It’s common for sellers and buyers to negotiate the asking price when it comes to home selling/buying. Why? Because as a buyer, you’ll want the most you can get, and as a buyer, you’re going to want to get the best price possible and not overpay a ridiculous amount for your future home. Negotiating the list price is a normal part of the real estate experience. Your real estate agent will often play a role in guiding your transaction, but it’s wise to familiarize yourself with the negotiation process.
What To Do Before Negotiating a Home Price
You’ll need a lot of patience and organization when it comes to negotiations. Here are a few things you can do before you start:
Understand the Market
The housing market will determine the amount of wiggle room you’ll have in terms of house prices, especially if it’s a buyer’s market or seller’s market. Essentially, a seller’s market means that those selling their homes have more negotiating power than the buyer. When a seller’s market occurs, there are likely more home buyers than existing homes for sale. As of the last few years, there’s been a housing shortage which has resulted in most sellers profiting from their listed price.
In a buyer’s market, people looking to purchase a home hold negotiating power over the individuals selling their property. This usually happens when there are more homes for sale than potential buyers.
However, if many people are interested in a single home, and an abundance of offers are made, you’ll have less room to negotiate the purchase price. By contrast, if the local market is dry and the seller isn’t receiving much traction, you’ll have a better opportunity to ask for a lower price.
Work With a Real Estate Agent
Real estate agents do more than show homes to potential buyers. They can lend a hand in the negotiation process and help you determine how much to offer.
Many buyers believe they can go through the process alone since so many real estate listings are available for self-serve online. However, real estate professionals are experts in the local housing market. They understand the interest rates, what properties may grow in value, and what the property taxes will be. Remember, a real estate agent is there to ensure your transaction.
Get Your Finances Together
Before you start a bidding war or take a seat at the negotiation table, you’ll need to guarantee that you can get a mortgage. Most sellers won’t consider an offer without proof that you can afford the home.
Before submitting an initial offer letter, you must get preapproved for a mortgage loan. A pre-approval letter will indicate the mortgage amount you’re qualified for, which will let sellers know if you’ll be a likely candidate.
Why Is the Seller Moving?
The more you learn about why the seller is relocating, the better it’ll be for your negotiating tactics. Perhaps the seller is going through a divorce and is looking to move closer to their children. They might want to sell their property as fast as possible. The seller may have bought a new home and might not be able to do the repairs or renovations you were hoping for because they’re more concerned about their new purchase.
Your real estate agent can do some research about the seller and determine whether they’re looking to keep their listing up for a short or long while. This information may seem mundane but it can be a huge help in knowing whether or not you can negotiate the seller’s price.
Negotiating the Home Price
Learning some negotiation tips can help you once you’re ready to start discussing house prices.
Get a Home Inspection
Purchasing a home after only viewing it can be a big gamble. Asking for a home inspection can ensure that the house is in working order. It can also play a key role in negotiating the final selling price.
During a home inspection, an inspector will walk through the property and determine if there are any issues with the foundation, ventilation, HVAC system, and more. Once evaluated, the inspector will provide a detailed report of their findings.
You have a few options if the home inspection uncovers any potential problems that pose as a deal breaker. You may ask the seller to fix the problems found, ask for a credit for closing costs, or a lower price for the home. In some cases, the inspection results may even cancel the house sale if there’s an inspection contingency in your offer or the inspector finds a major issue with the house.
An important distinction is that both an appraisal and inspection are different. Appraisals only offer rough estimates of what the home is worth, whereas an inspection is a more thorough look at the integrity of the real estate property.
Ask About Closing Costs
To close the deal on a house, you have to take care of the down payment and the closing costs. Closing costs are expenses that go directly to your lender for servicing your loan. You may be looking at anywhere between 3%-6% of your loan value.
A safe bet is to set aside some money that’s separate from the down payment. If you’re unable to cover closing costs, you may ask for seller concessions. What are seller concessions? You can ask the seller to pitch in or pay a portion of the closing costs. However, you may want to avoid asking this if there’s some competition on a specific piece of real estate. You can also talk to your lender about including closing costs in your loan.
Negotiate Through Your Real Estate Agent
The prospect of cutting out the middleman and negotiating the price of a house alone may be tempting – but think again. Stick to negotiating through a local real estate agent. Real estate professionals understand the ins and outs of the market.
First-time buyers may not be as familiar with the real estate process. It helps to have a professional there to guide and help you understand the entire undertaking.
As a potential home buyer, you should avoid reaching out to the seller directly. Your real estate agent can handle the conversations between you and the seller. They’ll know how to negotiate to get you the best price possible.
As we mentioned, negotiating is an expected aspect of the real estate process. However, it’s integral to avoid lowballing your offer or going higher than you’re able to afford. Consider going in 10%-20% lower than the asking price. Take a look at the market. Is it a seller’s or buyer’s market? These factors will play heavily into the negotiation process.
During negotiations, the seller may make a counteroffer if your initial offer isn’t accepted. There are various ways you can receive a counteroffer which is often influenced by the following:
- Higher sale price
- Changing the closing date
- Reject closing costs or contingencies
You can discuss this counteroffer with your real estate agent. They’ll know the best course of action to take moving forward.
Do you find that you attend multiple showings but can’t find the right home? Get assistance from a reliable Vancouver real estate agent. They’ll be able to help you search for potential homes, negotiate the asking price, and help to provide positive results. Contact our realtors at Leo Wilkes Real Estate and find your dream home today.