When it comes to buying a home, the ability and willingness to negotiate is a must for both the buyer and seller. It's human nature to want the best negotiated deal possible when buying anything...think about it, even the simplest items you order off online are cross-shopped on Amazon, so why not negotiate your absolute best on one of the biggest purchases in your life! In general, buyers will initially offer less than they're willing to pay for a home, but the trick is finding the right balance between feeling good about the purchase, and not leaving the seller feeling insulted. The following tips could keep some extra cash in your pocket the next time you're making offers on a home.
Know Your Market
Real Estate is a business that either favors the buyer or the seller (depends on the cycle), hence the term "buyers market vs. sellers market." When negotiating a purchase price, it's important to know which market applies to the area you're searching in. As the buyer, you'll have the best chance at a successful negotiation if you research the selling price of other comparable homes in the area before making an offer. Understanding the difference between the List price of a home and its Market Value/Selling Price can save you from undercutting competing offers and missing out on a great opportunity. Ask your agent or broker for a Comparable Market Analysis (CMA) or sound like a pro and just say "I need some neighborhood Comps." Avoid automated valuation tools like the Zillow Zestimate or Redfin Estimtes. These are software/algorithm based valuations that can incorrectly compare properties and give you false guidance. Your agent should guide you through the market pricing process, and the right agent will have the local knowledge and experience to make sure you don't get beat out by the competition.
Make It Personal
When you make an offer, the seller will see nothing more than the price on a piece of paper (or email, it's 2017!). But if you really want the seller to take your offer to heart, let them know why you want to buy the home. You can do this by preparing a handwritten letter expressing your interest and the reasons you fell in love with their home. Let them get to know you and allow them to picture the happiness you can bring to their soon to be former house...this is especially true of families buying their first home, so share how happy the home purchase will make your family. Believe it or not, some sellers actually look at the process like finding a good home for a puppy...they want quality and caring people to buy their home, so do your best to show them in a sincere way. We have a proven approach for the "make it personal" method, message or call me directly for further advice.
Nobody Likes Rejection
Not every offer is accepted, so don't be heartbroken if your first offer isn't a winner. In fact many buyers in our local SoCal market will make anywhere between 3-6 offers before they open escrow on "the one." Don't let the disappointment of one rejected offer side-track you from achieving your goals. Some agents feel the only way to win a bid is by throwing more money at the seller, which may not necessarily be true. While price is a hugely important factor, there may be a number of other reasons why a seller chose to reject an offer; such as weak offer terms, credit requests, conflicting timelines or troubled financing documentation. Whatever the reason, have your agent find out exactly why your offer was rejected, and use this as "ammo" to improve upon your next offer.
Winners Are Made In The Counter-Offer Phase
It's my personal experience that some buyers will take offense to a sellers counter-offer, often saying "that was a great offer!" or "this seller is unrealistic!" Don't put your first offer up on a pedestal, that type of thinking during negotiation is a recipe for disaster. Have you ever heard the old saying "never take the first offer?" The same is true in real estate, almost every seller knows it. Your first offer is likely to be less than what you're willing to actually pay for the home, which leaves some negotiating room between you and seller.
Just remember, winners are made in the counter-offer phase. So keep a clear mind and positive attitude...the right agent will keep you cool, calm and collected during the counter-offer/negotiation process. In most cases, a seller will make a counter-offer, asking for your "best & final" response back. Some counters are based purely on conditions and terms other than price. Make sure your agent is doing everything in their power to find out what type of competition you're up against! I can't stress enough how important it is to be working with the right agent at this point.
Alain Babaian is a real estate agent with a Brokers license based in Glendale, CA. He's personally invested in the Glendale, Pasadena & surrounding areas...the same areas where he helps sellers, buyers and investors with their real estate needs. Alain Babaian is frequently ranked amongst the top agents in his community, and is the recipient of multiple awards & accolades from Americana Real Estate, the Glendale Real Estate Firm he's partnered with for over 7 years. You can reach Alain direct by calling or texting him at 818.839.0443.