Television does the art of negotiations a serious injustice. According to Hollywood, you’d better put on your ray bans and poker face. Otherwise, the seller will bully you into accepting an offer way outside your budget. Or one party will stealthily pass a sheet of paper with a number across the table to another party, who then flips out.
In real life, that’s not how it works. Now, this is not to say you should walk in unprepared, but you also aren’t playing high stakes poker here. There is no winner takes all. A win in real-estate negotiations is when both parties walk away happy. Think HGTV happy tears when someone gets their dream home. So, how do those white-knuckled negotiations work when the cameras aren’t rolling? Let’s check it out.
Let’s Meet in the Middle
The key here is to make the other party think they are in control of the deal. Don’t be the sleazy car salesman before the devil horns come out. Your words and your body language must be genuine. Nothing makes a person turn into The Hulk like feeling tricked into a deal. You want everyone to feel like they are on the same team. Affirming language is the tool of choice.
If you think they are going to go catatonic on you, give them an out. Take a tip from Josh Flagg founder of Flaggship.com. Use phrases like “You’ll probably refuse, but …” to allow the other party the freedom to say no. You may be thinking, “I don’t want to give them a free pass to back out!” Don’t worry, that’s not what you’re doing. You are increasing your chances of winning the other side over.
Who Has the Upper Hand?
Before you are negotiating you need to know what type of market you are in. Otherwise, you’ll be pulling your hair out and get an eye twitch when another deal falls through. Don’t be that guy. It’s not worth it.
Sellers’ Market
- Don’t offer lower than list prices for homes. In a seller’s market, they are being bombarded with offers. Don’t get laughed out of the running.
- No special requests. If you don’t like the paint this is a chance to brush up on your DIY skills. The seller has other competing offers. You don’t want yours kicked out of the pool.
- Work with the seller. Moving is a time-consuming and stressful process. Be flexible with the seller on their move out date. It will make your offer look better.
- Be extra! In a good way. Make sure you are pre-approved for the loan.
Buyer’s Market
- Negotiate closing costs. Those closing costs add up fast! In a buyer’s market, you can request that the seller pay closing costs during negotiations.
- Look for those upgrades. Sellers won’t expect a high ROI on upgrades. Even if they are in stellar condition, they don’t expect 110 percent back on them. Eighty percent is looking good. Sellers know that in a buyer’s market.
- Make sure the seller is flexible on the price after the inspection report comes in. It may reveal some unexpected news.
The Value Offered
Give your offer some thought on value. What can you bring that another buyer can’t? It must be inexpensive to give and valuable to receive.
Here’s a hypothetical example: mints at the end of dinner. They are cheap for the restaurant to give but they’re valuable to receive because they cleanse the palate and taste downright delicious. If you’re on a first date, you don’t want to disgust your date with bad breath. Unless you really don’t want a second date. Real estate negotiations are kind of like that. “For the same price, will you throw in new paint in the living room?” “Can you add a flower garden for that asking price?” These are valuable to receive and inexpensive to give. It gives the other party the warm fuzzies.
Did You Do Your Homework?
Still sweating bullets over negotiating your dream home? Well, don’t! Your Realtors are here to help through each part of the transaction. Our expert team will review the contract and answer all of your questions. You can approach the negotiation table with confidence. Homie Realtors help you formulate the perfect response to each counteroffer. They do all the talking including communication with the seller’s agent. After it’s all wrapped up everything is sent to you via DocuSign. It’s that easy, Homie has you covered.
Don’t Accept the First Offer as Is
You may think you are doing yourself a favor, but you aren’t. Don’t come off as desperate! You brought your A-game. The price doesn’t have to change, but you do need to play hard to get. It’s a little like dating in that respect. The seller is expecting you to come back with a counteroffer. If you don’t, they will question their offer.
So, what does that look like? Think about add-ins and bonuses. “For that price will you throw in the washer dryer? Kitchen appliances? Patio furniture?” You get the idea.
