Buying a house is all about mastering the art of give-and-take. Many buyers think that the purchase price is the main negotiation point, but in reality, that’s only one piece of the offer.
By learning where your major negotiation points are (and how to use them), you’ll have the advantage of being able to craft an offer that works in your favor while simultaneously seeming beneficial to the seller.
Realistically, there are five big negotiation points to consider when writing an offer, and each one is just as important as the last.
If you’re getting ready draw up an offer, you’ll want to read ahead:
1. Offer price
In terms of places for negotiation, this is the big one. Everyone knows that the sale price on a home is variable. But, this is also where a lot of deals fall apart.
While it’s only natural to want to score a deal on your home, we’d advise you to try not to get too hung up on this one variable. There are lots of other places to work the deal to your advantage.
Simply put, the sale price is, ultimately, far more important to the seller than it is to the buyer.
Once you close on a home, the seller will receive a lump sum of funds for any added value they've put into the home. If the sale price is low, and they still owe a mortgage, it’s possible that they won’t benefit much, if at all, from the sale.
However, as the buyer, you’re a little bit more protected. If you’re getting a mortgage, the sting of that higher sale price will be distributed throughout the life of the loan. Your best bet is to ask your lender to work up figures for you so you can see how your cost of living will be affected at various sale prices.
After sale price, offer contingencies are some of the most important details of the transaction. As a refresher, the term “contingency” refers to anything that needs to happen in order for the transaction to continue moving forward.
Usually, contingencies are deadlines for things like completing your inspections and getting approved for a mortgage. They can also include details that are uniquely relevant to your transaction, as well, such as the sale of your current home.
From a negotiation standpoint, it’s generally thought that the fewer contingencies you include in an offer, the more appealing it will seem to a seller.
This is because fewer contingencies means fewer chances for the deal to go south.
In order for a successfully closed deal, each contingency outlined in the offer contract must be satisfied in a way agreed upon by both the buyer and the seller.
When an agreement can’t be reached, both parties can decide to walk away from the sale.
That said, contingencies -- and especially inspections -- are for your benefit.
If you waive your right to them to have a better bargaining position, you’re agreeing to take the house as-is, including any major issues. Ask your buying agent to go over available contingencies with you, so you're aware of what you’re agreeing to and feel comfortable with everything.
Another tactic that allows you to still feel covered yet competitive? Shortening your contingency periods instead of completely waiving them.
3. Closing date
The settlement date you choose will determine the length of the transaction. Typically, most closings fall somewhere within a 30-90 day timeframe, depending on how many contingencies there are to fulfill and the buyer and seller’s individual needs.
This negotiation piece becomes important if you’re looking to move within a specific timeframe. For example, you have a definitive start date for a new job or you’re trying to selling your old home at the same time.
If you don’t have any pressing time constraints, though, we suggest being open to working on the seller’s schedule.
Often, a concession here on your part can foster good will between you and leave the seller more open to accommodate your requests in other areas of the transaction. Some sellers are looking for a longer escrow period or a "rent back" if they're buying and selling a home at the same time.
4. Closing costs
The term “closing costs” refers to any fees that were incurred during the transaction.
Usually, these fees end up amounting to between 1%-2% of the total sale price and are split between the buyer and the seller. However, the way that you pay your half as the buyer can be a matter of negotiation.
After the down payment on your mortgage, it’s possible that you won’t have much cash left over to cover closing costs. If you're using Open Listings, your commission refund of up to 50% often covers most, if not all, of those costs.
However, if you're going the traditional agent route and paying those homebuying fees, you can ask the seller to take care of your half upfront, using their proceeds from the sale. Then, usually, that amount is added to the sale price, which gives you the opportunity to pay for it over the life of the loan.
5. Personal property
In real estate, there are two different types of belongings that a person can have. “Real property” -- which refers to things like flooring and cabinetry that are attached to the home and sold as part of it -- and “personal property”, which includes any movable belongings like furniture that the seller could bring with them.
However, in some cases, if a buyer likes a particular item of personal property, he or she can negotiate to have it stay behind.
It’s best to think of negotiating on personal property like a favor.
As the buyer, you can ask the seller to leave an item of personal property behind in your offer, but they’re not obligated to agree. If they say no, move on graciously. More often than not, a patio set is not worth losing out on the opportunity to buy your next house.