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Everybody wants the best deal possible, especially when it comes to a major purchase like buying a new home. Whether you’re working within a strict budget or just don’t want to overpay, it helps to have a few negotiation tactics up your sleeve when home buying so you don’t pay more than you should.
That being said, in a hot market like the one we’re in now, buyers don’t have a lot of leverage or negotiating power. Go too far with negotiating, and the seller might simply choose a more competitive offer.
If you want to negotiate the best price, upgrades (such as a new roof), or concessions when buying a house, take it from the experts. As part of our Ask Orchard series, we talked to our in-house Home Advisors about the best negotiation tactics and tips. Here’s what they said:
1. Have a pre-approval from your loan officer in hand
When you go house hunting, it’s important to know just how much money you have to make an offer with. If you get a mortgage pre-approval, you’ll have just that.
Pre-approval is when a lender looks at your income, assets, credit, and other financial factors to figure out what loans you qualify for, and for how much. Have that pre-approval ready before you make an offer on a home.
“There are several lenders out there who offer something called a fully underwritten pre-approval, where they send your file through underwriting before they issue the pre-approval,” says Rachel Bennett, an experienced Home Advisor and team manager in the Austin, TX area. “It’s a much stronger approval and shows that you are a competitive buyer.”
Sellers will want to know that you have the funds, or access to the funds, to buy their home. They’ll be more willing to negotiate with you in good faith if they know they’re not wasting their time with you.
2. Consider the market and local trends
Context is everything. In order to understand whether an offer or ask is realistic, take into account the market and neighborhood in which you want to buy.
“It’s really important to make sure that you’re looking statistically at what’s selling in the neighborhood so that you’re sure your offer is competitive and relevant,” says Bennett.
Bennett advises taking a look at recent sales in the neighborhood, or talking with your agent about what the list price to sales price ratio is for the homes that have sold recently.
“If homes are selling for $50-60,000 over asking price… then you’ll know you don’t have a chance coming in at $10,000 over the ask,” she says.
3. Don’t lowball — especially on the first weekend
There’s a time and a place for a “lowball offer” — meaning an offer well below asking price. In a seller’s market, where homes are going off the market in just a few days in some places, you’re not likely to win or even be taken seriously with a lowball offer. And keep in mind that a lowball offer is unlikely to ever get accepted when a home first goes on the market.
“I would always put your best foot forward when submitting the offer, especially if it’s the first weekend on the market,” says Erin Konopka, a Home Advisor in Denver, CO. “This is not the time to be low-balling sellers and trying to get a ‘deal’ in this market.”
Unless a seller is in a dire position, they’ll probably want to wait and see if they can get the asking price — or more — for their home. A lowball offer out the gate is likely to be rejected.
4. Respond quickly to counter-offers
When negotiating, you need to be willing to play ball, and fast. If a seller entertains your offer or request and responds with a counter-offer of their own, don’t leave them hanging.
“If you receive a counter-offer from the seller, I highly advise that [you] respond in a timely manner,” says Konopka. “The seller can pull that counter-offer at any time and we don’t want to miss out on your dream home.”
While you mull over the seller’s counter-offer, someone else can swoop in and offer them a better deal, leaving you with nothing. Engage with the seller and get them to close the deal, if it works for you.
5. Don’t take it personally
This last tip, in Bennett’s eyes, is maybe “the hardest of all”: Don’t take things personally if they don’t work out.
“It can be really easy to have knee-jerk reactions or get emotional when things aren’t panning out exactly how you wanted them to,” says Bennett. “Make sure that you stay calm, you stay level-headed, and you view this as the investment and the transaction that it is, as you are in the middle of those negotiations.”
A poor reaction to a counter-offer, or to a seller going with another offer, can prevent that seller from coming back to you if for some reason the other buyer pulls out or things fall through. And bringing negativity and low expectations into the next negotiation can sabotage things before they even begin. Be sure to stay positive, trust the process, and keep going. You’ll find the right home at the right price if you can keep that in mind.