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The days of bidding wars and tight supply are starting to fade. Many local housing markets are more balanced, giving buyers room to breathe — and bargain. While negotiating a home price may sound intimidating, it’s a common practice that most sellers expect. With the right strategies, you can walk into discussions confident and prepared. Here are helpful tips to help you negotiate the asking price and more as a buyer.
➡ Read more: Why are home prices so high?
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A successful negotiation starts well before making your first offer on the house.
“Before a buyer even thinks about negotiating, get a preapproval letter and a crystal-clear idea of the home’s actual value,” Adriana Trigg, Florida-based licensed REALTOR®, said via email. “Don’t just take what the home is listed for, but also understand what it’s worth based on recent comparable sales and local market trends.”
Apply for preapproval with multiple mortgage lenders for an estimate of your loan amount and mortgage rate based on verified income, creditworthiness, and other financials. You can then work with a real estate agent or use websites like Zillow.com or Realtor.com to research your local housing market and get an idea of how much the home is worth.
The agent can also help you look beyond what similar homes sold for. Check the “days on market” (DOM) and price history to see which properties have been on the market for a while and are likely more open to negotiation.
There is no one way to negotiate a home’s price, and certain situations call for different strategies. However, these tips may increase your chances of success.
The best real estate agents are experts in the local market and the home-buying process. While every buyer should be as knowledgeable and prepared as possible, you can also lean on your agent to ensure you’re not overpaying or overlooking critical details during negotiations.
Find a real estate agent through referrals or a local online search. Verify the agent’s license through your state’s real estate regulatory agency.
While a home inspection is not always required, it can be critical when negotiating the house price. An inspector can highlight anything from minor inconveniences to major foundation problems.
“One of my favorite strategies is to point out issues from the inspection report in a calm, fact-based way,” said Trigg. “You’re not insulting the home — you’re pricing in the real cost of repairs.”
Make a list of the significant issues, especially those that impact the property’s value or your safety. You can use the inspection report to ask the seller to pay for repairs or come down on the asking price to cover the cost.
You can also include an inspection contingency in your offer, which lets you walk away if the inspection reveals major damage to the home without losing your earnest money deposit.
During the peak of the seller’s marketing, buyers may have waived inspections to get their offer accepted. But, in today’s marketing, skipping one is an unnecessary risk. A seller should expect buyers to request an inspection and may be more willing to negotiate on repairs to keep the deal alive.
Repairs aren’t the only costs a seller may be willing to cover. You can ask for seller concessions that bring down the overall cost of buying the home.
A rate buydown is a concession that is especially beneficial when interest rates are high. The seller would purchase discount mortgage points on your behalf to temporarily or permanently lower your mortgage rate.
You can also ask for additional allowances, funds for expenses you may incur after closing on the loan — for example, cash to cover a home warranty or your moving expenses.
Seller credits are some of the most common types of concessions. It’s a cash credit that goes toward closing costs, such as origination, appraisal, recording, and other loan fees — as well as prepaid expenses, including property taxes and HOA fees.
There’s a limit to how much a seller can contribute to closing costs, and it varies by loan type.
FHA loans: 6% limit on seller concessions
USDA loans: 6% limit
VA loans: 4% limit
Conventional loans: 6% limit on loans with down payments between 10% and 25%; loans with less than 10% down have a 3% limit; loans with more than 25% down have a 9% limit
Asking for concessions can backfire in a seller’s market. However, they’re often seen as a standard tool in a more balanced market.
➡ Read more: How to ask for a seller-paid rate buydown
Some sellers are willing to strike deals on certain fixtures or furniture used during staging. You can also use the time to close as a negotiation tactic.
“Another smart move is to offer a faster close,” said Trigg. “A seller who’s relocating or juggling multiple properties might take a slightly lower price if it means fewer headaches.”
➡ Read more: Rate buydown vs. closing costs vs. price reduction
A seller’s asking price can depend on many factors, such as the local housing market, the property’s condition, and the length of time it has been for sale.
For example, asking for 20% below the price is generally considered a lowball offer, but it may be appropriate for a home that needs a lot of work or has been on the market for a while. A buyer looking at a recently listed home in good condition may be able to offer 10% below the asking price. But this often works best when the local market is balanced, and you’re unlikely to be priced out by competing bids.
You can start with a reasonable offer that’s below the asking price, but not so low that the seller doesn’t take you seriously. This is where having information on comparable sales and the property’s condition can help — plus the help of a good real estate agent.
➡ Read more: How much should you offer on a house?
Negotiating the home price takes patience, compromise, and knowing when to move on.
If the seller refuses to budge or offer reasonable concessions, take a step back to really think about whether you can afford the home. Try to avoid increasing your offer so much that you deplete your savings or struggle to make the monthly mortgage payment. In markets that are starting to stabilize, you don’t have to feel pressured into overpaying out of fear you won’t find another home.
When you walk away, make sure you know the potential legal ramifications. You can opt to include certain real estate contingencies in which your offer depends on the outcome of the appraisal or inspection report. If you back out of an offer for a reason not covered by contingencies, you could still end up owing money.
How much a seller will lower the asking price depends on the market, the property’s condition, and other factors. In a highly competitive market with more buyers than sellers, known as a seller’s market, a seller doesn’t have much incentive to come down on the price. On the other hand, if you’re in a buyer’s market with more homes than buyers, you typically have more leverage to ask for a lower price, within reason.
You can tactfully negotiate the price on a house by making sure your offer is reasonable. Base your offer on similar homes that sold recently in the area. When you ask for a lower price, justify it, like with the inspection or appraisal report. Share how the ask can help you both, like speeding up the time to close.
Offering 20% below the asking price may be acceptable if the home needs major repairs or if it has sat on the market for an extended period. Make sure your offer is justified. However, you may not be successful if the home is newly listed or in a highly competitive local market, even if the home needs significant work.
A lower purchase price is one of the best ways to save overall. It lowers your down payment, principal, total closing costs, and potentially property taxes and homeowners insurance. However, if your goal is to limit how much cash you bring to closing, closing cost credits may be a better option. And a mortgage rate buydown will likely save you the most money month-to-month, directly lowering your mortgage payment.
Source: Yahoo Finance
