After years of bidding wars and fast-going properties, house hunters are finally enjoying a buyers market. But that doesn’t mean finding and negotiating the best deal is any easier.
While there is still a glut of inventory and desperate sellers in most parts of the country, you’ll still need to do a fair amount of homework before you make an offer. Knowing how much you can afford, when to walk away and maintaining a poker face at all times are some of the effective negotiating tactics you can employ when buying a home.
“It’s still a great time in most every area of the country to negotiate,” says Amy Bohutinsky, a spokeswoman for Zillow.com . “There’s more supply than demand, which puts buyers in the driver’s seat.” A few years ago, buyers had to make a decision on the spot and in most cases pay top dollar for a home. That’s no longer the case. According to Zillow, home buyers across the country can negotiate an average of 3% off the list price. In some cities you can negotiate as much as 8%, while in others sellers budge by as little as 1%.
Do Your Homework
The most important and effective element in house negotiations actually happens before you make an offer. You find a house you want to buy; you’ve cased the neighborhood and, if you have children, checked out the schools. Now it’s time to come up with the price you’re willing to pay. Finding out how long the house has been on the market, the selling prices of similar houses in the neighborhood and the motivation of the seller can go a long way in negotiating a lower price. Compiling a lot of comparables that are selling for less than the one you want undermines the seller’s asking price, says Ed Brodow, author of “Negotiation Boot Camp.”
Arm yourself with as much information going into the sale talks as possible. Web sites like Zillow.com and Trulia.com can tell you how long a house has been on the market, how much other houses in the neighborhood have recently sold for, and even how many times the seller has lowered the asking price. You can even learn if the home has been owned for a long time or was recently bought and sold. A realtor with knowledge of the local market can also provide information about the home and other similar houses in the neighborhood, but make sure your realtor works for you and not the seller. Otherwise, it’s their job to get the most money in the sale.
If you come into the negotiations armed with knowledge and facts to back your offer, it may be easier for the seller to agree to a lower price than if you just simply made a low-ball offer with no justification behind it, says Brodow.
Know When to Hold ‘Em, Know When To Fold ‘Em
Getting prequalified for a mortgage is not that easy these days, but it can strengthen your hand come negotiation time. In many cases, homes have languished on the market for months and even years, so buyers want to sell quickly and may be willing to take a lower price if they know you are serious and can get a mortgage. Same goes for your down payment. Long gone are the days where you could put no money down or less than 20%. If you can show you’re able to put 20% or more down, the process will be quicker, which could motivate the seller to drop the price.
Before you start negotiating the sale price, come up with the amount you think the house is worth and how much money you can afford to pay — and stick with that price. The worst thing you can do is fall so helplessly in love with a home that you’re willing to pay more than it’s worth. Remember there is a slew of houses on the market, so if the buyer won’t budge it’s time to move on.
“Once you want it so badly that you’re willing to pay anything you’re giving up your negotiating power,” said Brodow. “You always have to be willing to walk away from the house.”
Keep a Poker Face
Just like the seller doesn’t want to give away why he or she is selling the house, you shouldn’t give away how much you can and are willing to pay for the home. If the seller senses you can afford more than you are offering, he or she may be less willing to give in on price. Go into the negotiating process as unassuming as possible, says Steven Cohen, president of The Negotiation Skills Company. Don’t go to the house in a Mercedes, wear a designer suit or a ton of bling that screams money.
“You want to reveal as little information about your own finances as possible,” says Cohen. “Don’t do anything that looks fancy and don’t start talking about putting the wine collection over there.”
You also don’t want to lay out your cards and let the seller know the maximum amount you are willing to spend, says Zillow’s Bohutinsky. The good news is that buyers have a lot of homes from which to pick and choose. If one particular home is priced too high, you can easily move on to the next.
If all of these negotiating tactics fail to get you a lower price, there are other things you can get the seller to throw in, including closing costs, repairs to the home and even realtor fees. While it may not be actual money off the list price, you’re still saving money on the purchase.