When you're house hunting and find "the one" you want to lock it down and the more intentional you are about your offer terms, the better your chances of making a successful bid. Follow these seven rules to negotiate like a pro.
1. Know Your True Price Point
In addition to confirming with your lender what amount you are approved for, you’ll need to understand what your monthly payments will be. This information will be important to know the top limit to your offer. Commit to a maximum budget to prevent emotions from taking hold in the heat of negotiations.
2. Strategize Your Offer Price
A home’s list price is the seller’s opening bid in your negotiation to buy a home. Should you offer less? More? There are always several factors like how long the home has been on the market and the amount of other similar homes available that will affect your bargaining position and offer price. Your agent will give you the context you need to understand what offer price will put you in the best position to engage a seller in negotiations without overpaying.
3. Show You Mean Business
Earnest money is the amount of money a buyer offers as a “good faith” deposit to show that you are serious about moving forward with a home purchase. If a buyer gets cold feet after their offer is accepted they could forfeit this money, depending on the circumstances. A typical amount is between 1%-3% of the home’s price but a larger amount here can be a helpful tool to make your offer more attractive to sellers without actually affecting the purchase price.
4. Consider Contingencies Carefully
Contingencies are provisions that must be met before the sale can go through, or the buyer is entitled to walk away from the deal with their earnest money. Contingencies protect buyers, but also make offers less appealing to sellers because they give buyers legal ways to back out of the sale without any financial repercussions. There are some risks with waived or limited contingencies and a key part of any offer strategy is to work with your agent on finding the balance you are comfortable with to keep you protected, yet competitive.
5. Expect a Counteroffer
If your offer price is under the home’s list price or you are competing again other offers it is likely that the seller will respond with a counteroffer for a higher price or fewer contingencies. Don’t worry, engaging in a back-and-forth is a good sign! Your agent should provide guidance on your initial offer that accounts for this so you have a game plan to keep the ball rolling.
6. Respond Quickly
Do not delay your response to a counteroffer. Once you are in negotiations, think in terms of hours, not days! Nobody likes anxiously waiting and the longer the process goes on, the more opportunity you leave for another buyer to enter the picture and put you at a big disadvantage.
7. Know When to Walk
Negotiations can be anxiety-inducing and draining. It can be tough to walk away when you feel an agreement is within reach, but if a seller isn’t budging it may be the best thing to do. Trust that there is a better deal out there and that your newly sharpened negotiation skills will come in handy to close on “the one”!
With these rules in mind and the guidance of a trusted agent, you’ll be prepared to negotiate with confidence when you find your dream home!