Successful artists spend years honing their craft. They combine their natural talent with meticulously acquired knowledge, diligently practiced skills, a thorough understanding of their audience, and a lot of discipline. Negotiation is often described as an art, and it’s a fair comparison, as many of the same qualities are required. If you want to get the best price for a home, you can’t just walk in blind and blunder through the process. You need accurate information and an understanding of how to use it. That’s why learning about how to negotiate a home price is vital.
How to Negotiate a Home Price Effectively
When it comes to home prices, the rules regarding supply and demand apply, and the housing market has seen a persistent national trend toward tight inventories in recent years. According to The Close, list prices year-over-year in April 2019 were up nearly 7 percent. Clearly, knowing how to negotiate a home price effectively is important if you don’t want to lose out on your dream home. How do you do it?
Understand the Role of the Housing Market
Housing markets can vary widely by location, so it’s crucial that homebuyers take a close look at their particular market before putting in an offer. As Realtor.com explains, a market where inventory is low, competition is high, and sales are brisk is a seller’s market, and sellers are unlikely to give buyers much wiggle room on the home price. On the other hand, a market with high inventory is known as a buyer’s market. Here, sellers tend to be more open to negotiation because buyers and offers are harder to come by.
Discover the Seller’s Situation
Learning what you can about the seller’s situation allows you to tailor your offer to maximize its appeal, according to U.S. News and World Report. Are you dealing with a motivated seller who is eager to close quickly? Would the seller appreciate a chance to lease the home for a few months after closing because they are still searching for their next home? Are they unlikely to agree to a lower sales price because they have little equity and need a high price to satisfy their lender? Knowing the seller’s priorities helps you negotiate more effectively.
Make a Good Offer
How much should you offer for a home? Is the asking price fair? Is it always a good idea to go lower than the asking price in your initial offer? While your real estate agent should be able to offer guidance, a little research can help you determine the likely value of the property in the current market, and that’s what your offer should really be based on. Having the facts at hand to share with the seller can also add some persuasive weight to your offer. The Home Buying Institute suggests taking the following steps:
- Review comparable sales, or recent sales of similar homes in the same area, to determine the fair market value of the property.
- Judge how the house you hope to buy stacks up to the comparable sales. Is it fairly similar? Does it have features that increase its value? Are their drawbacks that lower its value?
- Use the comparable sales as a starting point for your offer. Add to the amount for features that would boost its value. Subtract for any that would negatively impact its value.
- Make your offer. Include the comparable sales to show the seller where your numbers are coming from.
- Prepare for the seller’s response. If they accept your offer, you’re good to go. If they reject the offer, you’ll have to decide whether you want to make a higher offer or walk away. If they reply with a counterproposal, then it’s time to negotiate.
Look Beyond the Selling Price
As you’re negotiating, don’t get too fixated on the sales price. After all, there are several ways that buyers and sellers can trade value during real estate transactions. As Forbes points out, you may be able to accept a slightly higher price if you win certain concessions, like having the seller pay all or some of the closing costs or pay for points. While the buyer traditionally pays for these items, the seller can pick up the tab as part of the deal. Alternately, you could have the seller pay the premium for a one-year home warranty or request that certain furnishings or upgrades be included in the sale. Flexibility on the closing and possession dates can also be a negotiating point.
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