How to negotiate a lower price when buying a house
When buying a home, negotiating the price of a house may feel taboo or outright uncomfortable. However, it's a common practice often expected by the seller. When prepared with the right strategies, you can walk into discussions confident and prepared. Here are helpful tips to help you negotiate the asking price and more as a buyer.
Read more: Why are home prices so high?
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In this article:
What to do before negotiating
How to negotiate a house price
How much can buyers negotiate?
When to walk away
FAQs
A successful negotiation starts well before making your first offer on the house.
'Before a buyer even thinks about negotiating, get a preapproval letter and a crystal clear idea of the home's actual value,' Adriana Trigg, licensed Realtor and owner of Legionary Real Estate Investing, said via email. 'Don't just take what the home is listed for, but also understand what it's worth based on recent comparable sales and local market trends.'
Apply for preapproval with multiple mortgage lenders for an estimate of your loan amount and mortgage rate based on verified income, creditworthiness, and other financials. You can then work with a real estate agent or use websites like Zillow.com or Realtor.com to research your local housing market and get an idea of how much the home is worth.
There isn't just one way to negotiate a home's price, and certain situations call for different strategies. However, these tips may increase your chances of success.
The best real estate agents are experts in the local market and the home-buying process. While every buyer should be as knowledgeable and prepared as possible, you can also lean on your agent to ensure you're not overpaying or overlooking critical details during negotiations.
Find a real estate agent through referrals or a local online search. Verify the agent's license through your state's real estate regulatory agency.
While a home inspection is not always required, it can be critical when negotiating the house price. An inspector can highlight anything from minor inconveniences to major foundation problems.
'One of my favorite strategies is to point out issues from the inspection report in a calm, fact-based way,' said Trigg. 'You're not insulting the home — you're pricing in the real cost of repairs.'
Make a list of the significant issues, especially those that impact the property's value or your safety. You can use the inspection report to ask the seller to pay for repairs or come down on the asking price to cover the cost.
You can also include an inspection contingency in your offer, which lets you walk away if the inspection reveals major damage to the home without losing your earnest money deposit.
Repairs aren't the only costs a seller may be willing to cover. You can ask them to pay some of the closing costs, such as origination or appraisal fees. Other seller concessions worth exploring include prepaid property taxes, a home warranty, and even discount points to lower your interest rate.
There's a limit to how much a seller can cover, and it varies by loan type.
FHA loans: 6% limit on seller concessions
USDA loans: 6% limit
VA loans: 4% limit
Conventional loans: 6% limit on loans with down payments between 10% and 25%; loans with less than 10% down have a 3% limit
Ask for seller concession with discretion. Asking for too many can backfire, especially in a seller's market.
Some sellers are willing to strike deals on certain fixtures or furniture used during staging. You can also use the time to close as a negotiation tactic.
'Another smart move is to offer a faster close,' said Trigg. 'A seller who's relocating or juggling multiple properties might take a slightly lower price if it means fewer headaches.'
A seller's asking price can depend on many factors, such as the local housing market, the property's condition, and the length of time it has been for sale.
For example, asking for 20% below the price is generally considered a lowball offer, but it may be appropriate for a home that needs a lot of work. A buyer looking at a home in good condition should probably ask for no more than 10% below the asking price, but be prepared for a counteroffer in a super-competitive housing market.
You can start with a reasonable offer that's below the asking price, but not so low that the seller doesn't take you seriously. This is where having information on comparable sales and the property's condition can help — plus the help of a good real estate agent.
Dig deeper: How much should you offer on a house?
Negotiating the home price takes patience, compromise, and knowing when to move on.
If the seller refuses to budge or you find yourself in a bidding war, take a step back to really think about whether you can afford the home. Try to avoid increasing your offer so much that you deplete your savings or struggle to make the monthly mortgage payment.
When you walk away, make sure you know the potential legal ramifications. You can opt to include certain real estate contingencies in which your offer depends on the outcome of the appraisal or inspection report. If you back out of an offer for a reason not covered by contingencies, you could still end up owing money.
How much a seller will lower the asking price depends on the market, the property's condition, and other factors. In a highly competitive market with more buyers than sellers, known as a seller's market, a seller doesn't have much incentive to come down on the price. On the other hand, if you're in a buyer's market with more homes than buyers, you typically have more leverage to ask for a lower price, within reason.
You can tactfully negotiate the price on a house by making sure your offer is reasonable. Base your offer on similar homes that sold recently in the area. When you ask for a lower price, justify it, like with the inspection or appraisal report. Share how the ask can help you both, like speeding up the time to close.
Offering 20% below the asking price may be acceptable if the home needs major repairs. Make sure your offer is justified. However, in highly competitive markets where the seller has multiple offers, you may have a hard time lowering the price even if the home needs significant work.
Laura Grace Tarpley edited this article.
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