Negotiating can feel intimidating, as it’s not a common skill Americans use in most financial transactions.
Want a sandwich or a pack of lightbulbs?
You just go to the store, pay the sticker price, and walk out the door with your purchase.
Not so with bigger purchases, such as cars and homes.
The asking price just opens up the conversation, and it’s expected that buyers and sellers haggle back and forth before they come to a mutually beneficial agreement and close the deal.
If the thought of home buyer negotiations makes your skin crawl, don’t worry.
We’ve put together a guide of tips, tactics, and strategies you can use when buying a new home.
We’ll go over how to do the research you need to come to the negotiating table prepared, how to present yourself, and how to come away from negotiations with a favorable deal for both you and the seller.
11 Real Estate Negotiation Tips for Buyers
Below, we’ll discuss the strategies you need to ace the negotiating process for buying your next home.
Even the shyest introverts can gain more confidence by following these tips and tricks.
1. Research & Know Your Stuff
Enter a negotiation with as much information as possible.
The more you know about the property, local real estate market, sellers, and their agents, the better prepared you’ll be to negotiate.
Gathering information about the property should include hiring an inspector to find any potential issues or additional costs.
Counseling with your real estate agent about how the house stacks up against comps as well as current, local real estate market conditions will give you additional leverage.
The most important advantage that knowledge gives you in negotiation is confidence in your own position.
If you know the seller is asking too much because you’ve pulled comps and done your homework, you won’t be caught up in a bidding war on an overpriced property.
You’ll also have the confidence to walk away from a deal if the numbers don’t make sense for you.
2. Control Your Emotions & Stay Positive
Selling a home can be a very emotional process for the seller.
People grow attached to their homes.
While this is a weak spot for sellers, this turns into an advantage for buyers.
You haven’t lived in or loved the home yet, so you’re less emotionally invested in the deal.
By remaining calm, positive, and in control of your emotions, you’re in a much better position to negotiate.
Don’t fall in love with a house before you sign the papers and move in.
Removing emotions from your negotiation tactics allows you to assess the situation objectively and make decisions based on logic and facts.
Making decisions based on emotions is a common first-time homebuyer mistake.
3. Don’t Speak First
When beginning a negotiation, avoid speaking first.
Allowing the other side in a negotiation to speak first will give you a sense of how committed they are to their current price and how much persuading might be needed to change their mind.
According to Harvard Law’s Program on Negotiation study:
“Masters in Business Administration (MBA) candidates who made the offer first when negotiating a single-price deal felt more anxious about their decisions, and as a result, felt less confident and satisfied with the outcomes.”
The same holds true for residential real estate negotiations.
Let the seller play their hand first so you can get a better look at the lay of the land and plan your own strategy.
4. Always Have a Backup Plan
Negotiations can be unpredictable and turn sour very quickly, which is why it’s important to have a backup plan.
Having a solid backup plan (renting for longer or a few more homes to tour) will enable you to walk away when you can’t get the deal you want.
This is mostly a psychological edge for you as the buyer so you don’t negotiate from a place of desperation.
5. Be Prepared to Walk Away
If your negotiations are getting bogged down or hung up in ticky-tacky details, it may be best to shelve the deal or call it quits entirely.
Sometimes the most powerful move in a negotiation can be taking your ball and going home.
Again, this comes back to not getting emotionally invested in the home before you close the deal, as this makes it much harder to back out.
While there is always some compromise when two parties negotiate, so decide on what deal-breakers are absolutely non-negotiable, and be willing to tap out if you can’t get what you need.
If you do end up walking away from a deal, be diplomatic about it.
Your departure may be what changes the seller’s mind on price, concessions, or another critical item.
If you’ve backed away from the deal in a kind, understanding manner, the seller doesn’t have to swallow their pride to restart the negotiating process, and you may end up getting just the terms you originally wanted.
6. Be Courteous, Friendly, and Polite
This is good advice for life in general, but especially pertinent when negotiating a real estate deal.
By being warm, open, and friendly, the seller won’t feel like they should be on their guard and will drop some defensiveness.
In his book Never Split the Difference: Negotiating as if Your Life Depended on It, FBI hostage negotiator Chris Voss states, “He who has learned to disagree without being disagreeable has discovered the most valuable secret of negotiation.”
Take the time for small talk and chit-chat.
Get to know the sellers a little bit.
People like to do business with those whom they know, like, and trust.
A seller will probably be more agreeable to selling their home to a friendly face for a fair price than to a cold person for a little bit more.
7. Use Affirming Language
This is verbiage that conveys admiration and respect for the other person and validates that person’s feelings and experiences.
Using affirming language will make the other party feel heard, understood, and that their needs and wants are important, including their right and ability to say no.
Josh Flagg, star of Million Dollar Listing and founder of Flaggship.com, offers this example: “The buyer is asking for you to pick up the closing costs to close the deal. You’re free to say no to that, of course, but would you be willing to consider it?”
Below are some more examples of affirming language:
- “You might not go for this, but would you consider including the washer and dryer with the deal?”
- “I don’t want to make you commit to anything you’re uncomfortable with, but is there any room to move up the closing date?”
- “You’re completely free to say no to this, but we were wondering if you’d entertain splitting the closing costs.”
This type of language makes the seller feel validated and that they’re in a position of control.
Hence, they may be more likely to entertain some of these concessions than they would if you were aggressive in your tactics.
