When we think of real estate negotiations, we often imagine a stressful, highly contentious situation. The buyer and seller are pitted against each other, both refusing to make any concessions. While this is sometimes the case, it doesn't have to be your home buying experience!
While you don't have control over the sellers' behavior, if you enter negotiations with the right expectations, you'll have the best chance of an ideal outcome with limited stress and agitation. Most of your success will depend on what you do before the negotiations begin.
Use the following tips to help you to navigate your negotiations with confidence!
1. Perform an in-depth Comparative Market Analysis (Don't rely on Zillow estimates!)
There can be a wide gap between the asking price of a property and its true market value. Is the property overpriced, underpriced, or right on the money? What have other nearby properties sold for within the last three months? Were they in better, worse or the same condition as the property in question?
Also look back 5-10 years so that you can gauge how the prices are trending in a given neighborhood over a longer timeline. Is the rate of appreciation above, below, or in line the rate in the greater region? If prices have been stagnant over 5-10 years, then you need to do some deeper investigation as to why that is.
Having done thorough market research, you should be able to establish a dollar amount that you will not exceed, given what you know about the value of the property.
2. Understand your upfront and recurring costs
For a given offer price, do you know how much will be due at settlement? What about your recurring costs such as your mortgage payment, maintenance and repair costs, property taxes, utilities, and HOA fees?
Do you have room in the budget to pay for a new roof or replace an air conditioning unit? Would your budget be stretched if your monthly energy costs increased by 20%?
Plan for the unexpected so that you don't overextend yourself in the negotiation process.
3. Be willing to walk away from a deal
You’ll increase your negotiating power immensely if you are willing to move on from a deal that doesn’t meet your criteria. Ideally, you want to be in a situation where the homeowner is more urgent to sell than you are to buy. This could be due to financial need, a career change, or some other time-sensitive matter.
If you need the home more than they need to sell, it will be difficult to have negotiating power.
4. Don't let emotions cloud your judgement
Don’t take negotiations personally. Remember that you and the seller are both seeking the best possible outcome.
Stay focused on your long-term goals, because any frustrations you experience during negotiations will be short-lived.
5. Do your due diligence
Research the property and the surrounding area thoroughly. Not everything you'll want to know is included in a home inspection report. Some questions you may want to consider are:
- Are property taxes likely to increase significantly after your purchase?
- Are there any major construction projects underway nearby?
- Will there be any upcoming special assessments by your HOA or condo association?
- Does your city and/or HOA allow residents to rent out their properties on a short-term or long-term basis?
- Are there environmental risks such as flooding, falling tree damage, or fire?
- Is there pollution from a nearby factory or highway that impacts the home?
- Has crime been trending up or down in the area?
- What is the reputation of the local school district?
- Is there traffic gridlock when the nearby school lets out?
Think about what other questions would be relevant for your situation.
6. Work with a trusted agent
One of the benefits of working with a skilled agent, is that you are able to remove yourself from having to directly negotiate with the seller or seller's agent. You'll have someone that will advocate for you and strive to get you the best deal, while being sure not to disclose any information that could harm your negotiating position.
Along the way, they should be fostering open communication and cooperation with the sellers and their agent, not hindering it.
Your ideal home is within reach
The right preparation and the mindset are the keys to successful real estate negotiation. Ready to begin your home buying journey with confidence? Schedule a consultation today!