Buying a home? These four steps will help you negotiate like a pro!
1. Make it your business to know the market
Start by looking at comparable listings in your desired neighborhood. Knowing if a home has been on the market for a long time, or if its listing is higher or lower than similar properties will provide invaluable insight into your bargaining options. It also pays to know about the seller’s situation. Is the home being offered by retirees who might not be in a hurry to sell? Likewise, an impending divorce or job transfer may make the seller more motivated to sell quickly.
2. Negotiate from a position of strength
Some experts recommend making your first offer your best offer, while others suggest taking a more aggressive approach by offering 10% less than what you are ultimately willing to pay. This bases negotiations on your terms, rather than on the list price. Offers that are too low are likely to be refused or ignored all together, particularly if the market is competitive. Asking for quick response time can also be an effective tool, especially if you are dealing with a highly motivated seller. It is equally important that you respond to counteroffers quickly to avoid being edged out by other buyers.
Don’t show all your cards upfront. If you have a bargaining chip such as being able to pay in cash, hold on to the information until it will have the most impact.
3. Know when to ask for what you want
The status of the housing market can determine the extent of your bargaining power. In a buyer’s market, motivated sellers are much more likely to make concessions at the buyer’s request, such as upgrading fixtures or offering price reductions. The opposite is true in a seller’s market, where the higher number bidders puts negotiating power squarely in the seller’s hands. In any scenario, the best time for buyers to negotiate extras is after the inspection period and during escrow. This is also the best time to ask the seller to cover closing costs and other fees.
4. Be prepared to compromise
Since nothing is ever perfect, you’ll most likely have to make concessions when it comes to the price, size, or location of your dream home. That same willingness compromise applies to negotiating its purchase as well. Get the best deal by allowing yourself to let go of some of your smaller “wants”–new carpets and countertops can wait.
Compromising on terms such as foregoing inspection contingencies or changing the move out date to suit the seller may go a long way towards negotiating the best deal. Keep in mind that your ultimate compromise may be to walk away rather than overpay for a home.
Sources: US News, Roberts Real Estate, Time
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