8. Always Negotiate Face-To-Face
Negotiating over text or email simply isn’t the same as talking face-to-face.
Meeting in person (or even virtually) enables you to read a person’s gestures, expressions, and body language.
Smiles, laughs, and handshakes all help to create a positive rapport between the parties that can’t be duplicated in any other way.
Additionally, when meeting face-to-face, the other side doesn’t have time to think or rework their offers.
The same is true for you too, however, so do your research before you meet the sellers so you know the details of the house, local market, and seller’s needs and values.
9. View the Transaction as Win/Win
Thinking of your real estate deal as having a winner and a loser is going to create animosity between the negotiating partners and make the process much less pleasant than it should be.
Stephen Covey, author of Seven Habits of Highly Effective People, talks about a third option — a win-win situation. He states, “Win-win is a belief in the Third Alternative. It’s not your way or my way; it’s a better way, a higher way.”
After all, the buyer’s and seller’s wants can each be satisfied by the other person — the buyer wants a new house, and the seller wants to sell them one.
Both people should come away from a real estate deal with what they want.
The negotiation process assures that the exchange is maximally beneficial to both parties.
The price and terms should be fair to both buyer and seller.
As the buyer, when you think of how you can meet the needs of the seller, you’ll create a sense of goodwill.
The seller will then be more likely to look to meet your needs as well.
10. Start with Fair Market Value Instead of the Asking Price
In real estate, sellers can ask for the moon in exchange for their property — that doesn’t mean the request is reasonable, but it may be tricky dissuading them of that.
Remember — people get emotionally invested in their homes.
Don’t assume the asking price is a reasonable one.
Ayoub Rabah, President of Coldwell Banker in the Greater Chicagoland area, states “The adage in real estate is location, location, location. When it comes to negotiation, it is data, data, data. Let the data drive your negotiations and decisions. Gather information and leverage it to your advantage. The key is to have more information than the other side.”
Have an experienced local real estate agent help you run a comparable property analysis (also known as “running comps”) on the home you’d like to buy.
Take the following into account as you consider how much to offer:
- Current market conditions
- Size and location of the property
- Square footage
- Number of bedrooms
- Average days on market
- Age of the listing
- Any previous price cuts
- Average price per square foot of similar properties that have sold recently
If the number you get for fair market value differs greatly from the seller’s asking price, state that from the get-go.
Try something like, “I’ve checked out the numbers and — now, don’t think I’m crazy here — but I’m coming up with [X] for the fair market value of the property.”
Then show her the research you’ve done to back up your claim.
11. Find the Seller’s Needs and Fill Them
Knowing a seller’s non-financial needs is a great tool to gain an advantage in real estate negotiations.
Is the seller in a time crunch to sell the property?
Are they going through a divorce?
Do they lack the ability or know-how to do home repairs?
Are they skittish about the deal falling through for the fourth time?
All of these items can help you grant the seller things they crave in exchange for concessions you want.
A seller that needs quick cash so they can buy another house out of state may settle for a lower price to speed up the closing process.
More earnest money may help elevate your offer to a buyer who needs reassurance.
Focus on filling the seller’s needs to get the best deal.
What Can You Negotiate When Buying or Selling a House?
It’s important to know what is (and isn’t) up for negotiation when buying or selling a house.
The items below are commonly used in negotiations for residential real estate.
This one is the most common and possibly the most important in a real estate transaction.
Buyers are always trying to drive the price to the lowest possible.
Sellers resist this downward pull (they want to get as much money as they can for their home), however both parties are often willing to give in a little on price to get other items that they want on this list.
2. Closing Date
While some of the timeline for the closing date is in the hands of banks and real estate attorneys, many sellers look favorably on offers that will get them to the closing table faster.
Selling a home is a long, stressful process, and in the minds of most sellers, the quicker it can be over, the better.
This is why cash offers and inspection waivers are so powerful.
They take the weeks of underwriting, scheduling, inspections, and reports out of the picture.
If a buyer can make an offer that shortens the time to close, the seller may make concessions on pricing or other items, depending on how badly they want to be done with the deal.
3. Closing Costs
Certain closing costs are predetermined with regard to who pays for what.
For instance, the seller pays for their portion of the year’s property taxes, and the buyer pays for any underwriting costs associated with the mortgage.
But most closing costs can be negotiated.
It’s traditional for the buyer to pay the majority of closing costs, so if a seller wants to sweeten the deal or attract buyers, they can offer to split or cover closing costs.
4. Furniture & Appliances
Moving the fridge and the washing machine is a hassle for sellers, so they might be willing to throw in furniture or appliances as a concession to buyers (and a convenience to themselves).
If the seller is unwilling to budge on price, a buyer might ask the seller to include the appliances to feel like they got a bit more for their money.
5. Home Repairs
Few houses are sold in perfect condition.
Unless it’s being sold as a fixer-upper home, buyers often use the flaws or needed repairs in a property as bargaining chips to get a lower price or other concessions from the seller.
Sellers often want to avoid the effort and expense of completing repairs as they are selling a home and moving.
They are often willing to grant allowances to the buyer to shift away the responsibility of fixing the property.
Wrapping Up Our Real Estate Negotiation Tips for Buyers
Negotiating for a home might seem a little scary, but it doesn’t have to be.
With a little knowledge and a few key strategies, you can make your way through the negotiating process with confidence that you can get a great deal on your new home.
Contact us today for a free consultation!