Have you found that home you would love to buy? If so, the next step is to write an offer. These home price negotiation strategies can help you reach an agreement with the seller in this step by step article.
What Comprises a Purchase Offer?
A purchase offer is a written contract in which you sign and submit to the seller. It is accompanied by an earnest money deposit. The written purchase offer indicates the amount you are willing to pay the seller for their property. If you are working with a Real Estate Agent, the Agent will typically provide a standard purchase offer form which you sign and then hand over to the seller to sign.
Written offer forms the basis of a legal contract with the seller, so make sure to be thorough. There are some important details you should be sure to talk through with your agent and make sure are accurately included on your purchase offer, such as:
· The amount you are offering for the home and how you will pay the seller
· Contingencies to protect you if your financing falls through or if the inspection finds major problems with the home (inspection happens after you make an offer)
· Conveyances, such as whether the home will come with window treatments or not
· An expiration date, by which the seller must respond before your offer expires
· Concessions, such as any closing costs or other costs which you would like the seller to pay
· The amount of earnest money you are offering
· The size of your down payment
· The “earnest money” deposit can range from about $1000 to 5% of the value of the home.Your earnest money is typically put towards your closing costs; however, if you enter into a contract with the seller and then breach that contract, you could stand to lose this money.
Once you make an offer, sign it and submit it to the seller along with your earnest money deposit which is done through your agent. The seller has the right to sign your offer, make a counteroffer or reject your offer outright.
If the seller accepts your purchase offer, the offer becomes a contract, and you are on your way to owning a home. If the seller counters your offer, you may choose to reject his or her offer or walk away.
Why Is Home Price Negotiation So Important?
It’s not often that a seller isn’t willing to negotiate. Unless there are competing offers, you’re going to buy lower than the listing price. The average discount varies by market and condition but usually it is below the listing price. How do you get there?
Try following these home price negotiation techniques.
Use your initial offer to gather information about the seller’s reason for selling.
Are the sellers trying to downsize? Does the seller need to make a quick move due to a sudden financial situation? You may not get direct answers to your questions about the seller’s motivation for moving, especially if their agent has urged them not to give this information, but you might be able to get an idea into the seller’s willingness to negotiate by making an offer and seeing what the seller comes back with. If the seller refuses to come down off of his listing price, this may indicate that they aren’t in any hurry to move or they may not have much equity in the home. On the other hand, if they respond immediately with a counter-offer that is higher than what you offered but lower than the listing price, they may have more lead way in their price.
Be realistic with your offer, and don’t lowball. This shows you are serious.
Nothing is accomplished by going in with a low-ball offer, it usually offends sellers and makes them not want to negotiate. Sellers love their homes, and offering a lot less than what a property is worth won’t help you make things easier. The only time to lowball is a foreclosure or a listing that has been on the market for a very long time! Do your research and if the research shows that the property is fairly priced, offer a bit less than the listing price. If your offer does not elicit a meaningful counter-offer from the seller, your offer failed. Make sure the seller knows that you are a serious buyer. Remember a serious buyer has preapproval for financing. Once the seller knows that you are serious, that starts the negotiation process.
Be ready to walk away.
If you can’t put together a deal on the first property you like, don’t worry. There will be many more homes for sale. It is VERY common to end up finding a home a week later that you like even more than the first. Not taking that first home might be a blessing in disguise. Just a piece of advice for you is to not make an offer without seeing other homes first.
Stick to your guns.
By the time you’re ready to make an offer, you should have done your homework. You should know what homes in the area are worth. And you should know how much home you can afford. Be serious about sticking to your guns! It is easy to get carried away by emotion and allow the seller to get you into a price that is above what you’ve decided. If you have chosen your agent well, this shouldn’t happen. Unfortunately, bad agents have been known to urge clients to accept counter-offers that were not in the best interest of the client. Be firm!
Set deadlines for the expiration of your offer.
You and your agent need to make sellers BELIEVE that if they want to sell their home to you, they’re the ones who need to not delay. You can tell them that there are other homes on your list that you would be happy to have as well. When you make your offer, there is a space for putting a time limit on it. Make this a very short period, for example, within 24-48 hours. If you are making an offer in the evening, make the expiration early the next afternoon. Why you ask? Having a long period just invites a competing offer! In which you do not want. Don’t give the seller’s agent a chance to find another buyer.
Be creative with your offer if the owner is stuck on a price.
If the seller seems emotionally tied to a certain price on their home which happens alot, instead of asking the seller to lower their asking price, ask for certain concessions, such as repairs, or that the owner contribute to the closing costs. If you never ask you will never know!
How can you negotiate a home price after inspection?
While it’s not uncommon to believe the deal is sealed at the signing, in many cases the negotiations begin afterward. If there has been a home inspection, you can ask the sellers for a cash-back credit at the close of escrow, which can help you complete the repair yourself. You can also ask the seller for a credit to fix certain issues in the interest of offsetting closing costs. Be sure to look relaxed when walking the property at the inspection — the last thing you want is to mention a gut renovation you’d like only to have the sellers refuse to make needed repairs.
I hope all of this information helps you in your future home buying experience! Good luck and when you need an experienced agent to help you please call me, Matthew Stebbins of My House realty.
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