How to negotiate an offer on a home is very individual to a home buyer. There are many variables to negotiating an offer on a home. Some of the variables are specific to the home buyer, some are specific to the actual home and some are specific to the real estate market at a given time. Understanding the contracts and the process is also an important consideration when tendering an offer on a home. Some things to consider:
- What are the general market conditions? Are home prices stable, rising or falling? Obviously if you are in a hot market, it is much harder to negotiate hard than in a falling market. A good buyer’s agent can provide you with good data about current market conditions.
- What is the fair market value of the home today? Anybody can list a home for any price they want, that does not mean its a fair price for a home buyer. Again, a good buyers agent can help you determine the fair market value of the home.
- Understanding what the current list price is compared to the fair market value of the home. Many buyers are tripped up, in this down market, because they don’t understand that some homes are priced under fair market value for a reason. Seller’s want a quick offer and the property will go for over asking price or even over asking price. Home buyer’s cant fathom that they have to offer over asking to get the home they want in this real estate market. If you want the home and the home is priced aggressively, it is probably not wise to start negotiating 10% below fair market value.
- Understanding the desirability of a home based upon price, location, appeal and the length that the home has been on the market. Good homes based on the above criteria sell quickly. Chances are if you have been in the market for awhile and are viewing a home that has just come on the market and you feel this is the right home, than other buyers are going to feel the same way.
- Your basic feeling of a home. One question I always ask buyers is are you going to regret losing this home over a few thousand dollars. Let’s face it if you have looked at 40 homes and you found the perfect home do you really want to lose it over hard negotiations? This is all very personal to you the buyer. I have had couples who seriously low ball a price on a home because they feel they have to try, meanwhile they are beat out by a better offer. All the while the couple would have paid asking price for the house.
- Something that is hard to find out is the motivation of the seller. Very often you don’t know what a sellers motivation is to selling a home. If it is something you can find out in can give you some very valuable insight.
- Seller psychology plays an important part in negotiating a price on a home. Understanding how a seller will react to a particular offer and how they may proceed in the negotiations can give you valuable insight.
Following are the steps for negotiating an offer on a home after you have considered the above points.
Step 1- Make sure you have a good pre-approval letter. If you are putting very little money down it is hard to compete with other offers that are putting a significant amount of money down or paying all cash. You don’t want to get hung up on a weak pre-approval.
Step 2- Determine fair market value of the home you are interested in putting in an offer.
Step 3- Put a negotiating plan in place based upon the above considerations.
Step 4- keep emotion out of the negotiating and stick to your negotiating plan so as not to be disappointed later on.
One last point for buyers to remember is that an offer is not legal and binding until it is fully executed. Meaning, the offer is signed by both buyer and seller. Just because you have submitted an offer does not mean that you have suspended showing activity or prevented other offers from being tendered. I cannot tell you how many times a buyer (can happen to sellers to) can be disappointed because they have dragged negotiations out over days, sometimes weeks, over a small point or small amount of money, only to have their offer beaten out by a better offer, causing them to lose a home.
Once you start negotiating it is important to negotiate in good faith and wrap up the negotiations quickly so you may put your dream home under agreement!
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This post, How do I Negotiate an Offer on a Home, was provided by Kevin Vitali of EXIT Group One Real Estate In Tewksbury MA. You can contact Kevin by email at kevin@kevinvitali.com or call 978-360-0422.
I pride myself in the quality of my work while helping buyers and sellers make dreams come true.
Real Estate Services in the northeast Massachusetts, around the Merrimack Valley, Southern New Hampshire including the towns of Andover, Billerica, Boxford, Chelmsford, Dracut, Georgetown, Groveland, Haverhill, Lawrence, Lowell, Merrimac, North Andover, Newbury, Newburyport, North Reading, Rowley, Tewksbury, Tyngsboro, Westford, Wilmington, West Newbury
