re strategic about what you ask for.<\/p>\n

“Our job is to fight for our clients to get as much as we can from the inspection,\u201d says Auslander.<\/p>\n

\u201cNow, we’re not going after the cosmetic-level issues. We’re going to go after things that affect our client’s health, safety, and the structural integrity of the home.\u201d<\/p>\n

If you discover the house needs a new heating system, or comes with electrical issues or mold, you can absolutely bargain for a credit or replacement. But start a war over nitpicky fixes under $100 or cosmetic imperfections<\/a>? That\u2019s liable to poison negotiations from here on out.<\/p>\n

Once you\u2019ve got your list of requests ready to go, “Do everything in writing,\u201d says Auslander. \u201cNothing should be verbal.\u201d<\/p>\n

\"Two<\/a>
Source: (Sebastian Herrmann \/ Unsplash)<\/figcaption><\/figure>\n

Ask the seller to cover a portion of your closing costs<\/h2>\n

Closing costs<\/a> are one-time fees that are roughly about 2% to 5% of the purchase price. If a home is $500,000, then this comes to between $10,000 and $25,000. These costs cover lender and broker fees (charged by most lenders) and third-party fees (charged on nearly all loans), such as property taxes, title transfer taxes, homeowners insurance, and the like.<\/p>\n

When you\u2019re putting a chunk of money down for a house, paying closing costs on top of everything else can feel like a lot at once.<\/p>\n

If you can get the seller to cover all or a portion of these costs, that\u2019s a huge win (though the seller is not obligated to do so). However, some sellers may be more receptive to pitching in on closing costs than they would be reducing the price \u2014\u00a0so it\u2019s a good request to keep in your back pocket in the event of a price stalemate.<\/p>\n

Negotiate for a little help with mortgage discount points<\/h2>\n

Some buyers choose to pay discount points to certain lenders at closing in an effort to buy down their interest rate (This is a trade-off, though \u2014 you\u2019ll have to weigh the cost of paying more upfront versus your interest savings over time, which will be more advantageous if you plan to stay in the house for a longer period.)<\/p>\n

If you do decide to go the discount points route, it\u2019s another line item you can potentially negotiate with the seller to help out with. It\u2019s more likely that you\u2019d be able to ask for this concession in a buyer\u2019s market when the seller is in a weaker negotiating position.<\/p>\n

When you make this ask, be sure the seller knows what\u2019s it in for them: The IRS notes<\/a> that although sellers can\u2019t deduct points they pay as interest on their tax return, they can count what they paid as a selling expense to reduce their gain realized. That lowers the amount of taxes they\u2019d owe on the home sale profits or makes it less likely that they\u2019d owe taxes on the gain at all, which is a compelling point to bring up in negotiations.<\/p>\n

Put your foot down on a home warranty so if stuff breaks\u2026 you\u2019re covered<\/h2>\n

Imagine you\u2019ve moved into your dream home and suddenly the AC busts in the middle of summer. You could be shelling out $1,200 to $1,800<\/a> at a time when you\u2019re relatively house poor. A home warranty can help you protect against having to cover a big-ticket expense right away.<\/p>\n

So, all in all, a home warranty can be a good item to negotiate with the seller \u2014 simply ask if they\u2019d be willing to cover all or part of the costs of the home warranty<\/a> at closing for your first year or two of ownership. A home warranty<\/a> typically costs $350 to $650 per year and usually covers your major appliances and systems \u2014 such as heating and cooling and kitchen appliances. In the grand scheme, it\u2019s a small chunk of change for pretty big peace of mind.<\/p>\n

\"A<\/a>
Source: (La Miko \/ Pexels)<\/figcaption><\/figure>\n

Give the seller plenty of time to move out \u2014 in exchange for something you want<\/h2>\n

Your move-in date can be a bargaining chip. If the seller wants to stay longer to finish out the school year or needs more time to move across the country, and you\u2019re flexible, you can ask for something you want in exchange.<\/p>\n

The best deal for you may be price savings or the snagging a piece of furniture you loved in the house and want included in the sale. Or if the seller needs a later closing date, perhaps they pay your rent for a month.<\/p>\n

Negotiating on the possession date is pretty standard and may help you save a few thousand dollars. The key is understanding what the seller needs, then being able to give it to them, while getting something your heart wants in return.<\/p>\n

If the house appraises under contract value, hold your ground<\/h2>\n

Even if you love a house, paying more than market value is dangerous. Let\u2019s say you buy the home, and in a year lose your job and struggle to make the mortgage payment.<\/p>\n

If you paid market value, you\u2019re in a better position to simply put the house back on the market and pay off the remaining mortgage balance with the proceeds. But if you\u2019re upside down (because you overpaid and now the house isn\u2019t worth what you bought it for) you risk having to go through a short sale or foreclosure.<\/p>\n

If the appraisal comes in under contract value, use it as a way to re-negotiate with the seller. At this point, the seller has some skin in the game and may want the sale to go forward as much as you do. Ask them to lower their price to the appraised value. If that\u2019s an absolute no-go, then you can try meeting in the middle to cover the difference. What\u2019s fair is fair.<\/p>\n

\"A<\/a>
Source: (\u00c1lvaro Serrano \/ Unsplash)<\/figcaption><\/figure>\n

Dig deep to find your inner Shakespeare<\/h3>\n

When you find the perfect home, you\u2019ll want to stand out from the crowd in a hot market. Auslander describes a time that a house had multiple offers within 48 hours: “One of the buyers wrote a letter that was one of the most beautiful letters we had ever read. It made our seller practically cry.\u201d<\/p>\n

The letter described how the home was perfect for their family, and it made the seller believe the buyer would love their home as much as they did. A heartfelt letter<\/a> shows the seller you care and helps you get on their good side, potentially elevating you above the competition. Sometimes the most effective negotiation tactic isn\u2019t hardballing; it\u2019s tapping into your soft side.<\/p>\n

Negotiating as a buyer: You won\u2019t regret making the ask<\/h3>\n

Understanding how to negotiate a house gives you confidence when emotions are getting the best of you. At the end of the day, you (with the help of your agent) need to be your biggest advocate because this is no small financial matter. No matter how much you love a home\u2019s layout or gorgeous hardwood floors, you\u2019ll regret not taking the opportunity to at least try and negotiate where you could. Bottom line?<\/p>\n

It never hurts to ask.<\/p>\n

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