Key Insights
- It’s important to know what the market conditions are and what (if any) leverage you have when buying a home.
- Discuss how high you’re willing to go before making an offer so you can quickly respond to counteroffers.
- Carefully read the terms of purchase and determine what terms are most important to you.
- Work with a REALTOR who understands the market, language and negotiation techniques to protect your interests and help you get the best terms.
You know it’s important to hire an expert negotiator when buying a home, but did you know that by doing your research, you can also keep the sale on track? Here are five insights you can use when negotiating a home purchase.
1. Determine leverage
Sometimes, leverage is based on local market conditions. When there is a shortage of homes for sale (as there is now in many areas), sellers may expect to get their listed price because buyers are competing over a small pool of homes for sale. When homes are abundant on the market, buyers hold the advantage and may be able to secure their desired property for less.
Of course, there are other factors that can give a buyer or seller an advantage. Buyers may benefit if sellers need a swift path to closing or can’t afford their monthly mortgage payments. And even in a buyers’ market, in-demand homes in trendy neighborhoods may fetch multiple bids and a higher sales price. If you find a home you love and aren’t sure who has the leverage, talk with your REALTOR® for insights and context.
2. Leverage comparable sales
Your REALTOR will have access to comparable sales, often called “comps,” in your desired neighborhood. Comps will show you the average sales price and time on the market of similar homes. These numbers can be invaluable as you determine your bidding and negotiation strategy.
Think of it this way: If you were bartering for a $50 lamp at a flea market, you might have no idea what to make as a starting offer. However, if you knew that a friend had bought a similar lamp from the same vendor for $45 last week, you could safely assume that a $45 offer would be reasonable. This same idea can be applied on a grand scale when putting together an initial bid based on comps in your desired area.
3. Respond immediately to counteroffers
If a seller responds to your offer with a counteroffer, it’s important to work with your REALTOR to respond to it quickly. In fact, you may even want to discuss how high you’ll go in a counter before you make your initial offer. That way, if a counteroffer comes in, your agent can verify that the number you previously discussed still holds and move the negotiation forward quickly.
4. Understand the terms of purchase
When your offer is accepted, you and your REALTOR will review the purchase agreement to see if you’ll agree to the seller’s terms. Some sellers may add special clauses saying that the sale does not include a prized chandelier or brand-new stacking washer and dryer units, and you’ll have to determine if these terms are deal-breakers. They could also include other terms, such as contingencies, proposed closing dates, provisions on inspections and more.
Remember, the party with leverage may not see the need to budge, so it’s important to enter negotiations with open eyes. Once the purchase agreement has been drawn up, it’s up to the buyer and their REALTOR to determine what’s worth fighting for and what can be accepted.
5. Never cut out the “middle man”
Keep in mind that while it may be tempting to directly negotiate terms with the seller, you should avoid this path. First, negotiations are about staying closely guarded without appearing too closed off, and REALTORS know how to expertly navigate these conversations. If you appear too eager to settle a term, you may give up any leverage you have. Plus, by calling the seller directly, you may be cutting out your expert while the seller is still consulting with their listing agent to get the best terms.
Last, the language of real estate contracts is complicated and requires the eye and experience of a professional. By negotiating a contract verbally (and outside the terms of the listing agreement), you may not end up with a contract that reflects your handshake deal. Your REALTOR will ensure everything is legally sound and in writing.
Start your home search
Before you can begin bidding or negotiating, you’ll need the help of a local expert who specializes in getting to the closing table. Edina Realty’s 2,000+ REALTORS work in every neighborhood in Minnesota and western Wisconsin, and we’d love to put you in touch with the right agent for you. Reach out today to get connected.
