It’s finally happened! You’ve found the home you want to buy. The next step? Making sure you get that home for the right price. That’s why we’ve prepared this resource on tips for negotiating the price of a house.
When it comes to real estate and homeownership, knowledge is key. Although your real estate agent will be able to present the market and guide you in the art of negotiating the right price of a house, it’s also wise to do your own research and consider which strategies you want to try. This will help both of you understand negotiations of a home purchase price.
If you’re looking for a guide to help you through the deal-making process of your home purchase, these five tips for negotiating the price of a house are a great place to start.
1. Understand the market
Before you can jump into the negotiation process, it’s always a good idea to know what type of market you’re heading into as a buyer. If you’re negotiating the price of a house in a buyer’s market, there will be more homes for sale than there are buyers to purchase them. In this case, you have more power to offer under the price you want to pay and ask the seller to pay for closing costs or leave the appliances. However, if you’re negotiating the price in a seller’s market where there are more buyers to sell to, it won’t be as easy. Not only will you have to move more quickly, but you’ll also have to stick to the basics when it comes to financing, appraisal and the inspection. If the market is balanced, anticipate getting and giving until both you and the seller are happy.
How do you know what kind of real estate market you’re in? Check places like the Canadian Real Estate Association (CREA) and the Canadian Mortgage and Housing Corporation (CMHC) for their monthly or quarterly housing reviews.
2. Research the seller and the property
In any type of sale, it’s always beneficial to know the person you’re communicating with. If you can find out why the seller is moving, you might be able to use it to your advantage when crafting your offer. If they’ve been in the process of selling their home for months, they might be eager to close and therefore include a tight time frame for inspections. On the other hand, if the sellers aren’t quite ready to leave their house they may offer a longer closing or a leaseback, which allows them the opportunity to rent the home for a short amount of time.
In addition to finding out why the seller is moving, gather information about the property through public records and online real estate listings. Knowing whether the house has been on the market before and at what price allows you to put together a better strategy for negotiating the price of the home.
3. Get creative with negotiations
Negotiating the price of your home isn’t always all about the sale price. Among the cost, you can also negotiate for things like the length of time to close, the time frame allowed for inspections and which of the appliances, if any, are included in the purchase. If you discover any significant repairs needed during the inspection, you might be able to reopen negotiations, but you can also ask for a credit at closing so you can hire your own contractors to make any necessary repairs.
If you’re a first-time home buyer, you might be surprised to learn about closing costs and fees associated with a home purchase that usually range from 2% to 5% of the purchase price — and must be paid for aside from the down payment. Fortunately, closing costs are another aspect of the offer that can be negotiated with the seller.
4. Write a love letter
We’re serious! Homeownership often comes with sentimental attachment because of the memories made during the time you live there. If you really want this home, you need to let the sellers know. Adding a personal touch by offering a personal letter along with your bid that expresses to them why you love their house might be exactly what the sellers are looking for. Are you newly married? Do you have a baby on the way? Telling them more about you and why their home is your dream property turns you from just another prospective buyer into the person who is going to enjoy the property as much as they did.
5. Expect to compromise or move on
As the saying goes, you can’t always get what you want. Try to enter the negotiation process prepared to compromise and work with the seller to ensure both of your needs are heard. If you’re working with an agent, make sure you’re on the same page about expectations and deal breakers. Keep in mind, it’s common to lose out to another buyer — especially if you’re in a competitive market — and sometimes negotiations will fall through. Consider negotiating the price of a house a learning experience and remember that the right agent will help you negotiate a price that’s right for you.
To negotiate the price of a house to get the best deal, you need to research the local market condition and understand how motivated the seller is. Don’t forget to remember that contingencies can be as important as price, so writing a personal letter with your offer can make a huge difference. Above all else, compromising is extremely important during the negotiation process and can make the sale of the property longer, but well worthwhile to finally land the home you’ve always wanted.