It’s About More Than Asking Price
Is the asking price on the higher end? If it’s over your budget don’t throw in the towel just yet. You don’t have to feel like Charlie Brown after a rough baseball game. There are other ways to even out those costs that don’t have to do with the asking price. Take a look at all the fees that come with buying a home. Closing costs and lender fees add up fast. If they keep the asking price the same, can those be covered?
Peace of Mind
You probably aren’t going to buy a home that’s nothing more than a shell. It will come with things like a hot water heater, HVAC, and kitchen appliances. Unless you are a fan of cold showers, fixing the hot water heater won’t be on your list of fun things to do. Ask about adding a warranty plan on major appliances to the package.
It Doesn’t Have to Be Your Dream Home Today
The home you buy doesn’t have to be your dream home right now. It may feel like it should because you’re signing your life away on a mortgage, but it doesn’t have to. When you’re preparing to negotiate on a home, look at it closely. Consider its bones. Can you make it into your dream home five or ten years down the line? Can you make changes without destroying the integrity of the home? Or your bank account? It doesn’t need to be perfect now for it to be a good buy.
Keep Your Cards Close to the Chest
Buying your home is so much fun. The real estate agent is super nice too right? Of course they are — it’s their job! But, here’s the thing. Unless the agent is specifically your agent, then they work for the seller. As the seller’s agent, they must tell the seller anything you share with them. If you are a first-time buyer, you will want to have a buyer’s agent working with you. They work in your best interests.
The easiest way to do your homework is to give Homie a call. We have an easy online search process with several beautiful homes for sale. We take the hassle out of buying your home.
It’s Closing Time!
You’ve done the work and the negotiating. Now it’s time to close! You feel like Steve Prefontaine going over the finish line. Wait, you’re not there yet. Even when you get this far, some closings don’t happen. Why? Because you don’t qualify for the loan.
All that time and effort! You can feel your dreams for the future slipping through your fingers. There are few things more frustrating. It’s avoidable though.
Ok, let’s rewind a bit here. What needs to be done on the front end to avoid this disappointment?
- Know your credit. Typically, if your credit score is 680 or lower your loan may be rejected. Run a credit check on yourself before you even start dreaming about that home. If there are some black marks take care of those before you apply for a loan.
- Save up! If you want to increase your chances of approval put 20 percent down. If you put 20 percent down, you don’t have to buy Private Mortgage Insurance. This will lower your monthly bill.
- Even if your boss is Miranda Priestly don’t job hop yet! Employment status plays a huge role in getting approved for a mortgage. Stick around at work throughout the buying process. You can make an epic exit when it’s all done.
- This is a good time to hide those credit cards. Put them in a cup of water and freeze them if that’s what it takes. Don’t take on new debt when you are trying to get approved for a mortgage.
- Know your budget. You may be approved for more than you can afford.
- Get pre-approved! You don’t want to find out you can’t afford your dream home at closing. Before you begin your search, get pre-approved for a mortgage. That’s where Homie comes in. We make sure you are pre-approved before you start looking at homes. When it’s time to close on your dream home the funds are there. No hang-ups during closing time.
Stay Confident
Negotiations are nothing to be intimidated by. But you need to walk in prepared with more than your expertly tailored suit and ray bans. So, lets recap:
- Use affirming language. This isn’t poker. The end goal is for everyone to win. You want the other party to feel at ease. Work with them.
- Know the market. Negotiations are different depending on who has the upper hand. Know the market so you can stay in the game.
- Have Homie at the negotiation table with you. Our attorneys work with both parties to make sure you get the best deal.
- Don’t accept the first offer. But recognize that it’s not all about asking price. There are many other pieces that can be negotiated that don’t touch the asking price. This is where doing your homework comes in.
- Use Homie’s experts to help you find your home. It’s easy and professional. Take some stress off yourself.
- Make sure you pre-qualify for your mortgage before you close. You don’t want to go through all that to be disappointed. Homie makes sure you pre-qualify before you start your search. We make it easy for you to buy your dream home.
Before you embark on buying your biggest asset, let our experts help. We make the process easy and affordable, so you don’t have to stress. The best place to start is touring your first home with Homie.