When it comes to buying a house, negotiations can be one of the trickiest steps in the homebuying process. In a perfect world, if the seller accepts your offer, you both sign the dotted line and the house is yours. That’s rarely ever the case. But the real question is, how much of the deal can you actually negotiate on? We talked to our real estate agents, and this is what you need to know.
First off, how much you can negotiate with a seller is dependent mostly on the local real estate market.
Negotiating in a seller’s market
In a seller’s market, there are more buyers than homes for sale. This makes it harder for buyers to drive hard-and-fast negotiations because there are likely more buyers interested in the property with fewer demands or an overall better offer. As a buyer in a hard seller’s market like Boise, make sure you have a plan for concessions and what you are willing and able to pay for vs what you want the sellers to pay for.
Negotiating in a buyer’s market
In a buyer’s market, it is the opposite: there are more houses for sale than interested buyers. In a buyer’s market the negotiation power shifts to the buyers. If the seller is unwilling to compromise or doesn’t accept the buyer’s offer, the buyer has plenty more listings to choose from. Sellers are often willing to accept offers under the asking price in order to sell quickly, since bidding wars are uncommon in a buyer’s market. However, lowballing too far for the sake of saving more money will likely lead to a counter-offer closer to the listing price, or dismissal of your offer altogether.
What can you actually negotiate on when being a house?
Here are the 5 most common negotiation subjects
Listing price/mortgage points
In a buyer’s market or a somewhat balanced market, buyers can offer a price at or below the listing price as part of the negotiations. The sellers have the ability to present a counter-offer or accept. Even if you want to put in the most competitive offer possible, you don’t want to tip your hand to the seller or go in for more home than you can afford.
Part of the negotiation process is hashing out what closing costs each party pay for. Closing costs are usually 2-5% of the purchase price, and buyers and sellers have specific costs that they typically pay. Here is a breakdown of usual closing costs. Depending on the seller’s moving timeline, they may be more amicable to paying some closing costs typically paid by the buyer, such as home inspections or appraisal fees.
Closing dates and move-in days
Typing into the previous point of the seller’s timeline, closing dates and move-in dates can be negotiable as well. If possible, learn the seller’s motivation for moving. This can give you insight as to when they ideally want to close. If your moving timeline is flexible, the seller may be receptive to it if they need more time to get their things in order.
Another option is to do a rent-back model if the seller needs more time to find a new house. In this model, they pay you rent for a given period of time until they are ready/able to move out. A certain amount of flexibility will go a long way in buyer and seller satisfaction, and may help you secure the winning bid.
Sometimes, what’s in the house can be just as effective for negotiating as the house and property itself. There may be a certain piece of furniture that fits the living room perfectly, or the washer and dryer are the perfect shade of red. While the buyer may initially plan to take them, you can negotiate to have the sellers leave them in exchange for paying a slightly higher price. Sometimes, the buyers will disclose what they want to leave in the house as part of downsizing or ease-of-moving.
One of our realtors had a buyer a couple years ago that insisted on having an ornate metal garden hose roller stay with the house or they would walk away form the sale. The sellers (who wanted to take the hose roller) let the buyer keep it and the house want under contract that afternoon. Sometimes, you never know what may be the deal maker or deal breaker. Keep an open mind and open communication line at the negotiating table.
A major appliance failure in the first year after putting tons of money towards buying a house is a quick way to end up in a lot of debt. This is where a home warranty comes in. A home warranty is insurance on the home’s major systems for up to 1 full year. This includes, electrical ,plumbing, and HVAC systems. A home warranty typically ranges from $300-$600 per year, which averages out to $25-$50 per month. Having a home warranty is place provides a huge increase in peace of mind that you made the right decision to buy that house. If something goes wrong in that first year, it will be taken care of.