How to Negotiate a Home Purchase
Learning how to negotiate a home purchase, instead of buying a house on nothing more than expectation and instinct, is going to save you thousands of dollars over the years. Buying a house is one of the best purchases that you’ll ever make. It’s also one of the most expensive.
Since a home purchase is a 20 to 30 year commitment, you want to know how to negotiate with a seller, so you get the best price possible. This is the biggest financial commitment most people make in a lifetime. You have no idea what your family is going to look like in 20 to 30 years, or if you’ll be here at all, so don’t saddle your loved ones with a bad mortgage.
The better the price, the lower your monthly payments. The better the price, the bigger the profit margin you collect, if you choose to resell the home in the future. This is not a purchase to make in the dark, but after you read how other homeowners have lowered the price of their mortgages.
Negotiating a home purchase isn’t as simple as walking in and demanding a lower price, though. There are factors to be considered which have an affect on what kind of offer you make, along with what you’ll ultimately pay for the home of your choice.
Negotiating a Home Purchase
Read about home purchase negotiation topics before you consider signing on the dotted line. If you have no experience, learn from other’s experience. Do your research and you’ll be prepared, when it comes time to negotiate.
Current House Market
The current house market plays the biggest role in determining how much you will pay for a house.
If there is a lot of demand for homes, you’ll be less likely to talk someone down on their asking price. In a booming housing market, there are always others be willing to pay the full asking price.
On the other hand, if the supply is large but the demand is low, most people selling their homes have had their house on the market and it’s sat there for several months. Negotiating a lower price is easier in this case, since sellers are starting to get antsy.
Look at how long a home has been on the market, before you start to negotiate the price. If you see a home has been on the market for months and months, that means the homeowners have seen others turn down the house at their asking price. They’re more likely to take a smaller profit, just to get out from underneath their home. That’s when you come in with a lowball offer.
This is how the house market is today, as of early 2010. There’s plenty of supply (homes for sale), but little demand (people to buy). Therefore homes are cheaper to buy right now, if you can get the home loan.
Homes in the Area
Look at the price of other homes in the area. We often talk of the housing market as one big polyglot, but housing prices actually a break down into a whole lot of smaller, regional housing markets. One part of the country is going to have different supply and demand than another part of the country, so you need to research your specific housing market to make sure the local trends conform to national trends.
If not, you might have to adjust your strategy one way or the other.
Target Homes that Fit Your Need
You don’t want to research a 2 bedroom, 1.5 bath, single story home, if you’re looking at buying a 4 bedroom, 2 bath, two story home. Research similar homes in comparison to what you’re looking to buy. The prices are more in line with what you’re going to spend.
When you find a home you’re interested in, research similar homes close to the house you’re looking to buy. Location can affect the cost of a house.
For example, a similar house 5 houses down from the one you’re looking to buy might be selling for $1,000 more, but a similar house across town might be selling for $10,000 more. The one across town might be located near a park, or it might be closer to town, or it might be placed on the rim of a lake.
Location can have a major affect on the price of a house.
But the whole idea behind looking at similar houses in a nearby area is so you have some leverage when negotiating. If a house 5 houses down the street is selling for $5,000 less, that’s a good point to bring up. It’s implied you have options, because you can buy a similar house down the street for less money. That’s a good reason for the home owners to come off their price.
That’s the spirit of competition. Other variables come into play, such as add-ons, landscape and overall quality, but it’s still a factor that you want to consider. Learn the factors that go into house estimates, so you don’t bring up a house that isn’t that similar, or the effect will be lost.
Get Appliances or Furniture Included
Sometimes a homeowner is stubborn when it comes to lowering their asking price. This may have to do with a lingering sentimental attachment to the home, or an unwillingness to admit the home isn’t worth as much as they believed. If they won’t come down on their price, ask them to leave their furniture or appliances behind.
Think about it; you’re not getting an immediate discount on the house, but you are saving money, by not having to buy or move furniture or appliances. You won’t have to move your old furniture, which can be used as an added selling point when selling your old home. You can sell your old furniture for the difference, or use it to negotiate when selling your home.
Either way, you also save on moving costs, which is money in your pocket.
Get an Inspection
Getting the house inspected serves multiple purposes. The most important purpose is highlighting any damage that’s done to the home, so you know what kind of shape the home is in and how much fixing up the home is going to cost.
However, inspections that lead to new-found damage serve as a leveraging agent, when negotiating a deal. Request to have the damages fixed, which add years of longevity to a home. These are other costs that come off the price you would have to pay, eventually.
The other option is to request money off the asking price, in exchange for not fixing the damage. This means you’ll have to take care of the damage on your own time and dime, but at least it’s more money taken off the overall cost of the house. This means less money you’re paying each month for a mortgage payment, and therefore more money to spend on repairs and fixup costs.
The closing costs of a home purchase amount to a couple thousand dollars, in and of itself. See if the sellers will eat the closing costs themselves. If not, discuss splitting the costs with you. If the closing costs are $2,000, you save $1,000 this way.
That’s substantial, and can almost equal one mortgage payment. Every little bit helps.
How to Negotiate When Buying a Home
Buying a home is an big deal, probably the biggest financial deal you’ll ever make. If you take your time, do your research and get a little creative, you can find the home of your dreams, and get a good price on it as well. When considering how to negotiate a home purchase, remember that you’re the buyer, so you have a significant amount of leverage in this bargain.