Buying a house can be a daunting experience, especially if you are a first-time buyer. Why? Well, on top of it being one of, if not the biggest purchase of your life, the home buying process is full of unfamiliar terms and financial implications that can be hard to understand.
A crucial part of this process is ensuring you get the house that works for you, which fits your budget. This is much easier said than done. Plus, you will need to get creative in order to know how to negotiate house prices while also staying within your budget range.
Not to worry, though! We have curated some house buying negotiation tips that we think will help you as you start your home-owning journey.
What to Consider Before Negotiating
Negotiations are all about give and take. Therefore, you need to be very familiar with what your seller is willing to give and what they expect you to take. Most new home buyers correctly assume the price the seller provides is higher than what they expect to get. As a result, they can negotiate the cost of the home. However, some buyers struggle to figure out the best strategies to use to get a lower price on a house.
The best way to go about this is to get answers to key questions like:
Why is the current owner selling the house?
Are you in a buyers’ market or a sellers’ market?
How many offers have they had on the house?
How long has the listing been on the market?
How does what they are asking for compare to other prices in the area?
What time frame are they working within for the sale?
What is the appraisal value of the house? What does the inspection report say?
The answers to these questions will provide pointers on how to negotiate home prices. If the listing has been on the market for an extended period, the seller may be open to going lower than intended in a negotiation with few offers. If the selling price is significantly higher than the area going-rate, and it is not clear why, it may be better to take a wait-and-see approach. This is because the seller might be forced to lower their asking price. If a seller is emotionally attached to the house they are selling, finding out how you can accommodate them may soften them to reduce the price in your favor.
In other words, research, research, research. The more you know and can find out, the better informed your decision will be.
What Can Be Negotiated
Although getting the asking price down is important, it is not the only aspect of how to negotiate house price. Sellers determine the price they set using multiple factors, including how fast they want to sell, the condition of the house they are selling, what contingency clauses they are willing to accept, closing costs, and terms. These may not all be monetary considerations, but they do have a financial impact on a buyer. For example, a listing with a low asking price that needs multiple things fixed as per an inspection report will likely not be the best choice for you. This is due to the fact that even with a low asking price, the cost of fixing and maintaining that property can quite quickly exceed your budget, leaving you in a worse financial position than you started. As such, it is vital that as you work out how to negotiate home purchase prices, you negotiate what, if any, repairs you are willing to make and which ones you require the seller to cover.
If you are not yet ready to move in because you need to wait for the end of a lease or have not yet found a buyer for your current home, this is something you can add to your negotiations with a seller. This is especially true if they are not in a great hurry to close the sale. These are known as closing or possession terms or dates and can impact your costs of moving because if a seller requires that you move in before you are ready, you will need to pay to finish your lease or move in without the income of your previous house sale. This can lead to financial issues for many.
When discussing how to negotiate a house, it’s important to remember it’s not just about you and the seller but also you and your lender or mortgage provider. Getting a reasonable mortgage rate from a reliable lender should be a priority for you. This is because of the interest rate you receive, and the different incentives lenders can give, such as loan points that can reduce your mortgage repayment. Additionally, getting a pre-approval from a lender increases your value to home sellers because it tells them that you are both credit-worthy and trustworthy and will not present them with additional stress during a sale.
Home Price Negotiation Tips
How to get a lower price on a house involves the knowledge you have and how and when you use it. As promised, here are some reliable house buying negotiation tips to help you in your home buying process:
1. Always Have a Plan B:
Finding the perfect house is difficult enough. But what happens when you and the seller are unable to agree? Be smart enough to walk away. This means that although it may be frustrating or painful to walk away from a potential home, you should have a second, third, and even fourth option if the first does not work out. As a potential buyer, you should have a shortlist of houses that you can begin negotiations on while still having your back-up options available.
2. What are Your Must-Haves?
Contingency clauses are conditions or actions that the buyer and seller agree to that make the contract binding. If you present too many contingencies that you are unwilling to compromise on, you can very quickly become less desirable to sellers. Deciding how to negotiate house price offers includes putting down the most important five or fewer items that should go into your contingency clauses. Doing so will make your offer more attractive to sellers and result in you getting more conditions you want in a sale.
3. Inspections and Repairs
Before you sign on any dotted line, you must have a professional inspection performed on the listing. This falls in the top three tips of how to negotiate a house price when buying because the inspection will give you a detailed understanding of what repairs need to be done on the house. Using this knowledge, you can then negotiate with the seller what repairs they should cover and which ones you will cover. Beware of sellers who insist on a very short closing period to pressure you into forgoing an inspection or trusting their inspection report without verification.
4. Closing Costs
Although most buyers pay these without question, it is not a set-in-stone rule and should be part of negotiating a house price prior to exchange. Closing costs typically include loan origination fees, recording fees, and lender title insurance and are generally calculated as between 2% – 6% of the sale price. Given that this is not an insignificant amount, it is beneficial for you that you negotiate with the seller to either pay a part of or the whole of the costs.
5. Remember Your Realtor
Buying a house on your own might seem like an easy option because of all the applications and sites that now provide you with information previously only available to realtors. While these are helpful, realtors are still recognized professionals you will need by your side to navigate how to negotiate house prices when buying. Their knowledge of local markets, unique insights into market movement, and what language you should avoid as you negotiate a contract are invaluable in the home-buying process. And to top this off, they also help you get the best deal suited to your circumstances.
Reali Can Help
Although buying a house can be stressful, it can also be an exhilarating process that leaves one feeling a great sense of achievement. To make your home buying experience a smooth one, we strongly recommend that you work with a recognized realtor. They can help you find your dream home and secure a good mortgage rate, as well as negotiating a home price to finally closing the contract.
At Reali, we are not just real estate agents but real estate experts who can help you navigate the legally sensitive definitions of home buying contracts, including how to get a lower price on a house. We make home buying as stress-free and straightforward as possible.