You don’t need to be a steely eyed negotiator to get a good deal on a house, but it helps if you do your homework and make a solid offer based on market conditions. Here are a few tips to ease the process.
Preapproval. A seller is more inclined to deal with a buyer who is preapproved for a mortgage, which lessens the risk of a deal falling through because the buyer couldn’t qualify for a mortgage. Don’t confuse preapproved, which is a more in-depth analysis of your financial situation, with prequalified, which is more cursory. If a seller has two offers of relatively equal worth, with one buyer preapproved and the other not, the preapproved buyer’s offer will likely prevail.
Crunch the numbers. Know what the house you want is worth. Ask your real estate agent to do a Comparative Market Analysis or CMA, which tells you what similar homes are selling for nearby. The analysis also provides crucial information such as how many days it took the homes to sell and if sellers had to reduce their prices. The ratio of list price to actual selling price will be a good guide to figuring out current market value.
How strong is the market? Bear in mind the market conditions when it comes to negotiating. If homes are selling in a month or less, make your first offer your best because you probably won’t have the opportunity to negotiate. Another offer will come and the house will be snapped up. It’s a painful lesson to lose a house this way.
If houses are taking more than a month to sell, there’s room for negotiating. Having buyers traipse through their homes for a long period becomes a grind to sellers, so they’ll be ready for relief. Also, if the seller is in some sort of distress, such as a job transfer or job loss, a buyer has more power in the negotiations. That said, it’s important to always be respectful when negotiating.
Under normal circumstances, it’s customary to make a solid offer below the list price, with back-and-forth negotiations from there. The counter offers will get tighter and tighter as you move forward in the negotiation.
An offer drastically below the list price is risky. It could even insult the seller. Remember you have other negotiating tools, such as closing dates, closing costs and credits on repairs. Also consider asking for all appliances to be included in the sale. In a hot market, consider offering full asking price, but then ask for concessions that put money back in your pocket.
Be patient. Make your offer or counter offer and wait for a response. Don’t get anxious if an answer doesn’t come right away. Let them make the next move or risk the strength of your position.