- Know What a Seller Needs
- Know the Average Price for the Area
- Have a Preapproval
- Know the Market
One of the most stressful parts of buying a home is negotiating the price. You don’t want to bid too little yet you don’t want to overbid either. So how do you know which is the best price to give without losing your chance of buying a home?
Know What a Seller Needs
Negotiating the price of a home actually means more than haggling on a price. There’s a lot more that goes into the sale than the price. There are also the details of the sale, such as the closing date, home possession date, contingencies, and even what the seller will/will not leave in the home.
If you have the opportunity to get to know the seller, do it. This way you’ll know his reason for selling the home and what he may want/need as a part of the sale. For example, if you know the seller is downsizing, he may be willing to leave things like the large appliances or window treatments. If you know the seller is in a hot hurry to move, you may win the bid by offering a quick closing date rather than taking several months to work out your financing and get to the closing.
Know the Average Price for the Area
If there’s one thing that turns a seller off, it’s a lowball offer. If you offer a price for a home without knowing what the average price for the area is, you risk making an offer that is too low. Some sellers get so offended by the lowball offer that the dismiss you as a potential buyer.
If you are working with a real estate agent, you can use the advice of your agent. They should be able to tell you if the seller’s asking price is within the right range or if they are way off base. This way you can make a meaningful bid that the seller might accept.
Sellers always have the option to counter-offer your bid, but if you are way off base, they may not even waste their time. Do your research or ask advice before you give a bid.
Have a Preapproval
If there’s one feature that can set two buyers with the same bid apart, it’s the preapproval. If you don’t have a preapproval, a seller may not take you seriously. The seller has no way to tell if you are capable of even buying the home. If they take your bid over the other preapproved buyer and you back out of the sale, you could put the seller in a bad position.
Some sellers won’t even entertain a bid from a buyer that isn’t preapproved. If you want the ability to negotiate, you need that preapproval. It only takes a little time with a lender as long as you have all of your financial details in order. That simple preapproval letter can give you the leg up on the competition.
Know the Market
If you happen to shop for a home during a seller’s market, you’re going to have some tough competition. A seller’s market means that there are a lot of buyers vying for the same home. The seller has his pick of buyers. This gives the seller the upper hand and the ability to enter some pretty hefty bidding wars.
If you shop for a home during a buyer’s market, you have much less competition. There aren’t nearly as many buyers vying for a home, which means you could have your pick of homes. Sellers are often more willing to negotiate the price of the home in a buyer’s market because they know their chances of selling the home are much slimmer in this type of market.
Don’t get overwhelmed when you bid on your first home. It’s important to take the emotion out of the transaction. You may not win the bid on the first home you fall in love with and that’s okay. There are plenty of other homes out there that you can try to buy. Learn from your mistakes on the first home that you lost and hopefully you’ll win the bid on the next home.