You’ve found a house that you want to buy, or a buyer who wants to purchase your home, but you haven’t quite settled on the price. It’s time to negotiate.
That’s what homebuyers and sellers do, but these days, negotiating from the buyer’s side is pretty hard. It’s a seller’s market with more buyers than homes for sale, and sellers know they can find another interested buyer if you even start to get on their nerves.
Still, that doesn’t mean you can’t get the price lowered. But there are some mistakes to avoid when negotiating a home’s price.
[Read: What Is a Purchase Agreement?]
1. Don’t Be Too Ruthless
You’re thinking, “I am not going to make that mistake. I will be nice to the seller. I am a super nice person.” But if you’re negotiating a price over a home, suddenly you’re on a different team than the seller and your competitive nature could take over.
“The most common mistake, in my opinion, that buyers make is playing hardball when negotiating,” says Brian Rudderow, a real estate investor who owns HBR Colorado, a Colorado Springs, Colorado-based company that buys houses. “It’s fine to be stern when requesting inspections and asking for money off, but you never want to overstep your bounds and make the seller angry by insulting their intelligence and calling their character into question.”
For instance, he says if you feel a home inspection reveals something that warrants a discount, just ask for it. Nicely.
“Never make accusatory statements to a home seller. I’ve never seen it work once,” Rudderow says.
2. Don’t Let Your Feelings Get the Best of You
“I think the most common mistake I see both buyers and sellers make is becoming overly emotional or taking things too personally,” says Robert Washington, a broker with Savvy Buyers Realty in St. Petersburg, Florida. “This typically happens if one of the parties is offended by an offer or counteroffer. This can happen if either party feels disrespected, and they often carry that resentment.”
Remember that buying and selling a home, even if this involves your dream home, is ultimately a business transaction. If you learn your seller has a completely different worldview than you do, don’t let that shade your feelings about the home. If it’s a fantastic piece of property and you sour on it because you don’t like the homeowner’s politics or favorite football team, you’re just hurting yourself.
“It’s important for both parties to take a step back and remember that at the end of the day, it is a numbers base transaction and that both parties will likely never meet or have a relationship outside of the transaction,” Washington says.
[Read: How to Find the Home That’s a Perfect Match]
3. Don’t Offer Too Much Information
When you negotiate a price for anything, it always helps to know the other person’s state of mind. Are they hungry for a deal? Are they willing to shave a little off the price or are they not going to budge at all? They’re wondering the same things about you. So be friendly but not too chatty.
“Buyers usually make the most mistakes because the sellers, if they are smart, get out of the house,” says Jeff Lichtenstein, owner and president of Echo Fine Properties with offices in southern Florida.
That’s because if the seller is there, you’re not likely to be as free with your feelings and say something like, “This is my dream home. I’ll pay whatever I can to get it.”
But when the seller isn’t there, the listing agent is. Sometimes, buyers forget that the listing agent represents the seller (indeed, a listing agent is sometimes called the seller’s agent). According to Lichtenstein, the listing agent “reads” the buyer.
“Buyers talk openly in front of the listing agent about their plans. They are being interrogated without them realizing it,” he says. “A good listing agent asks open-ended questions to derive information they can give back to the seller for a better negotiating position.”
If you give the impression that you would gladly pay more than the asking price, the listing agent will share all the vibes you’re giving off with the seller.
Your real estate agent will probably communicate to you subtly if you are oversharing in front of the listing agent. This is a two-way street — you want to keep your eyes and ears open to learn as much as possible from the listing agent or seller, just in case they reveal anything that might help when negotiating.
Sellers can blow it in a negotiation by also revealing too much information too quickly and coming off as desperate. “Sellers that show up at the home inspection can hurt themselves by being put on the spot when asked if they will take care of repairs,” Lichtenstein says. “Many panic and say they will repair everything when they really don’t need to.”
4. Don’t Make a Really Low Lowball Offer
You’re likely to hurt your position if your purchase offer is way below the asking price unless there’s a really good reason, such as an expensive roof repair or other issue discovered during inspection.
You could bruise the seller’s feelings with a bottom-dollar offer without reason. They may see your lowball offer not as you looking for a deal but as a sign of disrespect. You may not intend it that way, but there’s always a good chance emotions will run high, even though it’s a business deal.
“Buying a house is usually the most significant purchase someone will ever make so it is understandable that buyers will be emotional when purchasing a home,” Washington says. “It’s also usually the case that the sellers have occupied the home and there is probably quite a bit of sentimental value involved. But all of that needs to be minimized when buying or selling.”
5. Don’t Neglect to Listen to Your Real Estate Agent
Assuming you have one, you’re working with a real estate agent for a reason. If they think you’re making a good offer, you probably are. If they think you’re asking for too much or offering too little and they tell you so, keep in mind that they do this for a living. They do it all the time and you don’t.
Here’s some standard advice many agents offer that will help you if you do have to negotiate:
— Get your finances in order before you make any offer. Many real estate agents won’t work with you if you don’t have the financing lined up. Some sellers may not either; they need to know you’re a viable buyer. You can’t really negotiate if you aren’t sure if your bank will give you the financing for the home.
— Your first offer should be your best offer. Yes, you can lowball, but odds are somebody else is going to offer the asking price, or even a little more, to increase their odds of getting the home. This is especially true in this tight inventory market. While you’re bidding low and drooling about getting a super deal, your competitor could be actually getting the home.
— Don’t assume the inspection will give you a chance to negotiate. It might, if there are some real problems with the house. But if it’s a solid home and other buyers are circling, you probably want to stick with your original offer, which tends to be made before a home inspection.
[Read: An Insider’s Guide to Real Estate Negotiations For Buyers]
6. Don’t Assume You Will Be Negotiating
You certainly may end up trying to find common ground on a price. Remember, however, that each party has a different agenda. If you’re the seller, you have an asking price that you and presumably your real estate agent spent a lot of time settling on. If you’re an interested buyer, it’s assumed you are basically OK with the price range and will make a fair deal.
Negotiating comes into play if and when there’s a reason to negotiate. For instance, if your home inspector finds the house has termites, suddenly it’s not quite the home you thought it was. Maybe the carpet is threadbare or there are plumbing problems, and you’d like to fund the repairs with a price reduction. You need to weigh the cost of the necessary investment, and the seller must decide whether to stand firm on the price. Maybe the two of you decide to meet somewhere in the middle.
A seller may have a bottom-line number or there could be other interested buyers. You may need to decide how far to push a price reduction.
Don’t forget to consider nonfinancial incentives. Perhaps you want to move in right away or the seller needs a little more time to vacate the property. Perhaps you can start negotiating around the edges.
Starting the process with realistic expectations and a fair price will go a long way toward a smooth real estate transaction. If either party loses sight of this, expecting to get an unrealistic deal or hoping a bidding war drives up the sale price, somebody’s certain to be disappointed. It could also mean starting over, which is a loss of time and effort for both sides.
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6 Mistakes Buyers Make When Negotiating a Sale Price originally appeared on usnews.com
