It’s time to make an offer on a home, but you’re not a professional negotiator. That’s OK. You’ll need to brush up on your skills though. Negotiation is one of the most important aspects of buying a home. Your ability to negotiate will often determine the price you pay for a home, and it could save or cost your thousands of dollars, depending on which way the negotiations go.
Always, always, always get a pre-approval. This is one of the biggest mistakes that new home buyers make. They walk onto a property without any clue how of how they’re going to pay for it. It’s frustrating for the seller, all of the agents involved, and the buyer when he can’t sign a contract for the house he wants.
Pre-approval means that you’ve already filled out an application, gone through the process of a credit check, and the bank has approved you for a loan. You just need final approval based on the actual house you want to buy.
Take a Tour
Take a tour of the home you want to make an offer on. You’ll have to go to a few open houses, take lots of private tours but, when you’re ready, take a final walkthrough. Inspect everything. Then, tell the seller why you love their home. This establishes rapport. It also shows that you’re genuinely interested in the home.
Make an offer that is anywhere between 90 and 97 percent of the asking price, based on any repairs that might need to be done to the home. If extensive repairs or concessions need to be made, offer less. Don’t lowball the seller, however, if the home is in decent shape.
Making Your Initial Offer
Your initial offer is an important one. It sets the tone for future negotiations. Ideally, you’ll offer somewhere between 90 and 97 percent of the asking price. This allows for some room for negotiation. If you start too high, you’ll end up hitting the seller’s asking price too soon. You’ll also pay more for the house than you need to. Bid too low, and you risk offending the seller and losing the home altogether.
Getting A Home Inspection
Make sure you pay for a home inspection. Most homeowners don’t do this, but it’s one of the most important steps in the negotiation process. It gives you more wiggle room in the price if the inspector finds something wrong with the house.
For example, let’s say your initial bid on a $100,000 home is $97,000. The home inspection reveals that there’s a problem with the water heater and the furnace is about to die. That’s not good. Furnaces can cost upwards of $4,000 to $10,000 or even more. Hot water heaters aren’t cheap either.
Here’s where you can approach the seller and ask for a concession on the price of the home. You’ll need a new water heater immediately, and the furnace is about to die, so you can ask for money off to buy a new one.
Get An Appraisal
Get an official appraisal of the home. Some homeowners are irrationally attached to their home for sentimental reasons, even when they’re selling. They’ll assign a higher value than what the market can bear. An appraisal will ferret out the true value of the home so you don’t pay more than what the house is actually worth.
Get Your Agent To Negotiate
Spend some time learning how to find a realtor that knows how to negotiate for you. After all, this is what your realtor is for – not just signing the paperwork. A good realtor will be able to assess the seller’s willingness to sell, and will also understand how to negotiate the deal.
Most realtors are trained in negotiation, but that doesn’t mean that all real estate professionals are equally adept at it. Interview 10 agents, and ask about their previous sales. This will be a good indicator of what they can do for you.
Dennis Ellis has a long career in the real estate market. After years of working with homebuyers, he enjoys writing about navigating buying and selling property for the everyday person.