When you’re in the market to buy a house, the fun part is browsing listings and touring places in person, imagining yourself in your new abode.
The intimidating part: the negotiation.
Unlike when you go to buy something in a store, everything in real estate is negotiable — especially if you’re the buyer. This back-and-forth can work in your favor, but there are general ground rules to every negotiation.
We’re here to demystify the process and explain how to negotiate a house price.
When Does the Negotiation Start?
Some real estate agents like to say the negotiation process starts when you go “under contract” with a seller — as in, you’ve made an offer and they’ve accepted it. But it’s worth considering your negotiation power even before then, as in the very first time you see the home in person.
“Realistically, anything the buyer doesn’t like can be a negotiating point,” says Peter Farsai, senior partner at California Top Brokers Inc. This can include repairs that need to be done, what appliances or furniture may come with the home, and any facets of the property that may need to be fixed up or completed.
For example, if a house has an unfinished guest suite, this might not be considered a “repair” but is still a worthy point of negotiation. Since completing this space would require your time and funds in the future, it might be worth running those costs by your real estate agent (or even asking a builder to provide an estimate) and then asking the seller to come down in price to accommodate them.
How Does the Negotiation Work?
If negotiation starts the first time you see the house, it’s important to note that it doesn’t end until you actually close on the property. Closing usually occurs 45 days after you sign the contract, and in between a whole lot happens to protect the buyer and make sure you’re fully informed on your investment.
That means that from the time the seller accepts your offer, you typically have over a month to review the home and its documentation and go through the necessary steps to make sure the house doesn’t have any hidden problems and is worth the price you’re paying.
One key step in that process: getting a home inspection. Home inspectors check out all the systems of your house, plus all its nooks and crannies. Once you go under contract, schedule a home inspection ASAP, as this — more than anything — will alert you to anything major that needs to be discussed and negotiated with the seller.
Beyond what the home inspector finds, or anything obvious such as unfinished construction projects, there are a lot of small things you might want to negotiate. Keep in mind that small details may not actually affect the value of the home. Rather than negotiating on price you might just be asking a seller to include (or remove) something from the property.
“The most important factors impacting the value of a home is the location in which it is found, its livable square footage, and the size and usability of the land on which it sits,” says real estate attorney Rajeh A. Saadeh. “Other factors, such as the presence and size of garages, whether the basement and attic are finished, water damage, old carpeting, old appliances, and even creaking floors all impact value because it can affect whether a buyer is willing to purchase a property with these conditions.”
If you love the furniture in a home you’re viewing, you might ask the seller if they’d be willing to include it. Alternatively, if there’s old carpeting that smells like mold, this might be something you negotiate to have removed before closing. Keep in mind that negotiation isn’t just about your findings and perceptions of the property. A lot depends on the seller.
Understanding Your Market (and Seller)
Negotiating is a lot like playing cards, meaning it’s helpful to know a bit about the cards your seller is holding. Get a sense of why your seller is moving, and how motivated they are to sell. If your seller is already settled somewhere else and is renting out the home for extra income, they may be less likely to deal with many buyer contingencies — aka your requests. But if your seller really needs to get rid of the place either for financial or logistical reasons, they’ll likely be more willing to go along with whatever needs to get done to close the deal.
Another thing to keep in mind when negotiating: the market you’re in, and whom it favors.
“It’s basically a supply and demand situation,” says real estate developer Bill Samuel. “Right now, since many sellers don’t want to put their house on the market during a pandemic, almost every market is at record low inventory levels, making it very much a sellers’ market.”
Depending on what other offers the seller knows they can get, they may be more or less willing to negotiate the finer details with you.
In a buyers’ market (higher inventory with fewer buyers), a highly motivated seller might mean you score a better deal, both in pricing and contingencies.
This was originally published on The Penny Hoarder, a personal finance website that empowers millions of readers nationwide to make smart decisions with their money through actionable and inspirational advice, and resources about how to make, save and manage money.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.