Negotiating Real Estate

Buying a Home can be scary make sure you arm yourself with the right strategy to negotiate the best deal. Here are ten surprising tips when negotiating on a home! 

Whether you are a buyer or a seller, you will want to use these tips when negotiating real estate. When making an offer on a home, you will want a Realtor to help you understand the market and what type of negotiations are appropriate.

If you're buying a home in Cary, NC, or buying a home in Raleigh, you are stepping into highly competitive real estate markets, whereas if you're looking at new construction, you may have the opportunity to negotiate things like appliances, blinds, and an upgrade allowance. It all depends on what real estate you buy and your unique situation.

Many people shopping for homes in today's market understand how competitive it is. When it comes to negotiating, your Realtor and real estate attorney will want to use tactics that might not include sales price; it may include the seller paying or contributing towards your closing costs or other hidden costs when buying a house.

Negotiations are just one of the many things Realtors do for buyers and sellers.

You finally found the home that you have been searching for. Even though you are already picturing unpacking boxes and settling in, the purchasing process is not over yet. It is time for you to make an offer on that home. As soon as the sellers receive this offer, that's when the "fun" begins. It's time for negotiations.

There are plenty of different tactics and ways of negotiating. There are also different times to negotiate different things, whether the purchase price, closing costs, or negotiating repairs from the inspection report. An important key is knowing who you are going up against from the beginning.

Ask yourself: What kind of market am I in? Is this a buyer's market or a seller's market? Maybe it's neither, and it is an even market. Whether you are the buyer or the seller, you want to stand your ground to negotiate a successful deal. However, keep in mind that all of the parties involved want to close! Staying focused on the end game will help you get through this process.

In real estate, a buyer's first offer is often counter-offered by the seller. This sparks the negotiations and offers communicated by the buyer's and the seller's respected agents. Some buyers automatically accept the seller's terms and agree to the sale, leading to closing. However, this doesn't always happen because both parties want the best deal possible, so you must be ready and prepared for a negotiation process. Let's jump right into some important tactics to remember while negotiating.

Here are ten tips to use when negotiating! 

1. Don't Speak First

As important as your opinion is, it really is the only one that matters - it would be wise to let the other party begin the negotiations. This is a common tactic you may have already used when discussing terms in previous transactions. When you let the other party make the first offer, you have the upper hand immediately. You get to see their starting point, and you can use that to your advantage.

When negotiating, you try to find a point that both parties agree on. This amount tends to be around the middle of each party's first offer. Therefore, when you receive the other party's first offer, you will know immediately where the negotiation will head.

This greatly benefits you if your counteroffer isn't too low or too high. Sometimes, but rarely, the first offer may be perfect for your situation, and you accept that deal. Although this doesn't always occur, it shows how influential the first offer can be in a negotiation. Like playing a game of chess, your entire strategy will be based on your opponent's first move.

2. Don't Mention Anything Negative 

Buying and selling homes is an emotional process for both the buyers and the sellers. As a buyer, remember this home's sentimental value and the number of memories it includes. Tread lightly when it comes to saying negative things about the home to try and negotiate a better deal. Here's why:

That fence in the backyard that's falling apart and needs desperately to be fixed was built by the seller and his Father on weekends, and it took them two months. Even though it's lost all of its paint and looks terrible, say nothing. Offer your price and stick to it. Don't mention the fence, they already know it needs to be fixed.

Additionally, other things about the home that are unsatisfactory to you will not need to be mentioned as they relate to the property directly. When you're negotiating, stick to being positive and how great of a home it is, you're far more likely to win the best deal if you can win over the seller's emotions.

3. Have a Plan B 

Plans don't always work out how we expect or want them to. Most of the time, we have to put in the work to get things to go our way. In negotiations, this still tends to be true. Don't be afraid to fail. You will learn more from your mistakes and failures than you do from your successes. As much as we hate to lose or fail, we overlook the lessons we are learning now.

Even though you may have set up a great plan for negotiating with the other party, it is always smart to have a backup plan in case the process doesn't work out the way you envisioned. Having a backup plan reduces stress and keeps your mind at ease. You can control your emotions and calmly get through the negotiating period.

4. Meet in Person or Talk on the Phone 

Meeting in person or talking on the phone is best when discussing details and negotiating real estate. Meeting face-to-face or virtually not only allows you to build trust, but it doesn't give the opposing side much time to rethink their offerings. When meeting in person, make sure to do your homework beforehand so that you are prepared and not caught off guard. 

5. Closing Costs

Homebuyers typically are the ones who pay the closing costs to transfer title. However, they may ask for some help from the sellers. Typically, when a buyer does this, they end up paying a higher price for the home for the seller to help with closing costs. This is a smart negotiation tactic to satisfy the seller that you are willing to pay their asking price, and you will get to save some money when it comes to paying off the title insurance and home warranty. 

