How to Negotiate a House Price When Buying: Home Price Guide

by Richard Morrison
July 21, 2020
Buyers
0

Buying a home is likely the biggest purchase you’ll ever make. With so much on the line, you’ll want to negotiate the best possible price. But where do you start when haggling over hundreds of thousands of dollars?

While every real estate transaction is different, these proven strategies can help you negotiate like a pro when buying a house.

Key Takeaway: Successful house price negotiation requires preparation, market knowledge, and the guidance of a skilled real estate agent. Approach it as a conversation rather than a confrontation, and be ready to walk away if you and the seller can’t find common ground.

Table of Contents show

Get Your Finances in Order

Before you can negotiate effectively, you need to know exactly what you can afford. Work with a lender to get preapproved for a mortgage. This involves an in-depth look at your income, assets, debts, and credit score.

Preapproval shows sellers you’re a serious buyer who has already secured financing. You’ll have more leverage at the negotiating table than buyers who are only prequalified.

Understand the Market Conditions

Whether it’s a hot seller’s market or a cooler buyer’s market will impact how much room you have to negotiate. In a seller’s market with low inventory and lots of competition, you may have little negotiating power.

In a buyer’s market with high inventory and low demand, you can try for a lower price or seller concessions like closing cost assistance. Connect with a local real estate agent to assess conditions in your area.

Research Comparable Sales

Look at what similar homes in the neighborhood have sold for recently—known as “comps.” This gives you a benchmark for what to offer. You can find comps through sites like Zillow and Realtor.com or by working with an agent.

Make a Smart Initial Offer

Have your agent submit your first offer in writing with as much detail as possible. Avoid lowball offers that could offend the seller. Offer 10% below listing price or start higher if it’s a seller’s market.

Get an Inspection

Don’t waive the inspection contingency just to make your offer more appealing. The inspection findings give you insight into the home’s condition and leverage to renegotiate if issues are found.

Ask About Seller Motivation

If the sellers are relocating for a new job or divorcing, they may be motivated to close quickly. This gives you more negotiating power. Understand their timeline and constraints.

Request Closing Costs

In addition to the purchase price, cover closing costs like appraisal and origination fees. It never hurts to ask the seller to cover some of these, often 3-5% of the home price.

Act Fast

Respond quickly if the seller makes a counteroffer. Hesitation could mean losing out to another eager buyer. But don’t get emotional and overpay. Have your agent keep negotiations moving.

Wait for the Appraisal

The bank won’t lend more than the home appraises for. If it comes in low, this gives you grounds to renegotiate. Don’t waive the appraisal contingency.

Be Ready to Walk Away

As difficult as it is, be prepared to walk away if you and the seller can’t agree on a fair price. Don’t overpay for a home you’re not 100% excited about. There will be other great options.

How Much Can You Negotiate on a House?

There’s no magic percentage for how much below listing price you should offer when buying a property. The seller’s motivation, market conditions, and comparable sales will factor into how much wiggle room you have.

Here are some guidelines on typical negotiation ranges:

Buyer’s market: Offer 5-10% below listing price on your first offer if the home needs minimal repairs. Offer 10-15% below if improvements are needed.
Balanced market: Try 3-5% below listing to start. Increase offer if there are multiple competing bids.
Seller’s market: Offer at or slightly above listing price. Be ready to compete with other buyers and limit negotiations.
New construction: Look for builder incentives since the home is untested. Offer 2-5% under list price.
Renovation needed: Offer up to 20% below listing if electrical, roof, or plumbing work is required and quote repair estimates.
On market 30+ days: Offer 10-15% below list since the home is stale. Ask sellers to cover closing costs.

These ranges assume the list price is in line with comparable sales. If the home is overpriced, offer accordingly lower.

Tips for Making a Competitive Offer

Beyond just the dollar amount, you can make your offer more appealing to sellers:

Waive contingencies like the appraisal and inspection if you’re comfortable doing so after touring the home. This signals you’re ready to move quickly.
Write a personal letter to the seller emphasizing how much you love the home. Tug at their emotions.
Use a escalation clause stating you’ll beat any higher offer by a certain amount, up to a capped limit.
Offer a high earnest money deposit, showing you are serious and financially capable.
Keep the closing timeline short. Offer to close in 30 days or fewer.
Pay in cash if possible. No financing means less can fall through.
Be flexible on move-in date to accommodate the seller’s needs.

Know When to Step Away

As disappointing as it can be, sometimes you have to walk away from a home you wanted if the seller won’t compromise on price.

Be ready to move on if:

The seller rejects multiple reasonable offers from you without countering.
The home isn’t worth the seller’s high asking price.
The inspection reveals too many deal-breaking problems.
The appraisal comes back much lower than the contract price.

