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Negotiation PDF Print E-mail
Buying a Home - The Deal

The more you know about a seller's motivation, the stronger a negotiating position you are in. For example, seller who must move quickly due to a job transfer may be amenable to a lower price with a speedy escrow. Other so-called "motivated sellers" include people going through a divorce or who have already purchased another home.

There are several cardinal rules to negotiating effectively. One is do your homework, and learn as much about the seller or the buyer as you can. Another is to play your cards close to your vest and not reveal too much information to the other party or their agent. Don't let yourself get rushed into any decision, no matter how tempting it may be. Finally, if you have doubts about your negotiating skill, hire someone to help.

Remember that the listing price is what the seller would like to receive but is not necessarily the lowest they will settle for. Before making an offer, check the recent sales prices of comparable homes in the neighborhood to see how the seller's asking price stacks up.

Full-price offers or above are more likely to be accepted by the seller. But there are other considerations involved:

  • Is the offer contingent upon anything, such as the sale of the buyer's current house? If so, a contingent offer, even at full price, may not be as attractive as an offer without that condition.
  • Is the offer made on the house as is, or does the buyer want the seller to make some repairs or lower the price instead?
  • Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.

You should always do your homework about comparable prices in the neighborhood before making any offer. It also pays to know something about the seller's motivation. A lower price with a speedy escrow, for example, may motivate a seller who must move, has another house under contract or must sell quickly for other reasons.

Low-ball offers

A low-ball offer is a term used to describe an offer on a house that is substantially less than the asking price. Some experts discourage making deliberate low-ball offers. While such an offer can be presented, it can also sour the sale and discourage the seller from negotiating at all. In a normal market, a low-ball might be rejected immediately; in a buyer's market a motivated seller will either accept or make a counteroffer.

Are interest rates negotiable?

Some lenders are willing to negotiate on both the loan rate and the number of points (fees paid to the lender -- each point is equal to 1 percent of the loan) but this isn't typical among established lenders, who set their rates like large corporations set the prices on their goods. Nevertheless, it pays to shop around for loan rates and know the market before you go in to talk to a lender. You should always look at the combination of interest rate and points and get the best deal possible.

When shopping for rates, look for published rates in local newspapers or check the growing number of Internet sites that publish such information.

Negotiating price on new homes

It can be difficult to negotiate the sales price with a developer because they may claim their prices are based on fixed construction costs. But it doesn't hurt to try.

Experts say builders more likely to be flexible on price at the very beginning and the very end of a development project. Early on, most developers want to move people in quickly so the project picks up momentum. Later, developers may be more inclined to accept lower offers when only a few units remain.

If negotiating the price doesn't work, buyers commonly negotiate for better amenities (upgrade carpet, light fixtures, etc.) or lot location. Experts say a developer will rarely pass up a deal over a couple hundred dollars' worth of carpeting, for example.

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