Buyers tend to believe they don’t have negotiating power when purchasing a home in a seller’s market. In some cases, there may be very little wiggle room to negotiate a better price or repairs on a home, but most of the time, you can get a better deal with the right knowledge and resources.
Negotiating can be a daunting task for those who aren’t used to the practice or the market. If you negotiate too hard, you run the risk of offending the sellers and dealing with unyielding counter-offers. Sometimes, the seller will refuse to even respond to your offer if it’s too low.
The real trouble with a seller’s market is that the buyer doesn’t have a lot of time to waste on negotiations. If you make the wrong move, another buyer may swoop in and take the property out from under you. So, arm yourself with a few negotiating tips when trying to buy a home.
1. Make Sure It’s Really a Seller’s Market
Don’t give up your negotiating power too quickly by believing it’s always a seller’s market. Sometimes, buyers give away more than they must because they believe they’re slaves to the market.
Discuss the market outlook with your buyer’s agent. They can help you identify trends that relate to a seller’s market. You could also do research on your own, checking out economic trends for the area, the time the average property is on the market, and the listing prices. You might find that the market isn’t nearly what you thought.
2. Be Ready to Close
When you’re buying a house in this competitive market, you don’t have time to wait for your financing to pull through. A seller will want to see that you’re pre-approved for the loan and ready to go.
Additionally, be wary of using online lenders. Sometimes, sellers and their agents can be cautious of online lenders who might have a history of pulling out before closing. A pre-approval from a lender with a physical address is usually preferred.
3. Pick and Choose Your Repairs
Seller’s market or not, you still have the option of negotiating repairs into the property following the inspection. Don’t be overly picky with your repair requests. If a seller refuses to make repairs, you have the option of walking away. Your lender might also pull out depending on the nature of your loan and the repairs needed.
In most markets, sellers are more willing to negotiate because they don’t want the contracted bid. But if they had multiple offers on the table when they chose yours, they might not be willing to make the repairs, and if you threaten to walk away, they’ll just accept a different offer.
You can, of course, ask the seller to repair things, but focus on the major needs. For example, mold removal or plumbing repairs are significant issues that should be addressed before moving in. Peeling paint (not lead-based) in the living room, on the other hand, might not be worth the risk.
A great alternative to asking them to make repairs is to try to negotiate for built-in closing costs. The seller might not have the money or time to make the repairs you requested, but if they pay some of your closing costs upon selling the property, you’ll have a little extra money to make the repairs the way you want them.
4. Know When to Accept or Walk Away
It’s not always clear when you should stop pushing to get your way or when you should negotiate harder. Try to put everything into perspective. Will a difference of $2,000 really make a difference in five years of owning the home? Does it really matter if they make a repair you could also afford to do? Know how much you’re willing to give and your non-negotiables. Stop when you’ve reached your limits.
Likewise, don’t let the frenzy of a seller’s market convince you that you need to close on a house that’s not suitable for your needs. If they don’t make the repairs you need or they aren’t willing to meet your price point, walk away. Even in the most impacted markets, there will always be another house out there, and sometimes pulling out and starting again is the best strategy.