Either party may pay the closing costs, this is agreed upon while negotiating. Whether origination fees, surveys, taxes, discount points, appraisal fees, etc., closing costs must be paid before the title can be transferred to the buyers.

6. Keep Control of Your Emotions

One of the most critical points to take out of this is learning to control your emotions when investing in real estate. Don't be too quick to respond after getting an offer. Take your time to think it over and discuss it with your agent and others whom you trust to have helpful input. These people are not emotionally attached to the property like you are so they won't give any advice based on stress or emotion.

When you respond to an offer immediately, you let the other side know how eager you are, giving them an advantage. You want them to think that you are still looking at other options, whether you have other offers on your house or are a buyer and have other homes you are interested in. Be patient and take your time before responding to the other side's proposal.

When you are in a highly stressful situation, such as trying to buy or sell a home, it's easy to let your emotions get the better of you. Instead of letting this happen, take control of your emotions. You do not want to make irrational decisions, especially if it means making a bad investment. It is best to get other opinions and hear why you might be making the wrong or right decision. Remember, other options exist, so don't feel like this deal is your last negotiation chance.

7. Focus on Being Direct

Nothing is worse than someone beating around the bush. No one wants to be dragged along and kept out of the loop. Be straightforward and mention what you desire during negotiations. Some negotiations can feel like a tug of war, with offers constantly going back and forth, rejection after rejection. This can be very stressful and irritating to both parties.

Remember that being direct will help speed up the process, and you may get to acceptance and close much faster. How will you get it if you aren't telling the other side exactly what you want? You won't. When you don't ask, you don't receive it. Simple as that. Be direct and focus on getting what you want from the negotiation process.

Some people prefer when buyers and sellers negotiate directly without using any agents. Although there is nothing wrong with that, agents are there to catch any red flags you may not have noticed when you are about to send over an offer. They are experienced and will let you know if your offer is too low or too high. They will also make recommendations for you that they have learned from other negotiation transactions that they have taken part in. It is always wise to have someone on your side with experience in these matters.

8. Know When to Walk Away

An extremely important factor is knowing when the deal on the table is not a good one. Remember, emotions can get in the way of your decision-making. The house can be beautiful and the only one you've loved since you started searching for a house. From the seller's point of view, you may not be getting any offers on your home, and you have finally found someone interested.

Ultimately, both sides must remember to take their time before deciding. You do not want to accept an offer if it will hurt you in the long run. If you end up paying too much for a house that gets appraised at 10% less than what you paid for, or if you sell your home and realize you've made a bad deal, you will be hurt financially. You must keep an open mind if it is wise to walk away from a deal in search of a better one.

9. Do Your Research

Finding the right home is one of, if not the most important steps. Researching the market and the area you are looking into will help you better understand what you are searching for. You don't want to go into negotiations without knowing the surrounding area.

Researching on your own time is helpful, but hiring professionals to do inspections and appraisals for you is even better. Getting all the home and neighborhood information will give you more ammo when making an offer. Putting an offer together is easy, but you want to ensure that your offer doesn't affect you negatively in the long run.

You can find certain details of homes for sale or neighborhoods online by searching local real estate listings and public records. Knowing as much about the property and the surrounding homes will give you a better idea of where to stand when making an offer.

It is also important to get information from the other party. Why are the sellers moving out? Why is the buyer looking to buy, and how motivated are they? Knowing the other party puts you in a better position to walk away with a winning deal, so make sure you do your research first.

10. Repairs on the House

You may think you have found the perfect house, but it may not be that simple. Many homes have hidden flaws that are hard to catch. You will want to make sure to have a buyer's agent when buying a home. It is important because they can find red flags when seeing a home and many other things they can help you with.

If a home needs many repairs, you will want to consider that when making an offer. You don't want to have to spend a fortune after just purchasing a house to repair it. If this is the case, let the seller know that you are asking for a lower price, as you will need help to afford all the repairs that need to be done.

Lenders often require certain repairs to be handled before they loan any money out. This will slow down the process, and the seller is usually stuck with having to repair any problems with the home. A speedier route that some sellers tend to take is offering the buyer a credit when the home is sold so that the buyers can take care of the repairs themselves. They will save money on purchasing the home from the credit they receive for the repair cost.

FAQs 

How much can you typically negotiate on a house? 

If a home needs a lot of work and requires extensive repairs, it can be reasonable to offer as much as 20% under the asking price. The more the repairs and remodeling are needed, the lower the offer can be. 

What are the four C's of negotiations? 

The four C's of negotiation are common interest, conflicting interest, compromise, and criteria. 

Is offering 10% below the asking price on a house okay? 

If the home is in good condition but needs some small repairs or cosmetic work done, then it is acceptable to ask for 10% below the asking price on a house. 

Negotiating Real Estate - Final Thoughts 

When buying real estate, be prepared to negotiate in many different ways using many different strategies. The best real estate agents are always the ones who can get creative on what matters to you most while ensuring your real estate goals are met.