How Buyers Can Negotiate Prices for a House
- Learn more about the neighborhood
- Don’t reveal too much about your finances
- See if the seller will contribute to closing costs
- Spell out what you want included in the purchase
- Stay flexible with your closing date
- Always consult your real estate agent
If you find your dream home but the listing price is higher than what you’re willing to pay, don’t be discouraged! You may be able to negotiate with the seller and get them to agree to a lower price — or cover other costs — in order to seal the deal.
“First-time homebuyers should be aware that price is not the only major negotiation point,” says Kristina Morales, a Realtor at Surterre Properties in Newport Beach, California. “In fact, there are several areas of negotiation that can get an offer accepted.”
Negotiation involves a delicate balance of shrewdness and compromise. It’s a dance that can require careful planning, research, and strategy to achieve an ideal result. Of course, the process can seem intimidating, since not everyone has business experience or training in the art of price negotiation. But you also don’t want to miss out on the opportunity to secure a lower price or other concessions from the seller.
That’s why we’ve talked to several experienced real estate professionals to come up with this list of tips for how to negotiate house prices.
Tips for Negotiating a House Purchase
When it comes to bidding on your dream home, it’s important to remember that there are other factors under consideration beyond just the dollar amount in your offer.
“There are so many myths/misconceptions about the negotiation or offer process,” says Francie Malina, who is a licensed real estate salesperson at Compass, a real estate company, and based in Irvington, New York. “People think if they are the highest bidder, they will get the house. That is absolutely not the case, terms matter. Personalities matter. Goodwill during the offer process matters. Quality of the agent and ability to close the deal matters.”
Before you begin the negotiation process, you can give yourself an edge by following these pro tips on how to negotiate home prices.
Don’t Miss: MyWalletJoy’s First-Time Homebuyer Guide
1. Learn more about the neighborhood
Alexander Graham Bell, inventor of the telephone, famously said, “Before anything else, preparation is the key to success.” The more you know about the local real estate market and other homes in the neighborhood, the sharper you’ll be when it’s time to negotiate.
“While it can be easy to rely on your agent, lender, or inspector for all the information about the property, make sure to spend time doing your own research on the home, neighborhood, etc. to make sure that you are aware of everything that is going on to ensure your offer is reasonable,” says Kendall Bonner, broker/owner of Re/Max Capital Realty in Lutz, Florida.
If it turns out that comparable homes in the neighborhood are being listed for lower prices, you may have more leverage to negotiate. The same holds true if a development company is building noisy or hazardous facilities — like a hospital or power plant — that might drive down property values in the area. Context is key, so make sure to do as much research as possible.
2. Don’t reveal too much about your finances
When you’re facing competing offers from other parties who are also very interested in the home, a well-written buyer’s letter can help you stand out to the seller. Telling them a little bit about yourself adds a personal touch, and explaining exactly what you love about the property may show the seller that you recognize the value of their home.
But Bonner warns prospective buyers to be careful and not to reveal too much. If the seller starts to think you have plenty of money in the bank, you could lose negotiation leverage. Bonner also notes that you may inadvertently violate Fair Housing Act regulations — which protect against housing discrimination — by disclosing too much information.
“In Florida, we use a buyer disclosure form, a one-page document which outlines the buyer’s financial position as a way to imbue confidence to sellers about the offer,” she says.
3. See if the seller will contribute to closing costs
If you don’t think the seller will budge on the price of the home, you can negotiate for them to cover certain closing costs instead.
These closing costs include:
- The home appraisal: A home appraisal assesses the market value of a home and is conducted by a licensed third party. Your lender will likely order a home appraisal when you apply for a mortgage, but the buyer is typically responsible for paying the fee.
- The escrow fee: Also known as a closing fee, an escrow fee is paid to the attorney, escrow company, or title company that conducts your closing. The fee can be split between the buyer and seller or handled entirely by one side.
- The home inspection: A home inspection evaluates the condition of the property and checks for any repairs that might be needed. The seller may be willing to pay the fee if they’re confident that the home is in excellent condition.
- Title insurance: The title insurance premium is a one-time fee (unlike other types of insurance) that can be paid by the buyer, seller, or both parties. An owner’s policy protects you from disputes over the legal ownership of the property, whereas a lender’s policy — which is usually required as a condition for mortgage approval — safeguards the lender.
While asking the seller for concessions is smart, it’s also a good idea to keep your requests reasonable so that they don’t jeopardize the deal.
“Don’t ask for more than you actually need from the seller, in terms of closing costs and other contingencies, such as repairs,” Bonner says. “Focus on what repairs are most necessary — those that could prevent you from securing financing.”
4. Spell out what you want included in the purchase
Don’t assume that everything you see on the property will be covered by the purchase agreement. Unless it’s explicitly stated, the seller may not be planning to part with certain items in their home. This can extend to less obvious places, including the plants and trees in the backyard.
“Find out what is reasonable/customary for a purchase agreement in your marketplace,” Malina says. “In New York state, anything affixed to the property trades with it unless it is specifically excluded from the agreement: light fixtures, flat screens on the walls, shades, basketball hoops in the driveway secured with concrete.”
Important items like the washer and dryer may be affected, so make sure to confirm exactly what will and won’t be included in the sale. Otherwise, you could end up paying for expensive new appliances and other things on top of the home price and closing costs.
5. Stay flexible with your closing date
Another strategy when you’re negotiating home prices is to consider the seller’s situation and understand any personal deadlines or needs that will impact the seller’s decision-making.
“Some other areas that are negotiable are the closing date and contingencies,” Morales says. “Closing dates can be super important if the seller needs to stay in the home longer or close sooner than normal. Most closings happen between 30 and 60 days. If you know that the seller has special needs when it comes to closing and you are flexible, this can be a great place to make your deal stand out.”
By meeting the seller in the middle — especially on aspects that matter to them but don’t affect you as much — they may be more willing to lower the price of the home or grant some of your requests.
6. Always consult your real estate agent
In the same way that you should let a lawyer take the lead during a divorce mediation, it’s wise to defer to the professional in the room when you’re buying a home.
“When utilizing any of these strategies, be sure to consult an experienced real estate agent as you never want to negotiate against your own interest,” Morales says.
Though you should never sign off on a deal that you aren’t comfortable with, you can benefit from your real estate agent’s experience during negotiations. By not consulting your agent, you run the risk of asking for too much and jeopardizing the deal — or paying more than necessary because you weren’t familiar enough with the process.
The Bottom Line
Every negotiation will be unique — after all, each home has its own story within a local market that is ever changing. But what’s universally true is that proper preparation will only work in your favor. By researching the local market, getting a feel for the seller’s needs, and working with your real estate agent, you may be able to score a better deal on your new home.
Remember, negotiation isn’t just about the final home price — it also includes all the costs and considerations involved in the sale. Even if you aren’t an expert negotiator, you can learn the ropes by following these tips for how to negotiate buying a house.