Home buying negotiation tips – How to avoid over paying
Know local sales prices – Ask your agent to check comparable home sales or do your own research to measure your offer against current price tags. The listing agent may have already put together a comparative market analysis (CMA) on the property. This written report reviews prices of comparable homes that are currently on the market, that are currently under contract, and that have sold in the past several months.
Know the condition of the house and neighborhood – Before making an offer, you should be fairly confident that you are aware of any major problem areas in the house. You should have inspected the house to the best of your ability, questioned the sales agent and the owner about the structural soundness and condition of the basic systems, and reviewed the seller's disclosures. (Both sellers and real estate sales professionals can be held liable if they fail to tell the buyer of any defects they know of in the house.) You should also have a clear idea of what it will cost to fix any major problems of which you are aware.
Circumstances surrounding the sale – In deciding how much to offer, try to determine how anxious the owners are to sell. For example, if the sellers already have a contract on another house that is dependent on the sale of this house, you may be in a good negotiating position. It will be to your advantage to know how long the house has been on the market, whether the asking price has already been reduced, and what the fair market value of the home is based on its condition. Also, how much did the seller pay for the house, and, how long ago? And how much equity does the seller have in the property?
Know what you can afford – You should have obtained a Pre-qualification before you began house hunting and your Pre-qualification letter will indicate the maximum purchase price you are approved for. You should also take the time to estimate what your monthly housing costs would be should you get the house at the price you plan to offer. This requires knowing the annual cost of utilities, homeowner’s insurance, condominium fee (if applicable), and any special assessments. Make sure that the amount of your down payment is adequate and that you’ll have enough to cover the closing costs as well. Don’t be tempted to offer more than you are sure you can afford.
Financing terms – Remember that there are two aspects to an offer – the price and the financing terms. The terms may actually be more important to you than the price. For example, if the seller is willing to offer attractive financing terms, including paying for the title search, and other settlement costs, you may be more willing to accept the price.
The real estate sales professional will be glad to advise you as to how much you should offer. However, the decision is yours alone. (Remember, the agent typically acts on behalf of the seller.) Most prospective buyers do not offer the full asking price, at least initially. For example, you may want to offer less than the asking price if you feel that the condition of the house warrants a lower price.
Don’t get carried away in a multiple-offer situation – Stick to your market research and negotiate with a clear head. You may win the bid if you offer better terms, and still may get a lower price.
Control your emotions – No matter how much you want the house, you’ll probably feel worse knowing you overpaid.
Don’t be afraid to walk away – Unless it’s a unique property, you’ll probably find another house you like just as much.