Step 6: Negotiate Your Purchase
Once you've selected a home, decide exactly how much you want to offer for it and develop a negotiating strategy. If you offer too little, you run the risk of losing the property to another buyer; if you offer too much, the home may wind up costing you more than its fair market value. Your Dream Town REALTOR® can help you figure out a reasonable price range by comparing several similar properties in the same neighborhood that have sold within the last six months. And, as a Master's Level negotiator, they will spearhead the bargaining process and insist on the best deal for you.
Other factors will affect how much you offer for the property—especially whether there are other offers pending on this property, or are likely to be soon. If you find yourself competing for a property, can you make your offer more appealing? For example, if your offer is contingent on selling your current home, how confident are you that you can sell it and close on it before you close on the new one? Can you risk waiving this contingency to make your offer more attractive?
Be aware that once an offer is accepted by the seller, you can no longer negotiate the price downward, nor can you make offers on other homes. Therefore, you must clearly define the purchase price, any concessions you want the seller to make, and all contingencies in your written offer. If the seller accepts your offer, it becomes a legal and binding sales contract. Your Dream Town REALTOR® will write the contract and review all the details with you.
After your REALTOR® has submitted your offer, all you have to do is wait. If your offer is not accepted as is, you may receive a counteroffer from the seller. Review it carefully to see what has changed. If the new terms are not acceptable to you, your Dream Town REALTOR® will hammer out a new offer. Negotiations may go back and forth for days before you strike a deal.
- Create Your Purchase Offer - The purchase contract includes all the terms and conditions of your purchase offer: price, closing date, size of your down payment, your earnest money deposit amount, inspection and financing contingencies, the breakdown of closing costs, and other variables involved in the sale.
- Present Your Purchase Offer - Your Dream Town REALTOR® will make every effort possible to present your purchase offer in person to the seller's REALTOR®, and to explain the offer in detail. The seller's REALTOR® will then discuss the offer with their client, and either accept the offer or counter offer to begin negotiations.
- Negotiate the Purchase - If your initial offer is not accepted, then your REALTOR® negotiates with the seller's REALTOR®, bargaining to get you the best price and terms the seller will accept. There are many different negotiation strategies, and our Dream Town REALTOR®, an expert buyer's advocate, will point you in the right direction.
- Offer Acceptance - Once you and the seller agree on the details of the purchase, then your purchase offer has been accepted and becomes a legally binding contract.
Elements of a Purchase Offer
- The amount and due dates of earnest money—usually $1,000 with the offer and the balance within expiration of attorney review and home inspection.
- Your name as the Bbyer and the property owner's name as the seller.
- The offering price.
- The full legal street address of the property.
- The attorneys, brokers and other Realtors? and the terms and conditions of their compensation.
- The consequences to buyer and seller should either party default.
- Conditions for the return of earnest money if you withdraw the offer, it expires, or the seller decides not to sell.
- The type of deed and condition of title you'll accept, actions the seller must take to deliver a good title by settlement, and your recourse should that not occur.
- A contingency for you to acquire a written loan commitment within a specified time at specified terms.
- The dates of closing and possession, typically 45–60 days after acceptance with possession immediately after closing.
- The attorney or title company that will perform final closing service.
- The prorated property taxes up to closing date.
- A contingency for the sale of another property.
- The response time limit for the offer to remain valid—usually 48 hours.
- A contingency for home inspection—including the right to withdraw your offer if the home inspection report is not satisfactory to you for any reason.
- A contingency clause requiring the property to be tested for radon, lead paint, asbestos, or ureaformaldehyde insulation.
- Lists detailing what will be included (window treatments, carpeting, lighting fixtures, etc.) and what will be removed (wood scraps in the basement, mattresses stored in the garage, undesirable old floor coverings, etc.).
You can employ any of the following techniques in negotiating your home purchase. All home negotiations are different, and your own personal situation will dictate how you go about dealing with a seller. Your Dream Town REALTOR® will walk you through different scenarios and help you decide the course of action that is appropriate for your purchase.
- Make A Low (But Reasonable) Offer with a Price Jump - This approach is effective in a slow market in which you have time to wait for the seller's lowest price—you simply make an offer lower than the seller's price and expectations. Some sellers may refuse to counter what they consider to be low offers, but a good seller's REALTOR® will convince them to counter if you are a qualified buyer. After going back and forth, they will likely counter with an acceptable price, and our Dream Town REALTOR® will discuss the offer with you. If they request more than you feel the home is worth, then decide whether to make the price jump and match the offer or not. Making a significant jump from an initially low offer is often enough to please the seller and get them to accept a deal.
- Make Your Best Offer: One-and-Done - Some buyers present the top price they are willing to pay at the outset, avoiding the negotiation process altogether. Unfortunately, most sellers will still counter with a higher offer, even if they know you've gone as high as you are willing to go. This technique can be effective if the home has been on the market for a while and offers are scarce; however, if there are many interested buyers, the seller will most likely use your offer as a starting point in negotiations with other parties.
- Make a High Offer for a Fairly Priced Home - If you find a desirable property that is fairly priced, make an offer near the asking price—this will most likely bring about a quick and easy negotiation. If they ask for $350,000 for a home that's worth $350,000 and you offer $340,000, there may be minor haggling, but in the big picture, you are getting the home you want at a fair price. Remember, too, that if the price is fair, others may also be interested, so don't get caught up in negotiating just for the sake of a few dollars.
- Leverage Strategic Information and Gain an Edge - When you know specific elements of a seller's situation and reason for selling, it can gain you an edge in negotiations. Do they need to close quickly? Do they want to keep certain fixtures or appliances? Is there work that needs to be done on the house that they don't want to do? All these variables empower you to ask for a lower price in exchange for accommodating the seller's particular needs. You are giving something to get something, and when you know which buttons to push with the seller, you can get the price you want. Your Dream Town REALTOR® will collect the data that will give you a strategic edge in negotiations.
- Show Patience and Persistence - When you find a home you love, but the asking price is unfair and the seller is stubborn, take the slow negotiation route and gear up for many rounds of offers and counter offers. Dealing with unreasonable sellers requires patience and fortitude, enabling you to negotiate from a position of strength. You are only in a position of strength when the seller knows you're willing to walk away from the deal! Place a low bid, and only raise your bid in small increments upon counter offers from the seller. See whether they warm up to your fair offer. If the seller gets frustrated and negotiations stall, but you still want the home, you can raise the offer to show sustained interest and convince the seller to settle.
- Multiple Choice - Based on the variables of your negotiation, you might end up submitting an either/or offer that addresses multiple scenarios. Say you need to sell your home, but don't want to carry two mortgages. You can offer to pay a lower price with no contingency on the sale, or a higher price with the contingency. The key to this strategy is to make the option you want the seller to choose the most enticing.