Have you found your dream home, but the price is a little too high for you? Consider negotiating. Even if you’re comfortable paying what the seller is asking for, negotiate anyway – you never know how low you could get that price tag! Here are some things to consider when negotiating the cost of your new home.
Don’t Negotiate Just About the Money
Perhaps you are the buyer and you want the seller to cover half of the closing costs. Perhaps you, the buyer, want the seller to pay for a kitchen remodel by way of knocking some money off of their asking price. If you are the seller, perhaps you want the buyer to cover the title transfer fee as an exchange for wanting to expedite the closing process. It’s not just about the principal cost of the house – it’s also about each party’s wants and wishes from the other party, and there are a million different things that could qualify for “wants and wishes” in this sense.
Don’t Negotiate on the Basis of Asking Price
This can sound confusing, but once you understand it, you’ll be certain it’s the best way to go – do not negotiate the asking price of the house only. You must negotiate based on the total cost of the transaction and the total cost of owning the home. What does this mean? Getting the house of your dreams for less than it’s asking price sounds like a huge victory, but it can sell out if the house ends up being incredibly expensive to maintain or fix up. Yes, you must consider principal cost, closing fees, points, and other fees, but you must also consider how much it will cost monthly to own the house and negotiate with that number in mind as well.
Don’t Talk Numbers with Anyone But Your Agent
Any agent that is not your own is working for the seller, and is obligated to tell the seller anything that you share with them. If you are toured through the house by the seller’s agent, and tell them about your budget and your home wishes, it can undermine your negotiating power because now the seller knows all the cards in your hand. You must only talk numbers or wishes with your own agent, who will then help you deliver a negotiation to the seller in such a way that it does not undermine your negotiating power. This is especially important as you work through the negotiation process.
There is another side to this that you can consider accessing if you think you’re able to pull it off. Consider this: It’s in the seller’s agent’s best interest to close this home sale deal quickly so they can move on to their next client. If you can subtly convince them that you’re ready to buy, with the deposit prepared, the mortgage hypothetically ready to go with the bank, and the lawyer on-call, the seller’s agent will be highly likely to suggest you as a great option to the seller, even if your offer is lower than the seller had hoped. This removes any need for actual negotiating, but you must play it safe and must remember not to lie or intentionally dupe the seller’s agent – you just want to subtly imply that you’re ready to go.
Ask your Agent to Do it For You
Does the concept of haggling with someone about a large purchase make you sick to your stomach with anxiety? No worries – typically, your agent will be happy to negotiate on your behalf, only requiring you to sign your name to documents and confirm information with them. You should only speak to the seller or the seller’s agent to negotiate if you want to, and an agent who refuses to negotiate on your behalf is not one you should partner with! Be aware, though, that your agent’s job is not to get you the best deal, it’s to have the deal go through in the first place. You must outright ask them to help you negotiate and tell them what your ramifications are, and should not assume they will just do it for you by default. Sure, they will communicate with the seller, but you should ask them if you want them to push for a different or lower price!
Sell Before You Buy
This can be risky and stressful, but can have a huge payoff if it’s done correctly. If you sell your current house before you buy a new one, you are what seller’s agents refer to as “chain free”. This means that the seller will not have to wait for you to sell your current home before you buy their home, and that the process will be much quicker. Sellers will always prefer this, so you may be able to avoid negotiation all-together if you are able to get across to the seller’s agent that you’re a good prospect due to the speed in which the transaction can be completed.
Be Kind, But Firm
You don’t want to insult the seller by telling them they should lower the price due to all the flaws in their beloved family home. They may not be so inclined to sell their precious house to someone who is unkind to them about it. Instead, be kind but firm. If there is something about the house that is structurally unsound, unsafe, or not livable, you have every right not to budge. If one of your issues is largely or completely cosmetic, phrase your negotiation as less of a demand. And certainly don’t go overboard and tell the seller every single scratch and dent in the home to “nickel and dime” them into a lower price – they’ll almost surely pass you up for another seller that is less trouble to them.
Put Your Offer in Writing
Sellers and their agents both like this, and it shows them that you’re serious, especially if the letter is accompanied by proof of your mortgage offer or pre-approval. You may also find it to your benefit to indicate to the seller and their agent that you can be flexible to suit their schedule and that you’re willing to work with them. The easier you make selling to you sound, the more likely you will be sold to!
A Refusal is Not The End of the Conversation
If your negotiation offer is refused, it isn’t the end of the conversation. The seller simply replied to your offer. You can make another one! The seller may simply be playing a mind game with you to see how high they can get your offer with repeated refusals. Be sure t communicate to your own agent the absolute highest you will go, and then do not offer higher than that number under any circumstances. If your highest offer receives a refusal in return, communicate to both agents (yours and the seller’s) that you remain interested and will be available to talk again if the seller would like to return to you as a potential buyer.
Consider Negotiating Up
Do you really want to get your name in with the seller? Offer more than what they’re asking for. Don’t do this unless you really love the house and if you know that you’ll be able to afford it’s monthly upkeep less what you’ve paid over the original asking price. Make sure your finances offer that sort of flexibility. Be careful, though, because any counter offers should be made in descending order, so the seller knows there is a limit to how much you’ll spend and how long you’re willing to negotiate. Don’t let them talk you into paying even more than your original offer of more than they asked for!
Always Ask for a Home Warranty
No matter what, make sure you do this. It’s common for a seller to pay this expense up front, so do your due diligence to make sure they do. The seller pays the premium for the home warranty, usually between $400 and $600, and then the new homeowner is responsible for the deductible with any claim they make. The home warranty covers the repair of key items that come with the house, such as plumbing systems, appliances, air systems, or heating.
Renting? Ask the Seller to Buy You Out of Your Lease
You don’t have to wait until your current lease is up on your rental home or apartment before you can buy a house. In fact, you can negotiate with your seller to pay to buy you out of your lease. Many times, the seller has no issues with adjusting the price for this, as it’s usually only a few thousand dollars. This works the other way around as well – if a seller needs extra time to vacate due to another home purchase or construction, the buyers can grant them the extra time in exchange for a lower price on the home.