How to negotiate a better price
From a buyer’s perspective, there are a number of strategies and perspectives that may further your goals. They include: • The expression "everything is negotiable" is certainly accurate during the home buying process. Everything, including but not limited to price, terms, contract dates, inclusions, exclusions, disclaimers, and every other word of the contract are negotiable. You are in the driver's seat, and can ask for what you want. This does not mean you will get it. • You are the one who may choose to buy the home, but in no event will you be sold the home. You are the one calling the shots. The sellers have one home to sell, and need what you have: your and the lender’s cash. By contrast, you have the choice of many, many homes available to you and can pick and choose the best home on the best terms for the best price to your satisfaction. • Find more than one home that satisfies you, preferably three homes that satisfy you. Question: What is worse than being fixated on the "perfect" home, and losing it to a competing offer? Answer: Paying greater than market price for a home and being stuck with it and the memories of the dreadful negotiation until another heartstruck buyer even more in love comes along. So if you must have this home, make certain you do not make the very expensive mistake of letting the sellers know. • Let the seller know that other, very competitive and comparable properties exist and that you have a keen interest in these other properties. Absence makes the heart grow fonder. That is, the absence of interest in a seller’s property may make you a more valuable potential buyer. As in romance, sometimes the less interest shown, the better. • Consider making simultaneous offers on several homes. This is a wonderful way to tip the scales of power during a negotiation. Make sure the competing sellers are aware of your other offers. This is especially powerful when the competing properties are in a uniform project, such as a condominium project. The more similar the properties, the more powerful this strategy. Oftentimes the most highly motivated seller will surface — with hands waving. Be certain, however, that all of your simultaneous contracts contains protective contingency language, reviewed to your attorney’s satisfaction, or you may find yourself owning more than one home. • Include "red herrings" in your contract that you do not really want and use these as bargaining points to obtain higher priority items. These lower-priority "straw" items are concessions that you will most generously cave-in on, especially since you did not really want them in the first place. The seller’s pride is preserved, and you have effectively conceded very little or nothing. • Attempt to persuade a seller to prematurely put their best offer on the table. This call for a "final offer" on the seller’s part, once obtained, can be rejected and will provide a new, lower floor from which any further negotiating can proceed. • Determine the seller’s bottom line, and test it. When the seller has admitted that you have hit their "bottom line", consider testing it with a counteroffer. If your counteroffer
does not produce a more favorable response from the seller, you have indeed reached rock bottom. The decision is now yours whether you wish to purchase at this value, or move on to another property. • The state of the market, whether it be a "buyer’s market" or "seller’s market", can have a very dramatic effect on your negotiation strategy and the ultimate outcome of negotiations. Typically in a seller’s market, there is upward pressure on home prices, limited inventory of homes for sale, non-contingent or limited contingency contracts, plentiful "for sale by owners sales", short marketing periods and even multiple competing offers for homes—sometimes even before they are "listed" for sale. By contrast, in a buyer’s market there is downward pressure on home prices, a large inventory of available homes, long marketing periods, and seller’s are forced to be very accommodating with contract terms. At any given time, the state of your market will probably lie somewhere in between these two extremes. Factor this in to your negotiation equation when contemplating offers and counteroffers. The way to convince another is to state your case moderately and accurately. Then scratch your head, or shake it a little and say that is the way it seems to you, but that of course you may be mistaken about it. This causes your listener to receive what you have to say, and as like as not turn about and try to convince you of it, since you are in doubt. But if you go at him in a tone of positiveness and arrogance, you only make an opponent of him. – Benjamin Franklin •Try to be likeable to the seller. Yes, it is difficult to appear likeable during a sometimes heated negotiation, but many sellers want to like the buyer of their home. It is difficult to say no to someone you like, even if he or she is offering less than you believe your home to be worth. If necessary, credit (or blame) your apparent firmness or lack of flexibility to your buyer’s agent, accountant or lawyer. If your negotiation strategy is to present "win-win", "partnering" type solutions in an effort to solve your "common problems", the importance of appearing likeable becomes even more important. •In most markets, there is a seasonality to home sales. Generally (and this will vary according to the climate and general business cycle in your target market), home sales are slowest during the November-December timeframe, begin picking up steam during early Spring and are most robust during May and June. Most people do not want to move or be bothered with home shopping around the holidays (November to January), and homes usually do not show as well during the dreary days of winter. There is something very powerful about viewing a house during bright sunny skies with trees and landscaping in full bloom. Also, there is usually an urgency to having selected, closed and moved into a home prior to the start of the new school year (September). A wise buyer can sometimes use these seasonal variances to their advantage, opting to put their home buying process in full gear during the slow (November-January) time period, when inventory is the highest and buyers are most scarce. •Make your initial offer lower than you think you should. This gives the seller some room to negotiate, without putting you at a disadvantage for the remainder of the negotiation. It also has the effect of lowering the seller’s expectations, and it may very well set the tone for the balance of the negotiation. Generally, worse case, you can come back later with a higher, more reasonable, offer.
•Choosing the precise initial offer is not a scientific process. Unfortunately, no buyer knows for sure what price the sellers will accept once an offer is put in front of them. Factors such as comparable sale and general market conditions are helpful, and may even be persuasive to the seller, but not always. Pat formulas of "3-5%" below the asking price don’t usually wash anymore than "lowball offers" of 20% or more below asking price. In the final analysis it usually comes down to one factor: seller motivation. "Know thy seller" is good advice here, though oftentimes difficult information to glean. Much like poker, it’s wise to play the players and the cards. To this end, a face-to-face meeting with the sellers is often very informative. Sometimes it’s worth another visit, or two, to the property for the opportunity to meet the seller. Information is power and information about the sellers and their motivation is mighty powerful indeed.