Here’s a guide on how to negotiate home price successfully. This is a followup guide on how to submit offer on a home successfully.
Buying a home without a realtor can save you tens of of thousands in commissions. So this guide will teach you how to negotiate with the listing agent and save potentially tens of thousands of dollars.
Typically, what happens after you wrote a purchase offer on a home, which here at diyhomebuyer.com we have a tool that helps you write a standard purchase offer to buy a home, the seller will either accept, ignore, or more commonly, counter-offer, if you submitted the offer to purchase successfully.
Instead of writing another counter-offer and sending it to you, what usually happens is the listing agent will give you a call and start the negotiation process. Sometimes they might choose to communicate via text or email.
After a verbal agreement is reached, you will need to rewrite the purchase offer, sign it, and send it to the listing agent. Then the seller will sign the offer and you are now under contract.
But what does the negotiation call sound like? Here’s an example.
The seller or the listing agent after receiving your offer will look at all the terms of the offer. The main terms they will focus on are: 1) the offer price, 2) financing terms and 3) contingencies.
There are other terms that they will consider, but these are the three main ones they will look at.
When you submitted your offer, your most ideal outcome is to receive a counter-offer. This means you didn’t overpay, while still keeping the seller interested in having a conversation.
Now if you have to understand two main things in order to negotiate successfully. 1) what do the seller and the listing agents want, and 2) what is your leverage in this negotiation. You can read our previous guide on how to submit offer on a home successfully to learn about point number 1.
Then you need to understand your leverage as a buyer. Here’s the main framework.
Understanding the real estate market condition in the area you are buying is important. It will help you understand the mindset the seller is in. If you are in an area that homes have been sitting for the past 10 months and not selling, you will have a better shot at getting the price and terms you want compared to buying in a market that home sells with multiple offers after two weeks on the market.
Start by researching the following metrics
These will give you a basic idea of the market condition and decide how to negotiate.
Competition in this case means two things.
For the seller, how many homes of similar size, condition, location, etc are on the market? This means options for the buyer.
For the buyer, this means are there any other offers or interests on the home? The more offers the seller has, the more leverage they have. Pretty straightforward here.
The way to find out is the ask the listing agent if they have any offers at hand. Now they can say whatever they want since their client is the seller, not you. So evaluate the situation and decide carefully.
You have to understand your own leverage if you want to negotiate successfully. Since you are buying a home without a realtor, you have the benefit of having complete control of the entire process and not be swayed. Here’s the common framework when evaluation the home.
If this is a home that you must have, and there are no alternatives, then sorry to say, you don’t have a lot of leverage in this negotiation. But don’t overpay if that’s the case.
For other situations, either there are other similar homes on the market, or flexible on closing timeline or possession of the property, you should use that to your advantage when negotiating.
Negotiating the best price and terms when buying a house is an art. It takes practice and learning. But the results are absolutely worth it.
If you want real estate experts to coach you through the negotiation process, feel free to book a coaching call with us.
