First-time Buyers Guide to Negotiating a House Price
The home-buying process is extremely tricky, especially if you’re new to it! But by far, the hardest part is the negotiation process.
However, it would help if you kept a few things in mind before heading to the negotiation table. And there are a couple of tips you can use during your negotiation.
Work with a Realtor®
Having a licensed real estate agent is an essential part of negotiations. If you’re a first-time homebuyer, it’s important to have someone who holds knowledge about real estate.
A Realtor® will suggest what you should offer for the home you’re interested in. They will also negotiate on your behalf. And given their experience, real estate professionals have a better chance of getting you the terms you’re comfortable with.
Know the State of the Local Market
The state of your local housing market is an important factor in negotiating! A buyer’s market generally means sellers are willing to sell their homes at lower prices due to higher inventory and fewer buyers. If this is the case, you can make offers below the list price.
When it’s a seller’s market, you compete against other buyers with a lower supply of homes. You’ll likely offer and pay for an amount of money higher than the fair market value of the house.
Use Contingencies But Keep Them Fair and Limited
When you make an offer, you also list your contingencies. Contingencies are clauses that specify an action or requirement that must be met before the purchase agreement becomes legally binding.
You might be tempted to list a bunch of contingencies to protect your earnest money. But that might force the seller to take another offer and pass on yours. You want to keep your contingencies fair and limited. An example might be a home inspection or title contingency.
You don’t want to have too many contingencies that bother the seller. But you want to have enough to protect your earnest money if you need to back out of the sale.
Tip: Always include an inspection clause if the inspector finds something wrong with the home you might not have noticed.
Responding to Counteroffers
Once you make an offer, the seller can choose to meet you halfway or stick to the original price.
If they stick to the listing price, they most likely do not want to negotiate the price of their home. At that point, it’s your choice if you want to continue making offers or walk away.
If they meet you halfway, you can take the option of continuing to insist on your price or accept their offer.
Things That Might Happen During Pre-Close
Inspection Goes Wrong
If you use an inspection clause, you will get a home inspection before the deal is finalized. However, if the inspector finds something wrong with the property, you must return to the negotiation table.
You can do one of many things. Ask the seller to repair the property, negotiate for a lower price, or walk away from the deal. You could also accept the home as-is.
The Appraisal is Lower than Expected
A low home appraisal means the lender will offer you a lower amount than you requested. The lender usually does this in cases when they determine a home is not worth the amount you offered.
You have a few choices. You can make the difference, go back to the negotiating table, ask for a lower price, or walk away.
The Home-Buying Process Can Be Complicated
Home-buying can be complicated, but that’s no reason to give up on your dream of homeownership. Working with a Realtor® is the first step in navigating your real estate journey.