How Much Can You Negotiate When Buying a Home?
Buyers are often weary to negotiate the price of a home.
Where do you start? How much is too much? How much is too little? These are all common questions that arise during the buying process. When you find the house of your dreams, you don't want to do anything to mess it up or to lose it.
So should you rather pay the asking price and sit with a massive bond for the next 20 years or should you try your luck in negotiating and risk a rejected offer?
Even if you are a seasoned real estate investor, negotiating can lead to anxious thoughts and feelings. It takes careful navigation to know which points you can negotiate and with how much room you have for negotiating.
If you are prepared and you have done enough research, you are in a better position than someone who is negotiating blindly.
There are a few important points to note when buyers negotiate homes and certain ways in which you can counter-offer. Here are a few important things to consider when negotiating during the buying process:
#1 - It all depends on the real estate market
The most important factor that drives the negotiating process, is the state of the real estate market in the area. These conditions will determine whether you can start planning a house party or whether you need to start looking for another home.
Experienced real estate agents should have sufficient knowledge of the real estate market in the area and they should be master negotiators. It is, after all, what they do every day.
Buyers should hire an agent that they trust and that they can communicate with. It is an investment that you make towards your future house.
#2 - How to negotiate in a buyer's market
A buyer's market means that there are more homes to sell than there are buyers. This means that the buyer has the advantage because there is more supply than there is demand.
A seller selling in these conditions might consider dropping his price by as much as 10% of the asking price.
Buyers can also try negotiating closing costs and the closing dates. There is nothing wrong with a healthy back and forth but be careful of lowball offers. The seller might be insulted and you can lose the offer altogether.
#3 - How to negotiate in the seller's market
A seller's market, on the other hand, means that there are more sellers than homes to sell. Here the buyer is at a slight disadvantage because he or she has to compete against other eager buyers.
Unreasonable and complicated offers full of contingencies can result in immediate rejection from the seller. Unfortunately, this means that negotiating has to be limited.
It is possible to offer a lower price after home inspection but be aware that there are buyers that will make an offer without asking for an inspection. These buyers often act quickly. A real estate agent should advise you on the best route to take.
#4 - Negotiating in a balanced market
A balanced market means that there is an equal amount of sellers and homes to sell. This does not mean that negotiating is easier. Home sellers take their time to work through offers and they go through several rounds of negotiation before making a decision.
This market displays a lack of urgency so the seller has time to choose the best offer. Buyers can still start with a lower offer and they can include certain contingencies. The negotiations might reach a cosy middle ground that is beneficial for both buyer and seller.
There are many different things that you can negotiate when buying a house. It does not only include the asking price and the closing costs.
Your real estate should prove to be a valuable source in this regard.