Negotiating A Home Price

If you want to negotiate a home price, here are some thoughts and suggestions you should keep in mind. Everybody wants to get the best deal in negotiating a home price, but very few people really do.

The first rule of negotiating a home price is to not go shopping when you're hungry. No doubt you've heard that advice applied to grocery shopping, but it applies to real estate, too. If you're not in any particular hurry to buy a house, you're in a much stronger position to negotiate the price of a home, because you have nothing to lose and you're not likely to buy on impulse.

If possible, don't wait until you really want to move or have to move to look at homes. Look at your leisure. It's at these times that you will likely come across a bargain or, more often than not, someone who is willing to drop the selling price just to sell quickly. "Good things come to those that wait."

The second rule of negotiating a home price is to know the value of what you're looking to buy. If you know what comparable real estate is selling for in the area near a home in which you're interested, you'll know if $250,000 is a screaming bargain or horribly overpriced.

The best time to negotiate a home price is when home prices are depressed, as they have been since 2008. Unless the seller has already cut his asking price to the bone, there's probably room to negotiate. If the seller is unwilling to budge, it's because the seller isn't strongly motivated to sell, he's already cut his price as far has he's willing to go, or he's being unrealistic with the asking price. If you can't get the seller to budge, walk away. Keep an eye on the house, though, as the seller may soon discover he's making a mistake, and may be open to negotiation.

Once you find a home you want, and a seller who appears to be reasonable, it's time to start negotiating the price. This shouldn't be a confrontation; in fact, it should be done as pleasantly as possible.

One tactic that works well is to get the seller to the point where he or she seems comfortable with the tentative agreement you've reached, but you then say that you need to speak to "the boss." If you've ever purchased a car at a dealership, you've likely seen the salesperson go to the sales manager with your offer. What the salesman is doing is letting the sales manager become the bad guy by rejecting your offer, while leaving the salesman as your "friend."

You can employ this same tactic by telling the seller that you need to talk things over with your spouse, your father, your real estate agent, or anyone else who might reasonably have a say in the matter. This leaves you free to come back to the seller and say that you're sorry, but your spouse/father/realtor thinks that the price is still too high. If you've already gotten the seller to drop his price before asking "the boss," chances are you may now get the seller to make another concession.

If the seller agrees right away to a price that you think is fair, don't accept it immediately. If you take the offer right away, the seller will think he agreed to a price that's too low. You want him to think he won the negotiation. so come back a second time with a lower offer. Even if the seller refuses, you've lost nothing.

Many people think that keeping a "poker face" when negotiating is the right approach, but it's not. You're more likely to get a seller to re-think his proposal if you look surprised or shocked. Even if the offer the seller is presenting is fine with you, look surprised. You'll be setting the seller up to possibly reduce the price even more.

Another mistake people make in negotiating is talking too much. When the seller presents his offer, keep your response short. Say something like, "I'm sorry, but you have to do better than that." Then wait for the seller to respond.

At some point in negotiating a home price, the buyer or the seller is going to offer to "split the difference" between the offers. Don't be the one to suggest splitting the difference; let the seller get there first. By doing so, you're letting the seller feel like he's winning. If the negotiations continue, the offer to split the difference will probably arise again, and the split will be in your favor.

Before you even start negotiating a home price, be sure to have something in your back pocket that you're wiling to give up. The key in negotiating is to make the other party feel as though he's winning. If you have something you're comfortable giving up, you're softening up the seller by making him think he's winning.

All of the above will get you nowhere if you're not coming into the deal with a clean offer. Make sure you're pre-approved for the price of the homes you're looking at. If at all possible, don't have any mortgage contingencies. A buyer who can close the deal quickly is much more likely to get a good deal than one who has to wait for approval on the mortgage, or has to sell his house first.

It's important to recognize that not every home you'll encounter is open for negotiation. Some homes are so desirable or reasonably priced that they may have multiple offers, or will sell very quickly. If you've done your homework, you'll recognize these bargains. Unless you enjoy negotiating just for the sake of negotiating, be prepared to jump on one of these deals.

If you're not comfortable playing negotiator, consider hiring a real estate agent to represent you in purchasing a home. A professional will know the market, and has the experience to get you a good deal.