Tips for Negotiating Home Purchase Prices

The home buying process involves more negotiation than you may realize. While most people know that some back-and-forth will follow the initial offer, there are other stages in the process where you could potentially save money or get more favorable terms for your deal.

Negotiating a home price may sound complicated and outside your comfort zone, but don’t worry; with the information on this page, you’ll understand this part of the home buying process well enough to go forward with confidence!

Know Your Negotiating Position

Negotiating during the home buying process starts with knowing how much leverage you have to work with. You’re in a strong negotiating position if:

• You’re buying in a buyer’s market with a lot of inventory.
• The home has been on the market for a while.
• You’re pre-approved for a mortgage and are in a position to close quickly.
• There’s not much competition.
• The property needs repairs.
• You’re flexible on your closing date.

In these situations, you may have more room to negotiate the home price or ask for more concessions. If you’re in a weaker position (a seller’s market, a new listing with lots of interest, a tight timeline), all is not lost, but negotiating the home price may not be the best strategy initially. Remember that you may have opportunities to negotiate after the home inspection.

Making Your Initial Offer

When it comes to how to negotiate a home price, your initial offer is crucial. You want the seller to know you’re sincere about the home buying process, but you want to maintain some leverage, so go in with a well-researched initial offer.

Look at Comparable Homes

Start by looking at comparable sales in the area. These should be homes that have been on the market for the same amount of time. Factor in the condition of the house, the lot size, and how far the comparables are from desirable amenities.

Go Beyond Price

In the home buying process, you are not just negotiating a home price. Here are some additional things you can add to your offer:

• Asking the seller to pay part of the closing costs.
• Including financing or inspection contingencies.
• Offering a flexible closing date.
• Asking for the appliances, items of furniture, or window coverings to be included in the price.

Pay Attention to the Market

Market conditions also play a key role in negotiating a home price. In a hot market with few available homes, it’s not advisable to start with a lowball offer. Structure the offer so it’s attractive to the seller, but without straining your finances.

Negotiating After the Home Inspection

If you have a home inspection contingency in your offer, you will have another opportunity to negotiate the home price after the inspection.

When you receive the inspection report, review it carefully, focusing on safety concerns such as faulty or outdated wiring, mold, asbestos, lead paint, and structural issues, as well as expensive fixes like an old HVAC system, leaky roof, or drafty windows.

Next, decide what to ask for in terms of concessions. Stick to reasonable requests and let minor cosmetic issues go; that will ensure your home buying process proceeds smoothly with goodwill on both sides. Depending on the market and the strength of your position, you can:

• Request a price reduction to offset repair costs.
• Ask the seller to make specific repairs before closing.
• Negotiate a credit toward closing costs so you can handle repairs yourself.
• Ask for a home warranty to cover potential problems.

Sometimes, an inspection reveals issues that are deal-breakers. If the seller isn’t willing to negotiate or the repair costs are too high, be prepared to walk away.

How to Negotiate a New Home Price with a Builder

Negotiating a home price with a builder is a unique home buying process that requires a different set of strategies. Builders are often hesitant to drop the sale price because it can lower future appraisals in the development. However, they can be open to offering incentives that don’t affect the recorded price. Rather than negotiating the home price itself, try asking for:

• Free or discounted upgrades (granite countertops, wood flooring, higher-end appliances).
• Modifications to the floor plan.
• A contribution toward your closing costs.
• A better lot at the same price.
• Better loan terms, especially if you have a quote for a lower rate from another lender.
• HOA fees for the first year.
• An extended warranty on the home.

Even if you’re experienced with the home buying process, work with a real estate agent who is familiar with local builders; they will understand the stage of the building process for the homes in the development and the stage of completion for the development itself. Along with their relationship with the builder, these insights can help you save thousands when negotiating a new home price with a builder.

Common Mistakes When Negotiating a Home Price

The home buying process can be complicated and stressful. Don’t let these common mistakes derail you when negotiating a home price:

Failing to Do Research

Going in without understanding comparable sales, neighborhood trends, or the property’s condition can lead to over or underestimating your leverage. You also need a good grasp on market conditions so you don’t start off with a lowball offer in a hot market or an offer over asking in a buyer’s market.

Overreaching

If you ask for unreasonable price reductions when you don’t have the leverage to do it, your offer might not be accepted. Also, avoid haggling over every single item in the inspection report and maintain good faith throughout the home buying process.

Emotional Decision Making

Buying a home can be as much a matter of the heart as the head. Try to keep your wits about you and stay focused on the data and the facts. Don’t start picturing life in your dream house before you even put in an offer, and be prepared to walk away from a bad deal or a seller who won’t negotiate in good faith.

Going It Alone When You Need Help

If you’re not working with a skilled real estate agent, you might miss out on professional insight and leverage. Agents are experts at finding solutions to home buying issues that get you the home you want and keep the negotiation stress low.

Negotiating a home price isn’t just about asking for a lower number; it’s about understanding market conditions, leveraging your position, and finding solutions that work for both parties. If you’re not sure about how to proceed with this part of the home buying process, an experienced real estate agent is your best resource.