How – and What – To Negotiate on a Home For Sale
You’ve finally found the perfect home and you’ve submitted your offer. In an ideal world, the seller would accept it quickly, you’d close, and the home would be yours. However, it’s not always that easy. In fact, it’s likely the seller will submit a counter offer. This is when negotiations begin.
Even if you have a well-versed real estate agent by your side, the thought of negotiating can be daunting. It can be tricky to know how low or high of a price to counter back with, or what other points you should negotiate on.
However, when armed with the right information and a great real estate agent, you can successfully negotiate the best deal. So, how much can you negotiate on a house? Don’t worry, we’ve broken down everything you need to know below.
Market Conditions Matter
How much you can negotiate on a house depends on one main factor, which drives everything else: the state of your local real estate market.
Conditions in your local housing market will determine whether your offer leads to a timely and successful transaction where you end up with a new house, or whether you need to start searching for another property.
An experienced real estate agent should have a deep understanding of local market dynamics and be a master negotiator, that’s what real estate agents do every day. Hiring an agent to help you find a house and negotiate its purchase is well worth the cost, especially in a competitive market.
How much can you negotiate on a house in a buyer’s market?
In a buyer’s market, there are more homes listed for sale than there are homebuyers. Naturally, this gives buyers the upper-hand since there’s plenty of inventory and sellers are usually eager to get their home sold.
With a market that’s ripe for concessions from the seller, they may even consider offers as low as 10% under asking price. You can also try negotiating that the seller pays the closing costs, the closing date you want, and other contingencies.
Although a little back and forth is fine and sellers are likely to be eager, it’s still wise to avoid lowball offers. You could end up insulting the seller which could cause them to decline your offer altogether.
How much can you negotiate on a house in a seller’s market?
If your local market is a seller’s market – where there are more homebuyers than available housing inventory – you won’t have as much negotiating power. Any unreasonable or complicated offer that’s full of contingencies can result in a quick rejection from the seller. With plenty of homebuyers clamoring to purchase their home, you need to make your offer easy to understand and limit your requests when it comes to negotiating.
Of course, standard contingencies related to a home inspection, appraisal, and financing are acceptable. But be aware that you might be competing with buyers who won’t ask for them, and those buyers can act quickly.
In this type of market, you need to be decisive, ask for just the essentials, and be wary when negotiating. Your real estate agent will advise you on the best route to take and how much you should negotiate on the house, if at all.
How much can you negotiate on a house in a balanced market?
In a balanced market, there are similar numbers of sellers and buyers to balance out supply and demand. Don’t assume, however, that a balanced market is easy to negotiate. Home sellers take their time working through offers and often the process involves several rounds of negotiations. The problem with this market is the lack of urgency.
When neither party has an urgent need to buy or sell, there is no reason to quickly push to finalize a transaction. As a buyer, it’s still wise to start with an offer lower than asking price. You can also include your contingencies as other buyers will be doing the same.
This is a compliant market, and many negotiations result in a contract that’s split right down the middle between the buyer and the seller. But, if you are ready to buy, don’t drag your feet for too long. There could be other buyers ready that may make a clean offer with fewer contingencies and win the deal.
Things you can negotiate when purchasing a home
You can actually ask for the seller to pay closing costs as part of your counter offer when negotiating. Closing costs will vary with the value of the home, and can typically range from 2% – 5% of the purchase price. If it’s a buyer’s market and your seller wants to move quickly, you might be able to negotiate to have the seller pay some or all of the closing costs.
Flexible closing and move-in dates
Your closing date usually depends on how fast the title company can ensure a clear title, how soon the inspection can take place, when repairs can be finalized, how soon an appraiser can assess the home, and final mortgage approval. Industry standard is to allow 30 days for all of this to happen.
Of course, one or more of these processes could take more time. If you can be flexible as a buyer, roll with the process and allow for flexible closing and move-in dates, it might take pressure off the seller and make your counter offer more attractive.
Household items, fixtures, furnishings, and cosmetic updates
Most homebuyers don’t realize that it’s not off the table to ask for some of the seller’s personal items in the home, even if the seller initially excluded personal items.
If you really like how a certain piece of furniture fits a room – and you would plan to purchase similar furniture anyway – you could boost your price and ask that it be included. If you like a lamp, artwork or other decor, you could also ask for that. Anything is for sale at the right price.
You might also negotiate to include minor repairs or property work that would prevent you from using part of the house until repair or replacement is complete. For example, if landscaping is incomplete, or a sink needs the grout removed and replaced, you could ask that the seller take care of these tasks before closing.
Since these typically are nice-to-have items, and not must-haves, you can expect a seller to turn down your request or ask for concessions in addition to just a price increase in return. Always consider the type of market you’re in and if this will help or hurt your negotiations.
When you negotiate on a house, you will hear the same advice again and again: separate yourself from the outcome and keep your emotions out of the transaction. A real estate agent doesn’t get upset if a seller declines a negotiation point and presents a counter. And, hard as it is, neither should you.