This article was prompted by a recent Trulia post, where a home buyer was asking about how to negotiate an offer on a home. In this article we will discuss some considerations to go into negotiating an offer as well as 6 tips for negotiating an offer on a home that you want. The question was:
What percentage of asking price should be made for the first offer on a house?
This is a question many home buyers will ask. Unfortunately, there is no pat answer there are so many variables in structuring a good offer. If you go into negotiating an offer with that mindset you will probably lead to a lot of disappointment.
Negotiating an Offer- The Negotiating Plan
Whenever I submit an offer for a buyer client, we discuss a negotiating plan. That plan will be highly individualized for each buyer. There are some questions to ask yourself.
- What is the home worth in today’s market? If you don’t understand the value of a home in the market today, you will not be making good decisions when it comes to negotiating.
- How well does the house suit your needs? Sometimes a house is more desirable than others to you. It may be easier for you to walk away from one house than another when it comes to negotiating.
- How desirable is the home to the general buying public? What makes a house desirable? Location condition and the price. A home in great shape at the end of a cul-de-sac priced right at the market will go quickly and for asking or over. As opposed to a house that is similar but needs cosmetics and sits on a busy road. The second house will definitely have less of a buying pool. Where the first house is just about what every buyer wants.
- How long has the house been on the market? You can typically negotiate harder on homes that have been sitting on the market rather than one that has just come on the market.
- How willing are you to lose the house over tough negotiating? Ask yourself, in 3 months how will you feel about losing this house over $3k or $5k or $10k. This is especially important when you may be in a multiple-offer situation.
I can’t tell you how many times I have worked with a buyer and they have lost a house over a few thousand dollars. Is it worth it? A good buyer’s agent will help you sort through these questions and help you put a realistic negotiating plan in place. Don’t forget that plan can be different for each individual house.
The 6 Tips for Negotiating an Offer on a Home
- Understand the true fair market value of the home you are interested in purchasing. Realize there are homes that are on the market overpriced, priced right at market and some are even underpriced. To offer a flat 10% off will get you in trouble. If the home is 20% overpriced you will overpay for a house, if a home is underpriced and you offer 10% off you will lose the property. At the end of the day, the house will generally sell for fair market value.
- Understand the money. It’s easy to get a pre-approval letter and run around and look at homes. But I run into many buyers who are “pre-approved” but they don’t understand the money involved. Find a mortgage officer that takes the time to educate you and give you hard numbers to sink your teeth into. It is much easier to make decisions based on facts rather than guessing. You can make an offer with confidence that the numbers work for you.
- Getting caught up in the game. It is not about winning or losing. Too often buyers get caught up in the fact that they need to steal a property. Doesn’t happen very often. You goal is to buy a home for yourself and your family that will suit your needs for years to come. At the end of the day if you live in your house for 10 or 15 years or more, a few thousand dollars is going to make a bit of difference one way or another.
- Wrap up negotiations quickly. Remember, all it takes is one interested buyer to get a house sold. I have worked with hundreds of buyers and over the years I have had buyers negotiate hard dragging it out for weeks, thinking they have it all under control, then a buyer comes along and offers a higher price and steasl the property right under them. Then the buyers come back and say, that’s not fair I would have paid full price. It happens more often then you think!
- Negotiate in good faith. Sellers have feeling to. As emotional and worked up as you are, so is the seller. Mean what you say, say what you mean and don’t play games. Over the years I have seen deals fall apart over hurt feelings that should have gone together. I have story after story of sellers accepting similar or lessor offers because they have gotten sick of the buyer and hard ball negotiations.
- Work with a good buyers agent. A good buyer’s agent can pull this all together for you. They will help you understand the true market value of a home. They will help you structure a negotiating plan that will suit your needs, based on the questions above. A desirable home that is new to the market and priced well will go very close to asking and could end up in a multiple-offer situation.
At the end of the day good negotiations start with good data and knowledge. A buyer’s agent can help you sort through the data and use their experience to help you negotiate the best possible offer on the home you want.
___________________________________________________________________
This article, 6 Tips for Negotiating an Offer, has been written by Kevin Vitali of EXIT Realty. Kevin has helped numerous of home buyers achieve their housing goals through out Northeastern Massachusetts over the past 12 years. Kevin is knowledgeable about the marketplace as well as negotiating. His approach is one of educating and counseling his clients, not “selling” his clients. If you are thinking of buying a home give Kevin a call at 978-360-0422
