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💬How to Negotiate When Buying A Home
Most home buyers might not realize that when you are searching for a home, the negotiation starts before you even tour the home. That’s right. Then it continues until the day you close on the home, because anything can happen throughout the home buying process. Before a buyer even starts looking for a home, there are several steps of preparation they need to make to be a strong negotiator in a real estate transaction.
You’ll notice that the title of this article includes the word “motivated”, and there is a very important reason. A seller’s motivation has everything to do with their willingness to negotiate. A seller who insists on their own set of preconceived parameters is not likely someone who will negotiate. When negotiating with a motivated home seller, your best asset will be your buyer’s agent.
💪Use An Experienced Buyer’s Agent To Negotiate From Strength
Real estate negotiating in is not an everyday occurrence for most people. In fact, we don’t often negotiate in our everyday shopping experiences. We don’t stand in line at the grocery store or the clothing store and haggle with the checkout employee over the prices of the products. We either buy, or we don’t.
On big items, like cars and houses, yes, we do negotiate. For most of us, we’re glad we only do that every few years; people buy and sell real estate every 9 or 10 years on average. Negotiation is not a skill that most consumers use every day. That muscle can atrophy over time!
For a real estate agent, negotiation skills are one of the top skills necessary for success. [imho] Unlike the car dealership, a successful negotiation in a real estate transaction happens when all parties reach a conclusion that they are satisfied with. We like to call it a “Win-Win”.
Finding a Buyer’s Agent who is skilled in negotiating is a great start to buying a home. A buyer’s agent is extremely valuable to you, as they are representing your best interests.
In Maryland, without a written agreement with a buyer’s agent, any agent involved in the process is working for the seller. That means they are representing the seller’s best interest. Anything that you confide in the agent is fair game for them to use to the seller’s advantage.
Your buyer’s agent should be a trusted adviser. Use your agent and take advantage of their market analysis and their negotiating expertise. Remember, as local real estate professionals, we are steeped in the market every day. Negotiating is what we do…365/7. Read more about Buyer’s Agency in Maryland.
😕Negotiations in Real Estate Are Complex
Negotiating in real estate is not like negotiating in the street market, or across the desk from a car salesman…thank goodness! When negotiating with a motivated home seller, there are many negotiating aspects to consider.
Deposit: The Earnest Deposit is necessary to have a completed contract in Maryland. The amount is negotiable, but the higher the amount, the better the buyer looks to a seller. In a day when financing is tightening and more deals fall out due to a buyer not being able to get their loan, a higher deposit amount can signify to a seller that this is a buyer who is more likely to be qualified.
Financing: Related to the earnest deposit, your financing is something the seller is going to be very concerned about. When you present an offer, you must have a pre-qualification letter with it. Make sure your pre-qualification is with a strong local lender, whether you end up using that particular lender or not. This speaks well of your ability to perform on a contract to purchase. Stay away from internet lenders!
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I like the “reach out and strangle them rule”…if a lender drops the ball, we like to be close enough to … have access to them! I once sat in a lender’s office all afternoon to get a buyer’s $500 fee back. The lender knew the buyer wouldn’t qualify for a particular loan, but took their money anyway. That’s just not right.” ~ Chris Highland
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👍One Step Ahead – Pre-Approval
Along those lines, having an “approved” status with your lender goes a long way when your offer is being considered. Having the approval of your lender, not just a pre-approval letter, will signal to the seller that as a buyer, you are a safe bet. Many of our buyers are seeing the value in starting the process of loan approval early on in their home search, so that by the time they find a home and make an offer, they are further along in the loan process than a buyer who just has a pre-qualifying letter. When negotiating with a motivated home seller in a competitive real estate market, having this edge over the competition is extremely helpful.
Closing Date: Knowing the home seller’s plans is helpful when considering a closing date. With today’s timelines, we always recommend a minimum of 45 days from contract ratification to closing. It’s very difficult to shorten that period of time, not matter what you’ve heard.
If the seller has a tight deadline, then the shortest time possible will probably receive a more favorable response from the seller. (Another reason to already be qualified with the lender!)
On the other hand, if the seller lives in the home and has to find his next home purchase, the opposite could be true. Knowing the sellers’ next intentions can be very helpful when time-lines are considered. An experienced buyer’s agent who is negotiating on your behalf can help tremendously.
Contingencies: The more contingencies loaded into an offer, often the lower the chances of acceptance, especially a home-to-sell contingency. It’s almost always best to have your home under contract and present a house-to-settle contingency. Having a contract on your home with a strong buyer will also go a long way. In a competitive seller’s market, like we’re seeing lately, it’s even better to have a home that is sold, if you can manage the interim housing need.
Motivation: Sellers have all kinds of motives for placing their home on the market. Although it would be a negligent listing agent that would spill the beans about their seller’s motives to everyone, a good buyer’s agent can get the meaningful information.
If a seller is relocating for any reason, their motivation to get their home sold is probably strong. If they have a time-frame in mind, they are probably motivated to meet a goal.
On the other hand, if the home has been on the market for two years, and the seller has burned out three real estate agents, but has not lowered their price…chances are, they’re not very motivated. Along with motivation, you can often judge their willingness to negotiate.
Ability to Negotiate: All parties should be willing to negotiate and should come to the transaction with a certain level of open-mindedness. Unfortunately, we sometimes find that some people just aren’t very flexible about much. Then the buyer needs to decide how badly they want THAT house. People come in all types…some are of the inflexible type. When that’s the case, its best not to exhaust your energy and emotion on a fruitless endeavor.
Sometimes, the seller just doesn’t have room in their budget for much movement on the price. In that case, they will be more willing to move on other issues, like dates and inspection results. Again, an experienced buyers’ agent will help you in the negotiating.
Inspection Negotiations: After the initial negotiations are done and the contract is ratified, you may think you’ve finished with negotiations. But wait…there’s more! After home inspections, there will be a new opportunity for a “meeting of the minds”. The results of a home inspection, pest inspection, well and septic if necessary… depending on the results, any fixes or monetary solutions to possible problems will all have to be hashed out. Hopefully all parties will be even more motivated to agree to a win-win solution.
Closing Cost Help
Sometimes, asking for help with the closing costs is possible. Sometimes, when there the home seller doesn’t much room in the price, the seller will not be able to help. In either case, some give and take on other issues, like time-frames, or home repair requests, might be the key to a win-win.
There are many ways to negotiate a contract that result in a scenario where both the seller and the buyer get what they want most, and thereby make the transaction possible. When negotiating with a motivate home seller, there is always an answer that will work to create a win-win for both parties.
🏡Negotiating Tips for Home Buyers
- When Negotiating in Real Estate, Don’t Let Emotions Rule. It’s true that often people buy emotionally; if you don’t love the house, most likely you shouldn’t buy it. But emotions need to be in check when you’re negotiating. Rational heads make the best decisions. We’ve seen people get emotionally worked up and lose sight of the end goal, while standing on principle over a small matter.
- Keep Sellers in Mind. You can never underestimate the stress that can affect a seller’s state of mind. There are many variables that are out of a seller’s control when it comes to selling their home…and that alone can be unnerving. Keeping a calm and respectful demeanor can go a long way in the negotiations.
- Don’t Insult the Seller with A Lowball Offer. Just don’t do it. Read more here. You will very likely end up with no response at all…then there will be no negotiation.
- Use a Skilled Buyer’s Agent. Your buyer’s agent should be a trusted adviser. Use your agent and take advantage of their market analysis and their negotiating expertise. Remember, as local real estate professionals, we are steeped in the market every day. Negotiating is what we do…365/7.