When you’re in the process of buying a home, it’s natural to feel nervous. Negotiating requires specific tactics, which can differ depending on whether you’re making an offer or are already under contract. Boost your confidence by understanding what’s negotiable and when it makes sense to request certain concessions from the seller, especially if you’re in a buyer’s market or considering a fixer-upper.
Let’s take a close look at how to negotiate a house price successfully in order to maximize your savings potential on this large purchase.
Key Takeaways:
- Negotiating a home price involves a number of options beyond the final sales price.
- Seller concessions are usually negotiated in the offer but can sometimes be renegotiated after inspections or appraisal issues arise.
- Know when to walk away from a home, whether the price is too high or the required repairs are beyond your comfort level.
Can You Negotiate House Prices?
Put simply: Yes, you can negotiate house prices. Whether you’re a first-time home buyer or looking for your next home, negotiations are a normal part of the process.
In fact, negotiating the purchase price with the seller can benefit the home buyer by helping you:
- Reduce the amount you borrow.
- Lower the amount you pay over your loan term.
- Save on repairs and updates.
- Save on closing costs.
Deciding how much to offer on a house requires a thoughtful strategy. An offer that is too low can inadvertently insult the seller or be quickly dismissed. Instead, you can use other tactics to lower the price or your closing costs once you’re under contract. Negotiating the right way requires a good understanding of the housing market, as well as patience, confidence, organization and often compromise.
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How To Negotiate House Prices During An Initial Offer
Each home sale is different, as is every geographic area’s real estate market. However, there are a few universal tips and tricks to keep in mind. Here are five negotiation strategies to consider when making an offer on a home.
1. Get Market Input From A Real Estate Agent
Navigating the homebuying process without a real estate agent can be challenging, but not pairing up with one during home purchase negotiations in particular could put you at a serious disadvantage.
Real estate agents can help you determine an appropriate initial offer using data based on the housing market in the area you are interested in living in and the condition of the property. REALTORS® (members of the National Association of REALTORS®) and other real estate professionals also can represent you when speaking with the seller’s agent. They can advise you when a higher offer is necessary, particularly if you’re having to navigate a bidding war in a competitive market.
2. Ask The Seller To Cover The Closing Costs
As a buyer, you don’t have to focus solely on finding ways to get sellers to commit to lowering their asking price. Instead, you can encourage them to cover part of all of your closing costs.
Closing costs typically range from 2% – 6% of the home’s purchase price or loan amount, depending on the loan type and location. They include an origination fee and the cost of getting title insurance on the deed. You can ask the seller to pay for some or all of these costs when negotiating a home purchase.
Again, your real estate agent can advise on how the market is performing and whether this tactic makes sense for where you’re buying.
3. Request Personal Property
You also can negotiate for items inside the home, not just discounts on the purchase price, which could save you money on expensive purchases after you move into your new home. Built-in fixtures are typically included in the sale unless specifically excluded in the contract. But you may want to consider asking for:
- Indoor or outdoor furniture
- Appliances
- Artwork
- Landscaping tools or equipment
- Piano
It’s important to iron out exactly what’s included in the purchase agreement so both buyer and seller understand the details. When crafting your offer letter, clearly state the items you wish to keep. The seller can then accept or decline that portion of the contract as long as they agree with all the other details.
4. Choose A Closing Date That Works For You
Sellers often propose a closing date that suits their needs, but as a buyer, you can negotiate a timeline that works better for you.
Another option is to have a rent-back agreement. This allows the seller to pay rent to remain in the home after closing. A seller who needs extra time to pack and move may be more receptive to an offer that includes a rent-back option. For buyers, this flexibility can strengthen negotiations and may even provide additional income. It can benefit both parties to have a real estate attorney present to navigate potential issues during a rent-back period.
5. Don’t Give Up If The Seller Rejects Your Offer
Think of the negotiation process as a two-way conversation. Be prepared for the seller to reject your initial offer or send back a counteroffer. If you’re confident you’ve found your dream home, you may still have the opportunity to come back with a stronger offer rather than throwing in the towel.
Your real estate agent can find out if the seller is considering multiple offers from potential buyers, which will help you decide how aggressively to negotiate from the beginning.
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How To Negotiate House Prices While Under Contract
Once you’re under contract, you can still try to negotiate with the seller at two different intervals: the inspection and the appraisal.
Inspection Results
A home inspection helps you understand the condition of the property and what may need to be updated or repaired.
Home inspections aren’t typically required but are highly recommended to help identify issues that could become costly problems down the road. Inspection findings also can give buyers leverage during negotiations. There are three ways to ask for seller assistance after the inspection results come in:
- Repairs: The seller pays for and oversees specific repairs before closing. Everything is done before you move in.
- Credit at closing: The seller covers the cost of certain repairs as a closing credit. Lowering your closing costs leaves you with more cash to pay for the repairs yourself once you move in.
- Price reduction: The seller lowers the price of the home. This reduces your mortgage payment, but doesn’t free up cash to pay for extensive repairs.
Low Appraisal
Your lender will require an appraisal to make sure the mortgage isn’t higher than the home’s appraised value .If the appraisal comes in low, you may need to cover the difference, renegotiate the price with the seller, or potentially walk away if the contract includes an appraisal contingency.
However, you may not have to shoulder that financial burden on your own. You can negotiate with the seller to lower the sale price so that it aligns with the appraised value. This strategy might not work if the seller has received cash offers, but it could be successful in a neutral or buyer’s market.
When To Walk Away
Negotiating takes time, but if you spend too much time trying to talk a seller into accepting your terms, it could backfire. You might want to consider walking away from the home in these instances:
- The seller isn’t interested in negotiating.
- The inspection uncovers extensive repair problems.
- The home appraises for lower than the asking price.
- The title comes into question, particularly if outstanding liens show the original owner still owes money on the home.
Be sure to understand the details of your contract, so you know exactly what contingencies allow you to walk away after signing it without forfeiting your deposit. In some cases, the seller may be entitled to keep your earnest money deposit or potentially pursue legal remedies depending on the contract terms.
Common contingency clauses include inspection, financing, home sale, appraisal and home insurance contingencies. If any of the conditions aren’t met or an issue arises under one of the clauses, you may be able to back out of the sale without penalty.
Walking away from a home you love can seem devastating. But, keep in mind that by moving on, you’ll be able to make offers on similar properties more quickly, which means you’ll be at less risk of losing out on a comparable home.
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The Bottom Line: It’s Smart To Negotiate On A House
Negotiating house prices can help you reduce the amount you borrow, lower the amount you pay over time, save you money on repairs and updates, and help you save on closing costs. When deciding how much to offer, it’s important to approach each step of the negotiation process with solid market data and realistic expectations firmly in mind.
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Ben Shapiro
Ben Shapiro is an award-winning financial analyst with nearly a decade of experience working in corporate finance in big banks, small-to-medium-size businesses, and mortgage finance. His expertise includes strategic application of macroeconomic analysis, financial data analysis, financial forecasting and strategic scenario planning. For the past four years, he has focused on the mortgage industry, applying economics to forecasting and strategic decision-making at Quicken Loans. Ben earned a bachelor’s degree in business with a minor in economics from California State University, Northridge, graduating cum laude and with honors. He also served as an officer in an allied military for five years, responsible for the welfare of 300 soldiers and eight direct reports before age 25.