Don’t get too attached to any one property when buying a property. Patience and persistence will pay off with the right deal.

Work With a Skilled Agent

An experienced real estate agent is essential for navigating the negotiation process and helping you submit competitive offers. Interview several agents and ask about their experience representing buyers.

Look for an agent who:

Has intimate knowledge of the local market and average sales prices.
Can access the MLS to analyze comparable active and sold listings.
Has strong relationships with other agents to get insight on a seller’s motivation.
Will fight to get you the best deal without compromising your interests.
Will guide you objectively without getting caught up in emotions.
Has ample time for you and won’t be distracted by multiple clients.

An agent with in-depth neighborhood expertise can prove invaluable when it comes time to negotiate the all-important purchase price for your dream home.

The Bottom Line

With the right preparation and guidance, you can negotiate your way to a great price when buying a home. Know your budget, research the market, make competitive offers, and be ready to walk away if you and the seller can’t find common ground.

Patience and maintaining objectivity are key. With an experienced agent in your corner, you can come away with the keys to your perfect home at a price that fits your lifestyle. Happy house hunting!

FAQs:

Q: What is negotiating a home price?

A: Negotiating a home price refers to the process of discussing and reaching an agreement on the price of a house or property between the buyer and the seller.

Q: Why is it important to negotiate a home price?

A: It is important to negotiate a home price because it allows the buyer to potentially get the best possible deal and save money. It also helps to ensure that the buyer is paying a fair price for the property.

Q: How can I make an offer on a house?

A: To make an offer on a house, you can submit a written offer to the seller or their real estate agent. The offer should include the proposed purchase price, any contingencies or conditions, and a deadline for the seller to respond.

Q: What factors should I consider when negotiating a house price?

A: When negotiating a property price, you should consider factors such as the current real estate market conditions, the condition of the property, comparable sales in the area, and your own budget and financial situation.

Q: What is a counter offer?

A: A counter offer is a response from the seller to the buyer’s initial offer. It typically includes a different price or change in terms from the buyer’s offer and opens the door for further negotiation.

Q: Should I get a home inspection before negotiating the price?

A: It is highly recommended to get a home inspection before negotiating the price. A home inspection can reveal any potential issues or defects with the property that may affect its value, giving you leverage in the negotiation process.

Q: How can I negotiate the best price when buying a home?

A: To negotiate the best price when buying a property, you should do thorough research on the local real estate market, work with a knowledgeable buyer’s agent, be prepared to walk away if the terms are not favorable, and be willing to compromise on non-price factors.

Q: What is an offer to purchase?

A: An offer to purchase, also known as a purchase offer or a sales contract, is a legally binding document that outlines the terms and conditions of the buyer’s offer to buy a property.

Q: What are some tips for negotiating a price?

A: Some tips for bargaining a house price include doing your research, being prepared to negotiate, starting with a reasonable offer, knowing your budget limits, and being open to compromise.

Q: Can I bargain the price when buying a property?

A: Yes, you can bargain the price when buying a property. In fact, negotiation is a common part of the home buying process to ensure that both parties reach a mutually beneficial agreement.

Conclusion

Buying a house can be a daunting process, especially when it comes to bargaining the price. However, with the right knowledge and strategies, home buyers can ensure they get the best price for their dream home. It’s important to recognize that the price of a home is not the only factor to consider during negotiations. Beyond the price, there may be other terms and conditions that can be bargained to benefit the buyer.

To successfully bargain when buying a property, it is essential to have a good buyer’s agent who understands the local market and knows how to negotiate. They can guide you through the entire process and help you make an informed decision. It is also important to stay informed about the property’s market value, as well as recent sales in the area. This knowledge will give you a better understanding of the home’s price and increase your bargaining power.

Additionally, it is important to identify whether you are in a buyer’s market or a seller’s market. In a buyer’s market, where there is more supply than demand, home sellers may be more willing to bargain and lower the price.

On the other hand, in a seller’s market, where there is more demand than supply, the seller’s may have the upper hand. In either market, a real estate agent can help navigate the negotiations and advocate for the buyer’s best interest. By working closely with a buyer’s agent, staying informed, and being prepared to bargain both price and terms, home buyers can increase their chances of getting the best deal on their property purchase.

Sources:
https://www.fidelity.ca/en/investor/investorinsights/mortgage-closing-costs-canada/ https://moneywise.ca/real-estate/homebuying-closing-costs

Ready to turn your real estate dreams into reality? Contact Richard Morrison, Vancouver’s top realtor with 20+ years of experience. As a Medallion Club member and RE/MAX Hall of Fame award winning agent, he’s the expert you need on your side. Whether buying, selling, or investing, Richard’s personalized approach and deep market insights ensure a successful transaction. Reach out to Richard today at (778) 900-2235 and make your real estate journey seamless and rewarding.

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