Negotiating with a Seller – How Low Should Your Offer Go?
For the last few years, the real estate industry has been a buyer's market. There was an overflow of homes on the market, and selling prices have been dropping since the economy's collapse in 2008. But that's all started to change in recent months.
Across the country, in both metropolitan cities and rural communities, there's a reduction of inventory, and prices are on the rise. In other words, there are fewer homes for sale, and the ones that are on the market are being listed at higher prices. So, how can you get the best deal on a home without overpaying? Here are some tips that can help you fine-tune your negotiation skills:
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1. Know your boundaries
Your initial offer should be lower than you intend to pay, but shouldn't be so low that it offends the seller, causing negotiations to come to a screeching halt. Think of it this way – by offering a price that’s lower that you want to ultimately end up paying, it gives you some wiggle room during the negotiations. In all likelihood, the seller is going to come back with a counter offer, and then each of you will give ground until you reach a price that suits you both. But if your initial offer is too low, the seller might consider it to be an insult, and may give up on you entirely. Not sure if your offer is good enough? If you have a buyer's agent, ask your real estate professional if they think your offer is reasonable. After all, it's their job to know current real estate trends, and to help you find the home of your dreams!
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2. Know the home's value
Buying a home is one of the most important and expensive decisions you'll make during your lifetime. Therefore, it's important that you do your research on the home you intend to buy. Compare the listing price with other similar-sized homes for sale in the surrounding neighborhood or in nearby communities. Also, compare it with the actual selling price of homes that recently sold in the area. We all know there can be a large difference in the seller's listing price and actual price a home sells for, so it's important to know if the seller has overpriced their home or not. By doing your research, you'll have a better idea what the house is worth, and therefore, better prepared to make a suitable offer.
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3. Know your seller
There are just a few weeks left in 2012, so if you're hoping to buy a home before the New Year, chances are the seller is hoping for the same thing. Many sellers who have their home on the market in December are hoping that it will sell before the year ends so they can get a tax break. And if that's the case, the seller may be more willing to negotiate the price. The same goes if the seller is in a hurry to sell the home for other reasons – like having to relocate for a job, a recent divorce, or an unexpected recent pink slip. Knowing why your seller is selling the home – and having a general understanding of the timeframe in which they hope to sell the home – can go a long way during the negotiations. In other words, it gives you the upper hand if you know they are hoping to sell the home sooner rather than later. If they are looking to get rid of the home quickly, offer a price that is 5% lower than you would give otherwise. It's unlikely they'll accept your low offer, but if they desperately need to sell the home, they just may take you up on it! By following these simple guidelines, you should feel better prepared to negotiate with your seller, and get the home for a price well below what the seller intended on.
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